By Tatiana Andia*
During the first weeks of April UNAIDS and the World Health Organization (WHO) hosted the 2014 HIV Market Forum in Geneva, where they brought together international experts to discuss the status of access to diagnostic methods and antiretroviral medication in the world. They also discussed possible strategies to improve access.
During the event, one of the most criticized strategies to improve access was that of differentiated pricing or “tiered pricing.” Differentiated pricing is a way to sell medication and vaccines at lower prices in developing countries based on national income levels. This strategy was the pharmaceutical industries’ response to the criticism made by advocates for greater access to medication and patients who consider high prices to be one of the biggest barriers when accessing treatment in developing countries. However, many NGOs, academics and activists who work on this issue believe it is only a partial solution that does not adequately solve the problem of access to health care products including medication.
One of the critiques made by public health advocates is that while tiered pricing guarantees different prices, it does not necessarily guarantee fair prices. These advocates believe that the best alternative to guarantee greater access to medication is still to increase competition. According to this position, unlike differentiated pricing, greater competition has shown to reduce prices for everyone in the long term, instead of adjusting them to the purchasing capacity of various actors.
But perhaps the most important critique of tiered pricing is that these types of policies give government, who have to pay for these health care products, very little decision-making power. This is especially true for middle-income countries. Instead, price setting is completely left in the hands of the production companies.
While I completely agree with this last critique, I would add that governments dealing with tiered pricing face an additional problem. In some cases, even when companies allege that they have a differentiated global pricing policy, the governments of middle-income countries are not only unable to negotiate a better price, they also have to fight to get the lower prices allegedly offered by the companies.
To illustrate this, let’s look at the cases of Colombia and Ecuador, who have attempted to access the lower prices offered to middle income countries for the antiretroviral Kaletra (lopinavir/ritonavir) produced by Abbott Laboratories (now Abbvie). According to a report by Doctors Without Borders on HIV-AIDS treatment pricing, the price set by Abbot for this product for middle-income countries is US $749 per patient per year (PPY). However, neither Colombia nor Ecuador were able to easily access this price. In Colombia the price of Kaletra prior to 2008 reached US $3,500 PPY and in Ecuador it was US $1,100 PPY.
Instead of automatically accessing the tiered price that Abbott had globally committed to, for Colombia as well as Ecuador, it took the mobilization of HIV patients, public health advocates and government intervention to finally get the price they were in theoretically entitled to.
In Colombia an initial price regulation expressly requested by civil society organizations reduced the price of Kaletra from US $3,500 PPY to US $1,067 PPY in 2009. Only after another price regulation in 2013, spurred by litigation by the same civil society organizations, did the price finally drop to $740 PPY, the global price Abbot set.
In Ecuador, it took the government’s declaration in 2010 that Kaletra was of public interest and the issuance of obligatory licenses, which allowed any company to produce the medication regardless of patent protections, for Abbot to offer the government the global price.Today both Colombia and Ecuador purchase Kaletra at the established global price for middle-income countries, but both had to display their regulatory powers and political might to get this. Furthermore, as the chart in Figure 1 below shows, the price that they obtained with so much effort is almost double the price of the generic version. Thus, there is no doubt that we should remain skeptical of “tiered pricing” as a way to increase access to HIV-AIDS treatment.
Figure 1. Kaletra’s Price change in Colombia and Ecuador (2008-2013)