Medicine prices: a WHO/Health Action International collaboration

1. Medicine prices: a WHO/Health Action International collaboration The approach, some results, and implications for policy to improve the affordability of medicines Andrew Creese Klara Tisocki Libby Levison

2. By the end of this session you should... • Understand the purpose and technical content of the WHO-HAI “Medicine Prices” project • Be able to interpret price ratios reported on the HAI website • Distinguish between price effect of local add-ons (components) from manufacturers’ pricing practice • Identify several ways in which use of price information can contribute to policy for better access

3. Structure of presentation • HAI-WHO project - purpose, technical basis of the approach, some results • A price study in progress: Kuwait - Klara Tisocki • From manufacturers’ price to retail price - Libby Levison • Policy issues and price information - brand premiums, manufacturers’ pricing practices, local add-ons, good procurement • Would a price study be appropriate in your work?

4. Purpose

5. Why this project? • Some evidence that retail medicine prices can be higher in low income countries than in high income settings • Practical difficulty of obtaining reliable, up-to-date information on drug prices, particularly in low income countries • Methodological difficulty of making international price comparisons • Approach to improve price transparency and empower actors concerned with health and medicines policy • WHO-Public Interest NGO Roundtable an opportunity to launch such an initiative

6. The WHO/HAI approach - its technical basis • Systematic sampling of medicine outlets in at least 4 areas, with a minimum of 10 pharmacies per area: • prices of 30 preselected commonly used medicines in at least public and private sectors • predetermined dosage forms and strengths • Supplementary lists encouraged, adapted to local needs • Innovator brands and different generic prices sampled • All components of price from manufacturer to retailer identified • Affordability of treatment for 10 conditions is calculated • Local prices compared to international reference prices • Excel workbook accompanies manual

7. “Core” list of drugs for price comparison - see page 30 of Manual

9. Some results: (1) brand versus generic price ratios - ciprofloxacin

10. Furosemide - ratios to international reference prices

11. Initial results (2) International differences in originator brand prices – Furosemide Lasix® (Celltech)

12. Manufacturers’ selling price in public sector MPRs for public sector procurement – all medicines surveyed

13. Some results (3) - Price components analysis: Furosemide (brand)

14. Price components (total markup as % CIF price)

15. Analysis of differences in ratios to international reference prices across countries These examples show • the huge difference within countries between originator brands and generics prices: ”brand premium” • variation between same brand across countries

16. Some initial policy messages • Policies aimed at increasing availability and use of generics should be implemented widely • Measures to improve public sector procurement and availability should be implemented • Essential medicines should not be taxed • Mark-ups in private sector may be a cause for concern. • Price information should be transparent, and prices monitored regularly • Medicine price policies should be based on evidence.

17. Policy issues and prices - • Brand premiums - do they matter? • Manufacturer price discrimination - what can countries do? • Price components - what are the policy options? • Public sector procurement - how to make it efficient?

18. MEDICINE PRICE STUDY KUWAIT Klara Tisocki PhD Douglas Ball PhD Nabeel Al-Saffar PhD and others at Faculty of Pharmacy Kuwait University

19. KUWAIT • Area 17,820 sq km • Constitutional monarchy with an elected national assembly • Total Population • 2 million (about 60% non-Kuwaiti) • HDI rank: 46 • Life expectancy at birth (years), 2001 76.3 • GDP per capita (PPP US$), 2001 18,700 • Health expenditure per capita (PPP US$), 2000 538 • Public health expenditure (as % of GDP), 2000 2.7 • Private health expenditure (as % of GDP), 2000 0.4 Source: UNDP, Human Development Indicators 2003

20. KUWAIT HEALTH SYSTEM- Public sector • Highly developed, with excellent infrastructure • Six health regions - specialist hospitals, general hospitals, polyclinics, • Universal health insurance coversbasic medical care incl. cost of medicines BUT • Non-Kuwaitis can receive medicines from a limited list only • Kuwaitis may receive any medicines free (BUT very high cost items have limited availability), • ALL medicines dispensed on physician’s prescription only • Public procurement through Central Medical Stores • Closed international tenders, Gulf Cooperation Council (GCC) bulk procurement, direct purchasing • Local pharmaceutical production virtually non-existent • CMS stocks over 3000 items of medicines + consumables

21. KUWAIT HEALTH SYSTEM - Private sector Retail Pharmacies • Prescription controls: only on antibiotics, corticosteroids, narcotics, psychotropics, loosely applied • Private pharmacies concentrated in main shopping districts or suburb’s commercial centres (co-operative societies) Who uses private pharmacies? • Patients without valid Civil I.D. to access public health care facilities • Non-Kuwaitis for medicines that are not available to them in public sector • Kuwaiti patients who want to avoid crowded public facilities or need medicines that are not available to them in public sector (shortages) Who decides on prices for private sector? • Government has price/profit controls – fixed margin for wholesaler & retailer Other Providers: • armed forces, private hospitals/clinics, Kuwait Oil Company, etc.

