A win-win solution?: A critical analysis of tiered pricing to improve access to medicines in developing countries

Authors: Suerie Moon, Elodie Jambert, Michelle Childs and Tido von Schoen-Angerer

Authors from MSF and Harvard School of Public Health have published a critical analysis of the role of tiered pricing to improve access to medicines in developing countries. The study was presented today at the Third International Conference for Improving Use of Medicines in Turkey.

Tiered-pricing is the concept of selling drugs and vaccines in developing countries at prices systematically lower than in industrialised countries and is increasingly used for newer medicines.

The analysis includes case studies on prices for medicines for HIV, malaria, drug-resistant tuberculosis and visceral leishmaniasis, and for pneumococcal vaccines. The authors found that tiered prices are generally higher than those achieved by competition. In many developing countries, resources are often stretched so tight that affordability can only be approached by selling medicines at or near the cost of production.

Identified challenges with tiered pricing include that the decision-making power lies entirely in the hands of manufacturers and that arbitrary divisions between countries can lead to very high prices for middle-income markets. However, in special cases, tiered pricing can be the only practical option to ensure access in the short term; for example, when market volumes are small and/or it is not possible to immediately have competitors. 

Competition should generally be the default option for achieving affordability, as it has proven to be superior to tiered pricing for reliably achieving the lowest sustainable prices. Policies that “de-link” the financing of R&D from the price of medicines are needed, since they can reward innovation while exploiting robust competition in production to generate the lowest sustainable prices.