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Open Access Highly Accessed Research article

Analysis of prices paid by low-income countries - how price sensitive is government demand for medicines?

Divya Srivastava1* and Alistair McGuire2

Author Affiliations

1 OECD, 2 Rue Andre Pascal, Paris 75016, France

2 LSE Health, London School of Economics and Political Science, Houghton Street, London WC2A 2AE, United Kingdom

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BMC Public Health 2014, 14:767  doi:10.1186/1471-2458-14-767

Published: 30 July 2014

Abstract

Background

Access to medicines is an important health policy issue. This paper considers demand structures in a selection of low-income countries from the perspective of public authorities as the evidence base is limited. Analysis of the demand for medicines in low-income countries is critical for effective pharmaceutical policy where regulation is less developed, health systems are cash constrained and medicines are not typically subsidised by a public health insurance system

Methods

This study analyses the demand for medicines in low-income countries from the perspective of the prices paid by public authorities. The analysis draws on a unique dataset from World Health Organization (WHO) and Health Action International (HAI) using 2003 data on procurement prices of medicines across 16 low-income countries covering 48 branded drugs and 18 therapeutic categories. Variation in prices, the mark-ups over marginal costs and estimation of price elasticities allows assessment of whether these elasticities are correlated with a country’s national income.

Results

Using the Ramsey pricing rule, the study’s findings suggest that substantial cross-country variation in prices and mark-ups exist, with price elasticities ranging from -1 to -2, which are weakly correlated with national income.

Conclusions

Government demand for medicines thus appears to be price elastic, raising important policy implications aimed at improving access to medicines for patients in low-income countries.

Keywords:
Medicines; Low-income countries; Pharmaceutical policy; Health policy; Government procurement