22. MEDICINE PRICE CONCERNS IN KUWAIT • Many patients who cannot access necessary medicines in public sector finds prices high in retail pharmacies or private clinics • Some travels to neighbouring countries and purchase 6 to 12 months supplies • Newspaper article (Al-Oula 1-7 March 2004) • Claims Kuwait has highest prices of medicines compared to other Gulf and Arabic countries, for example • Articles show prices for products by same company with same country of origin, for example in Kuwait: • Zocor® (simvastatin) is 2 x the price in Saudi Arabia • Roaccutance® (isotretinoin) is 3 x the price in Qatar • Ciprobay ® (ciprofloxacin) is 8 x the price in Egypt • In second half of 2003 prices changed twice 4% down then 10% up • National Assembly debated reducing prices in February 2004

23. PRICE SURVEY RESEARCH GROUP • Department of Pharmacy Practice, Faculty of Pharmacy, Kuwait University • Academic group • Composition: Kuwaiti citizens & expatriates • With permission of and in collaboration with Dept. of Pharmaceutical Services, Ministry of Health of Kuwait • Technical support and cooperation from WHO and Health Action International

24. Kuwait City Health area 1 Public hospital Health area 2 Public hospital Health area 3 Public hospital Health area 4 Public hospital Health area 5 Public hospital 4 polyclinics 5 retail pharmacies 4 polyclinics 5 retail pharmacies 4 polyclinics 5 retail pharmacies 4 polyclinics 5 retail pharmacies 4 polyclinics 5 retail pharmacies SAMPLE SELECTION 5 health governates were selected each served by a general hospital • Selection method follows WHO/HAI methodology • Dept. of Pharmaceutical services at MOH provided list of functional, primary health care clinics for each governorates • Random selection of polyclinics from those • Public: 5 hospitals + 20 polyclinics = total 25 facilities • Data: availability only • Private: total 25 retail pharmacies • Data: availability and prices

25. CORE AND SUPPLEMENTARY LISTS • Core list (30- 9 = 21) • Removed those not registered or not available at facilities to be surveyed (antimalarials, ARVs, fluconazole 200mg, fluphenazine inj.) • Supplementary list ( 14) • Based on common diseases (diabetes, hypertension), local usage patterns, off patent • ASA, carvedilol, cephalexin, chlorpromazine, fluconazole (50 mg), gemfibrozil, gliclazide, ibuprofen, indapamide, insulin, lisinopril, loratadine, paracetamol, simvastatin • Final list: 21 + 14 = 35

26. PRESENT STATUS • Permission granted from Ministry of Health  • Procurement data and access to public pharmacies • Public procurement data  • Official wholesale and retail prices  • Selection of polyclinics & retail pharmacies  • Survey to determine the most sold generic products • Only limited generics available in retail sector • Nearly complete • Information for price components • CMS official interviewed  • Need to clarify mark ups, pricing mechanism • Data collection • Availability only in public sector facilities • Availability & prices in retail pharmacies • Within next two months

27. PRELIMINARY RESULTS • Data not cleaned, cross-checked, etc. • hot off the press • Caution !! • Retail data based on official price lists not survey methodology • 1 list from MoH, 1 list from wholesale agent source • brand medicines only • Comparison with MSH and PBS reference prices separately • MPR = median price ratio (price/reference price)

28. BRAND PRODUCTS ONLY Public procurement vs. retail price Comparison of exactly same product – cost to Govt and, cost to private patient

29. GENERIC (public procurement) vs. BRAND (retail price to pt.)Retail + brand premium NB: Publicly procured product is generic but retail product is brand so premium represents buying the brand product privately compared to public procurement

30. AFFORDABILITY (RETAIL SECTOR) • Lowest daily wage of unskilled non-Kuwaiti worker: • KD 30/month US$ 100/month (still anecdotal) • 1 month glibenclamide 5mg (60 tabs) = 4.1 days • 7 days amoxicillin (21 caps) = 2.8 days • 1 month simvastatin 10mg (30 caps) = 12 days • 1 month fluoxetine 20 mg (30 tab) = 23 days Can get free in public sector Must buy in private sector

31. PRICE COMPONENTS & MARK-UPS Central Medical store prices • Public procurement usually FCA (“franco”) • all inclusive, warehouse to warehouse • else 2% clearance and 4% duty • Frequent promotional offer in tenders is to supply “free goods” with significant value • All products undergo batch quality testing before clearance from port • Private mark-ups awaiting confirmation • On top of set controlled price: • 25% for wholesaler • 25% for retailer

32. SUMMARY • Medicine prices are an issue even in high income countries • Following WHO/HAI methodology as closely as possible in Kuwait • Public procurement looks efficient • some MPRs lower than MSH for public procurement • higher retail MPRs • Controlled prices set high + mark ups • Brand penetration and demand by consumers ? • Suppress generic competition? • Relatively small private sector due to free basic medications for all • Data from public and private pharmacies in near future

