NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Pharmaceutical Pricing in Emerging Markets: Effects of Income, Competition and Procurement

Patricia M. Danzon, Andrew W. Mulcahy, Adrian K. Towse

NBER Working Paper No. 17174
Issued in June 2011
NBER Program(s):   HC   HE   IO

This paper analyzes determinants of ex-manufacturer prices for originator and generic drugs across a large sample of countries. We focus on drugs to treat HIV/AIDS, TB and malaria in middle and low income countries (MLICs), with robustness checks to other therapeutic categories and other countries. We examine effects of per capita income, income dispersion, number and type of therapeutic and generic competitors, and whether the drugs are sold to retail pharmacies vs. tendered procurement by NGOs.

The cross-national income elasticity of prices is 0.4 across high and low income countries, but is only 0.15 between MLICs, implying that drugs are least affordable relative to income in the lowest income countries. Within-country income inequality contributes to relatively high prices in MLICs. Number of therapeutic and generic competitors only weakly affects prices to retail pharmacies, plausibly because uncertain quality leads to competition on brand rather than price. Tendered procurement attracts multi-national generic suppliers and significantly reduces prices for originators and generics, compared to prices to retail pharmacies.

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Document Object Identifier (DOI): 10.3386/w17174

Published: “Pharmaceutical pricing in emerging markets: Effects of income, competition, and procurement” with Andrew W. Mulcahy and Adrian K. Towse. Health Economics 2013. DOI: 10.1002/hec.3013

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