Global Healthcare on the Ground: Differential Pricing

Tiered pricing is used throughout industry to help increase affordability and access to drugs in the developing world.
Dec 02, 2010
Volume 34, Issue 12

Many companies use tiered pricing models, also known as differential pricing, for the distribution of their pharmaceutical products. Tiered pricing involves offering a drug product at a lower price or percentage to populations in developing countries or least developed countries (LDCs), thereby making the product more accessible to populations in need.


The strategy largely took off in 2000 with the launch of the Accelerating Access Initiative (AAI), a collaboration of global regulatory bodies, United Nations (UN) agencies, and the pharmaceutical industry. AAI used the UN human development index to determine eligibility for differential pricing and focused on antiretroviral drugs (ARVs) to treat HIV/AIDS. In addition, industry and UN leaders tied the initiative to efforts to meet Target 4 of UN Millennium Development Goal 8 (MDG 8), which calls for pharmaceutical companies to establish partnerships to provide access to affordable drugs in developing countries.

In 2001, the World Trade Organization's Doha Declaration on Trade-Related Aspects of Intellectual Property Rights (TRIPS), allowed low-income countries to issue compulsory licenses to companies to manufacture patented drugs (i.e., generic versions) at less-than-market cost without the innovator's approval in cases of public health emergency tied to HIV/AIDS, malaria, and tuberculosis. (TRIPS has been extended to 2016, although WTO is looking into ways to provide extra flexibility so that countries unable to produce pharmaceuticals domestically can import patented drugs made under compulsory licensing (1)). In May 2003, the European Union passed regulation that enables exporters to deliver essential drugs at tiered prices to poor countries by making sure the goods are not diverted back to the European Union (i.e., ensuring that regular market prices remain intact within the EU).

Current practice

Key definitions
Most tiered-pricing programs still focus on ARVs as well as treatments for tuberculosis and malaria. The World Health Organization (WHO) monitors and tracks pricing through its global price-reporting mechanism. Differential pricing remains voluntary and most pharmaceutical manufactures have their own pricing schemes for determining which countries qualify for discounts and at what rate. Many pharmaceutical companies place countries into three groups (low, middle, and high income, see sidebar "Key definitions").

Merck (Whitehouse Station, NJ) was one of the first pharmaceutical companies to implement differential pricing for ARVs and began disclosing its prices in 2001 (2). Many other companies have followed suit. GlaxoSmithKline (GSK, London), for example, provides certain vaccines to LDCs at a 90% discount and offers its patented drugs to LDCs at a price no higher than 25% of the price paid in developed countries. The company is starting to modify its prices for middle-income countries as well (3).

Roche (Basel, Switzerland) sells Tamiflu (oseltamivir) at a reduced price for government pandemic stockpiling and offers additional price reductions to low-income countries. The company also has donated nearly 11 million treatment courses of Tamiflu to WHO, including 650,000 pediatric treatments.

Novo Nordisk (Bagsvard, Denmark) offers human insulin to LDCs at prices that do not exceed 20% of the average price in Europe, Japan, and North America (4). And Bristol-Myers Squibb has run a Global Access program since 2001 that provides the company's HIV medicines at no-profit prices to those regions most impacted by HIV and with limited ability to pay (mainly sub-Saharan Africa) (5). These are only a few examples of pharmaceutical manufacturers working to meet UN MDG 8.

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