Companies are using more tiered pricing schemes

Further Reading

More companies are using tiered pricing schemes, and applying them to a broader range of products and in more countries, but it is unclear whether the price reductions are enough to meaningfully increase affordability.

The use of inter-country and intra-country tiered pricing, where companies set different prices for the same product depending on the target country or population group within a country, is increasing, with more than three quarters of companies now engaged in it. The number of companies applying the approach within countries has increased from five in 2010 to 12 in 2012. The affordability impact of these schemes is uncertain partly because not all companies disclose the extent of their price reductions, but also because across companies that do disclose, there is little commonality in the way that pricing tiers are constructed and in the reference points used to calculate price reductions. It is therefore not possible to compare schemes in order to assess which companies are delivering affordability.

An additional two factors interfere with the industry’s attempt to use tiered pricing to lower prices. Firstly, companies often do not monitor the extent of mark-ups that third-party sales agents add to the price of their drugs, which means that even if the company sets low prices, the patient might still be paying high marked- up prices. Secondly, while so few companies use differentiated packaging to prevent drugs meant for the poor being diverted and ending up in the hands of richer patients, there is a risk of medicines not being available for the intended communities and that revenues lost through such market leakage could jeopardise the very sustainability of these schemes.

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