Access to affordable drugs hinges on competition

Study notes lowest prices in India, South Africa 

Developing nations with greater market competition for antiretrovirals and more generic drugs tend to have cheaper antiretrovirals available through the private sector, according to a new study.

"We found, as expected, that in countries where a monopoly for a certain drug, exists they have higher drug prices on those drugs," says Jan Ostermann, PhD, research associate at the center for health policy, law, and management at Duke University in Durham, NC.

"Patent holders charge significantly higher prices than generic producers, and the magnitude of those factors is quite substantial," Ostermann says. "In a monopolistic market, the prices are nearly 50% higher than in a competitive market, and the patent holder charges, on average, 75% more for a drug than a nonpatent holder."

The study concluded that competition has the greatest impact on antiretroviral drug prices, although patent laws, advocacy strength, international scrutiny, and political pressure also play a role.1

Investigators looked at nine antiretroviral medications that are sold in private-sector markets, including retail sales to pharmacies, but did not include prices of drugs in government-sponsored programs, notes Kermit Jones, an MD/JD student at Duke University.

Declining prices 

The drugs included in the study were selected based on their acceptability and use, he adds.

"What we wanted to do is look at several factors, including the measures of patent strength of a particular country, and we wanted to use a variable that looked at actual economic strength of that country," Jones explains. "We used per-capita gross domestic product (GDP) for that; and as a control, we had the prices of several medications used to treat opportunistic infections."

The expectation was that if prices were higher in a country for one kind of drug, then antiretroviral medication prices also would be higher, Ostermann says.

"We looked at a time trend overall and found prices on average declined 8% per year over the study period of 1995 to 2002," he adds.

The study does not break down the estimates by individual drugs, so they are an average across countries, Ostermann notes.

During the study, there was an increase in GDP that was associated with a decrease in the price of antiretrovirals, Jones says.

"The estimate on GDP reflects changes in wealth, and it’s correlated with time, basically," Ostermann says. "During that seven-year period, we noticed an increase in the GDP, a general strengthening of the patent index, and a trend to lower antiretroviral medication prices."

Since these three trends happened together, investigators are not able to say how they relate to one another, he says.

"If the patent index increases in a country, we might expect manufacturers to be able to command a higher price for the drugs. But over time and with increases in the GDP, we might expect a lower price," Ostermann adds.

In reality, India showed the greatest increase in per-capita GDP during that period and also had the greatest strengthening in patent law, and yet had among the lowest prices in antiretroviral drugs, he says.

In 1995, the antiretroviral prices in India were comparable to other developing countries, Jones says. However, by the end of the study period, India’s prices were much lower and its HIV prevalence was higher, Ostermann points out.

Increasing suppliers

"One way to decrease prices and make antiretrovirals more available is to increase suppliers in a particular country," he says. "Eliminating monopolies on particular drugs will have the greatest effect on price levels."

The research may contribute to the international debate over antiretroviral medications and cheap, generic alternatives.

"We realize that part of the debate is that pharmaceutical companies have a legitimate point about property rights and protecting their investment interests and encouraging the continuation of drugs," Jones says.

"But it seems from any economic standpoint, the most amount of money is spent in upfront research costs, and once these medications are discovered, generic competitors have proved they can come in here and produce them for pennies on the dollar," he notes.

One possible solution would be to find a way to decrease the upfront research costs through a regulated research bank or tax incentives to offset research costs, Jones adds.

Reference

1. Jones KL, Ostermann J, Bartlett J, et al. Country specific factors and price of antiretroviral medicines in several developing countries. Presented at the IDSA Conference. Boston; September/October 2004. Poster: 854.