Tiered Pricing Enables Health for All

The issue of affordable access to vaccines in less developed countries was recently raised by Financial Times reporter Andrew Jack.  Specifically, Mr. Jacks’ article highlighted the contentious issue of differential pricing between rich, poor and middle-income countries — and how PAHO’s vaccine system is undermining efforts to provide vaccines to the least developed countries in Latin America, Africa and elsewhere around the world.  Patients and Patents further discussed this issue in a recent blog (PAHO’s vaccine system hampers African efforts).

Dr. Wayne Taylor, F.CIM of the Cameron Institute — a not-for-profit think tank based in Canada — recently commented on the FT article and offered his views on the issue:

The June 23, 2009 Financial Times article by Andrew Jack entitled: “Vaccine system hampers progress in Africa” examines an important and often misunderstood issue relating to access to medicines in the developing world. Mr. Jack is right, that the issue of differential pricing between rich, poor and middle-income countries is contentious and that “tensions will increase”. But going beyond the hyperbole reported from the various stakeholders and examining the reality of the issue one can only conclude that the “vaccine system” does not hamper progress in less developed countries in Africa or elsewhere.

Differential pricing or “tiered pricing” has been successfully used in many industries for many years based upon identifying different “classes” of buyers for which differentiated pricing would be used. For over a decade the World Bank’s Human Development Network has endorsed tiered pricing for vaccines as a means to increase economies of scale in production through greater sales thus reducing costs, prices and distribution inequities around the world. (1) Costs of vaccines are recovered through higher market pricing in rich nations, moderate bulk procurement pricing in middle income countries, and much reduced pricing in the poorest of countries.

Most important to understand is that this is not subsidization of one country by another. Each country pays what it can afford for its citizenry – either through private plans or government plans (and mostly the latter for vaccines) thus removing financial barriers to access.(2) According to the Global Alliance for Vaccines and Immunization (GAVI) this private sector mechanism benefits all humankind equally in that poorer nations can now afford brand new vaccines earlier in their life cycle putting them on par with the richest of countries – one of the few, measurable tactics that has moved the world towards the goal of health for all.(3)

The Pan American Health Organization (PAHO) wants to negotiate a single price for all its member states. Let’s compare two PAHO member states: Canada’s 2007 per capita income was $35,310 (4) thus placing it in the higher price market segment. Haiti’s 2007 per capita income was $560 placing it amongst the poorest countries of the world, a market segment that also includes many sub-Saharan African countries, which are most deserving of lowest possible GAVI prices. PAHO also includes middle income member states such as Argentina that had a 2007 per capita income of $12,990, and Brazil which is often grouped with Russia, India and China into the BRIC group of rising economic powers.

PAHO must accept their share of the responsibility in ensuring health for all in the 21st century. Many Latin American countries are “rich” today compared to most African states and some of their sister “south” American nations. Middle income PAHO states cannot hold much of Africa or their own poorer member countries like Haiti hostage for the self-interests of their more powerful, richer rapidly developing countries.

D. Wayne Taylor, PhD, F.CIM
Executive Director
The Cameron Institute
Hamilton, Ontario, Canada

(1) For a commentary on this see Amie Batson, “Win-Win Interactions between The Public and Private Sectors”, Nature Medicine, 1998;4(5S):487-91.
(2) Jens Plahte, “Tiered pricing of vaccines: a win-win-win situation, not a subsidy”, THE LANCET Infectious Diseases, 2005;5(1);58-63.
(3) GAVI is the organization that advocates for and works with nations that have a gross national income per capita of

PAHO’s vaccine system hampers African efforts

Efforts to make newer and more costly vaccines widely available to the poorest in Africa are being hampered by a long-standing system that makes vaccines affordable to middle-income Latin American countries, reports the Financial Times.

The Pan American Health Organization’s (PAHO) revolving fund, which began in 1979, negotiates substantial discounts with manufacturers on prices in richer countries, offering in exchange significant volumes, predictable demand and funding.

At issue is a clause demanding that the vaccines purchased for these middle-income countries are made available at the “lowest possible price” charged anywhere in the world, making it impossible to negotiate even lower prices to poorer countries.

Disagreement between PAHO and the Global Alliance on Vaccines and Immunisations (GAVI), has already delayed wider use of certain vaccines amongst the poorest of countries.

GAVI uses mechanisms such as advance market commitments and IFFIm’s (long-term, guaranteed aid funding from donor countries) to overcome historic limitations to development funding for immunisation.

GAVI also relies on the principle of tiered pricing to provide vaccines to the poorest of countries.  Countries are grouped using a range of indicators of ability to pay, with poorer countries paying less per vaccine.

Companies have been increasingly willing to offer discounts on western prices to poorer countries, but they want richer countries to pay more in line with income levels to help support access to the poorest as well as research for future products.

