Journal Article

Price discrimination in essential medicines: evidence from International Drug Price Indicator Guide data

Michael Hanlon and Raymond Zhang

in International Health

Published on behalf of Royal Society of Tropical Medicine and Hygiene

Volume 5, issue 1, pages 58-63
Published in print March 2013 | ISSN: 1876-3413
Published online December 2012 | e-ISSN: 1876-3405 | DOI: http://dx.doi.org/10.1093/inthealth/ihs006
Price discrimination in essential medicines: evidence from International Drug Price Indicator Guide data

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Background

Few data are available on what donors, governments and other implementing organisations pay for the medicines they procure. To partly address this shortcoming, we analyse transactions of pharmaceuticals on the WHO's essential medicines list. Our objective was to identify the determinants of prices paid for these drugs.

Methods

We used data from the 2008 version of the International Drug Price Indicator Guide. We normalised transactions by representing their value as a ‘price per daily dose’. We used a mixed-effects regression model to quantify the impact of observable characteristics on prices paid.

Results

We present evidence of first-degree price discrimination in the market for essential medicines. We find that as a country's per capita wealth doubles, prices paid for the same pharmaceutical increase by 33%.

Conclusions

These data indicate that purchasing agents from wealthier countries pay more for essential medicines, all factors constant. This behaviour is not a form of development assistance for health but rather is indicative of inefficient markets in which buyers' lack of information enables suppliers to charge higher prices than they could otherwise.

Keywords: Pharmaceutical prices; Essential medicines; Price discrimination; International Drug Price Indicator Guide; Price per daily dose

Journal Article.  3256 words.  Illustrated.

Subjects: Community Medical Services

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