Analysis of prices paid by low-income countries: how price sensitive is government demand for medicines?

Divya Srivastava and Alistair McGuire

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Background:- Access to medicines is an important health policy issue. This paper considers demand structures in a selection of low-income countries from the perspective of public authorities as the evidence base is limited. Analysis of the demand for medicines in low-income countries is critical for effective pharmaceutical policy where regulation is less developed, health systems are cash constrained and medicines are not typically subsidised by a public health insurance system Methods:- This study analyses the demand for medicines in low-income countries from the perspective of the prices paid by public authorities. The analysis draws on a unique dataset from World Health Organization (WHO) and Health Action International (HAI) using 2003 data on procurement prices of medicines across 16 low-income countries covering 48 branded drugs and 18 therapeutic categories. Variation in prices, the mark-ups over marginal costs and estimation of price elasticities allows assessment of whether these elasticities are correlated with a country’s national income. Results:- Using the Ramsey pricing rule, the study’s findings suggest that substantial cross-country variation in prices and mark-ups exist, with price elasticities ranging from -1 to -2, which are weakly correlated with national income. Conclusions:- Government demand for medicines thus appears to be price elastic, raising important policy implications aimed at improving access to medicines for patients in low-income countries.

Keywords: Medicines; Low-income countries; Pharmaceutical policy; Health policy; Government procurement (search for similar items in EconPapers)
JEL-codes: N0 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in BMC Public Health, 2014, 14(1), pp. 767. ISSN: 1471-2458

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