Healthy Skepticism Library item: 13241

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Publication type: news

Jack A.
GSK varies prices to raise sales
Financial Times 2008 Mar 16
http://www.ft.com/cms/s/0/4dc2b3bc-f380-11dc-b6bc-0000779fd2ac.html

Full text:

GlaxoSmithKline has begun a groundbreaking effort to boost sales and expand treatment in the developing world by selling medicines to patients at different prices linked to their ability to pay.

The UK-based pharmaceutical group has launched experiments to extend its practice of differential or “tiered pricing” by offering its medicines at variable prices within, as well as between, middle-income countries.

The policy, known internally as “tearing down the barriers”, is under test in nations including India, South Africa and Morocco, which have a significant and growing middle class as well as many people with far lower incomes and little access to subsidised healthcare.

The approach, which will be described in its annual corporate social responsibility report issued this week, is designed to generate a premium to recover development costs on new medicines from wealthier people in emerging economies without excluding those who cannot afford to pay.

In a marked shift from the more wide-ranging practice of offering low-cost antiretroviral medicines for HIV in the developing world, the GSK test includes Avandia, a medicine for diabetes.

While it has in the past offered HIV medicines close to cost price in the world’s poorest countries, in middle income countries it has traditionally charged relatively high prices targeting the small but richest socio-economic classes.

Its new policies are designed to extend its products to far less well-off groups at significant discounts, while recognising that it will be unable to offer medicines so cheaply that they can compete with locally produced generics targeted at the very poorest.

GSK hopes that a greater volume of sales to a larger share of the population will offset lower prices, as well as freeing up governments’ scarce health resources in developing countries to focus on treating their most impoverished.

Pharmaceutical companies have traditionally been cautious about tiered pricing – especially within countries – because of fears that medicines charged at the lowest prices for the poor will be ”diverted” by middlemen for resale to richer groups. However, GSK has identified little such diversion in practice since it began its pilot programmes in late 2006.

Its strategy to minimise the practice include the use of different colours, packaging and branding of the same medicines to distinguish the richer and poorer markets.

The company’s social responsibility report makes little mention of diversion, but highlights a growing number of raids around the world against counterfeiters of its medicines. It identified 429 cases of fake GSK drugs last year with a value of £15m.

The most widely faked drugs were Heptodin and Zeffix – brand names for the antiviral lamivudine for hepatitis – and Panadol, as well as Sensodyne toothpaste.