Global tiered pricing, a new frontier for pharma
Tiered pricing - the concept of selling a medicine in developing countries at prices systematically lower than in industrialised countries has long since received widespread support from all related parties as a way to improve access to medicines for the poor. However, the correlation between a products price and the local economic conditions has found to be tenuous at best in places.
For some emerging markets, tiered prices are in place in areas such as infectious diseases, diabetes and hypertension. However, there is now a push to expand this to increase patient access to therapeutic innovations for critical illnesses such as breast cancer, stroke and multiple sclerosis, with payers keen to see corresponding tiered prices for treatments of these diseases.
Whilst pharma companies are keen to apply tiered pricing to these therapeutic areas, and have been differentiating prices for new medicines to ensure that socio-economic realities are matched to individual markets for a while now. The patient populations are too small to effectively implement a tiered pricing strategy, and the cost of manufacturing innovative products, particularly in the biotechnology sector, pushes the floor price already out of the range of many emerging economies.
Payers, governments, and non-governmental organisations in emerging markets are not happy, as they believe that the lower prices offered are not low enough. On the other hand, advanced markets, believe they may go too far as they are aware of the discounted prices available to poorer economies and may have these in mind during price negotiations, which can increase the risk associated with global tiered pricing strategies.