33. Acknowledgments Thanks to: • Dr Ahmed Al-Duaij, Director of Pharmaceutical Services, MoH • Dr Yaqoub Salem, Central Medical Stores for co-operation and provision of information of public sector The Medicine Price Survey Study Group in Kuwait (MPSGK) • Dr. Douglas Ball leader of MPSGK, Faculty of Pharmacy • Dr. Nabeel Al-Saffar member of MOH & Faculty of Pharmacy • Dr. Eman Abahussein • Dr. Phil Capps • Ms Maha Fodeh • Dr. Ivan Idafiogho • Dr. Lloyd Matowe Department of Pharmacy Practice Faculty of Pharmacy Kuwait University

34. Medicine Prices: the Price Components Handbook History, thenew approach, and a few open issues for discussion Libby Levison

35. By the end of this session you should... • Understand the financial burden of add-on costs (component costs) in medicine supply • Distinguish between the price effect of local add-ons and manufacturers’ pricing practice • Understand the inter-relatedness of component costs and drug policy, and the number of actors involved in reducing component costs

36. Structure of presentation • An example of price components • The Medicine Prices: Price Components methodology • Open issues • Discussion: what add-on prices have you encountered?

37. Price components or “hidden costs” “International price comparison in the field of pharmaceuticals is subject to many pitfalls, and retail prices, in particular, are often a distant relation to manufacturer’s selling price. Import duties, taxes, wholesale markups, both formal and informal, can double the price of a drug between manufacturer and consumer.” (WHO Secretariat 2001)

38. Procurement cost Procurement cost = manufacturer’s selling price + freight + import tariffs & taxes (national, state, local) + wholesale & retail markups + staff salaries + procurement practices + distribution & storage + stock losses, expiry, damages…

39. Rate 100 Import tariff 10.0% 110 Total 10% 10% Hidden costs: Tanzania (Myhr 2000)

40. Rate 100 Import tariff 10.0% 110 Port charges 1.0% 111 Total 11% 11% Hidden costs: Tanzania (Myhr 2000)

41. Rate 100 Import tariff 10.0% 110 Port charges 1.0% 111 Clearance/freight 2.0% 113 Total 13% 13% Hidden costs: Tanzania (Myhr 2000)

42. Rate 100 Import tariff 10.0% 110 Port charges 1.0% 111 Clearance/freight 2.0% 113 Pre-shipment inspection 1.2% 114.20 Total 14.2% 14.20% Hidden costs: Tanzania (Myhr 2000)

43. Rate 100 Import tariff 10.0% 110 Port charges 1.0% 111 Clearance/freight 2.0% 113 Pre-shipment inspection 1.2% 114.20 Pharmacy board fee 2.0% 116.20 Total 16.2% 16.20% Hidden costs: Tanzania (Myhr 2000)

44. Rate 100 Import tariff 10.0% 110 Port charges 1.0% 111 Clearance/freight 2.0% 113 Pre-shipment inspection 1.2% 114.20 Pharmacy board fee 2.0% 116.20 Wholesale markup ??? Total 16.2% 16.20% Hidden costs: Tanzania (Myhr 2000)

45. Rate 100 Import tariff 10.0% 110 Port charges 1.0% 111 Clearance/freight 2.0% 113 Pre-shipment inspection 1.2% 114.20 Pharmacy board fee 2.0% 116.20 Wholesale markup ??? Retail markup *50.0% 174.30 Total 66.2% 74.30% Hidden costs: Tanzania (Myhr 2000)

46. Rate 100 Import tariff 10.0% 110 Port charges 1.0% 111 Clearance 2.0% 113 Pre-shipment inspection 1.2% 114.20 Pharmacy board fee 2.0% 116.20 Wholesale markup ??? Retail markup 600.0% 818.83 Total 700%++ Hidden costs: Tanzania (Myhr 2000)

47. Country Total costs Sri Lanka 63.97% Kenya 54.22% South Africa 74.05% Brazil 82.38% Armenia 87.50% Kosovo 73.64% Nepal 48.08% Pune, India 81.94% Mauritius 59.26% Average: 69.9% Cost summary: country comparison

48. Sources of hidden costs • Government regulations (tariffs, port charges, markups, Pharm board fee) • Programmatic (procurement method used, warehousing, distribution, stock expiry) • General (inflation, theft)

49. Rate 174.30 Inflation/replacement 9-14% 189.99 Stock loss, expiry 0-35% 189.99 Financial 0-10% 189.99 Carrying costs 10-35% 208.99 Domestic handling 9.5-15.5% 228.84 Total 28.5 – 99.5% 228.84 Compound total 128.84% Other hidden costs

50. Limitations Add-on costs differ among sectors Add-on costs differ across products Add-on costs differ between generic and innovator forms Add-on costs differ among countries: comparison difficult