Tension emerged last year over Wyeth’s vaccine against pneumonia and meningitis, which was offered to the revolving fund at $26 a dose, less than a third of its price in richer countries.  However, the fund’s demand for the lowest possible price clashes with negotiations at $7 a dose for countries served by Gavi – with gross national income less than $1,000 a head.

Director of PAHO blogs about annual meeting, public health and innovation

The Director of the Pan-American Health Organization (Mirta Roses) stated in her blog that this year’s PAHO assembly would focus particularly on matters related to innovation and research.  ”Proposals for action to strengthen vital and health statistics, as well as the link between public health, innovation, and intellectual property, are part of our integral efforts to promote evidence-based policies.”

The debate around ensuring access to safe medicines and protecting strong incentives for continued medical innovation is of the utmost importance to patients around the world.  It is unfortunate that, more than a month after the annual meeting, PAHO seems to be maintaining the same secrecy as did the World Health Organization in the development of their Intergovernmental Working Group on Public Health, Innovation and Intellectual Property.  As PAHO further explores these issues, it is essential that patients be included in the process.

Director of PAHO’s Blog
The Home for Health in the Americas strengthening actions in public health and improving the social protection in health for our populations.

This week we are celebrating at our Headquarters, which I also call the Home for Health in the Americas, the 48th Directing Council of our Organization, in which all the Member States participate. At the opening session, we had the good fortune to have with us Dr. Margaret Chan, Director-General of the World Health Organization, His Excellency José Miguel Insulza, Secretary-General of the Organization of American States, and representatives from the other institutions of the Inter-American system, the observer states, and agencies and entities that cooperate with our efforts.

The Council’s intense agenda, which will occupy the entire week, will focus particularly on matters related to innovation and research. Proposals for action to strengthen vital and health statistics, as well as the link between public health, innovation, and intellectual property, are part of our integral efforts to promote evidence-based policies.

We are taking this action because our commitment, each of us in his own area but conscious that all of us are connected to one another in a network to improve public health, is to get results. This demands self-criticism to examine the progress made toward meeting noble and ambitious targets, such as those in the Development Goals of the Millennium Declaration, and timely action to adopt the measures necessary for meeting them, such as the Regional Strategy and Plan of Action for Neonatal Health within the Continuum of Maternal, Neonatal, and Child Care. It also demands solidarity among the Member States, a distinctive feature of public health in our Region, exemplified once again in the recent launch of the Action NOW for the Lives of Mothers, Newborns, and Children Initiative, a notable example of horizontal cooperation and solidarity among developing countries that is supported by the Prime Minister of Norway and a network of political leaders, headed in our Region by President Bachelet and President Lula. I congratulate Dr. Chan on the success of her activities in this area in New York last week, and I thank all the many government authorities and First Ladies of the Region, who have made the improvement of maternal, neonatal, and child care a high political priority.

Solidarity also implies a resolute struggle against inequity and poverty and their terrible consequences for public health. For this reason, activities to promote social protection and equitable access to quality health services are moving forward. Examples of these are proposals to make progress in the elimination of neglected diseases and in staunch promotion of the primary health care strategy, as well as support for the priority countries, with special emphasis on collaborative health efforts in Haiti.

It is clear that measures to reduce the risk and burden of disease, among them the Regional Strategy and Plan of Action for Cervical Cancer Prevention and Control and efforts for the prevention and management of diabetes and obesity, should be viewed in the context of health determinants and actions to address them. Therefore, the agenda also includes climate change and its impact on public health, a phenomenon that has been the focus of much of our effort this year (to which I have referred in other blogs) and that, as the latest evidence reported some days ago reveals, is intensifying at a rate that exceeds even the grimmest scientific forecasts. The consequences are, unfortunately, very real. Some Ministers of Health, understandably, could not participate in the meeting because they are grappling with the consequences of the severe hurricane season in the Caribbean.

We have major challenges ahead of us, then, as well as opportunities that the participants in this meeting of the Directing Council will address with the sense of responsibility and commitment characteristic of people devoted to the mission of public health. I am certain that this week of working together in solidarity will lead to new successes in public health in the Region.

Mirta Roses

Pan-American stakeholders speak out on innovation and public health

As the Pan-American Health Organization (PAHO) meets this week in Washington D.C., so too did a group of key healthcare stakeholders from across the Americas.  As part of their meeting this week, PAHO delegates will be reviewing the World Health Organization’s draft strategy on improving access to medicines and healthcare in developing countries.  While patients, providers, economists and academics alike agree that this is an important goal, they also advised PAHO delegates to ensure the health of future generations by protecting a strong environment for medical innovation.

The following is a press release co-distributed by the Creative and Innovative Economy Center at the George Washington University Law School and the National Hispanic Medical Association:

PAHO delegates advised to protect the health of future generations by fostering a strong environment for medical innovation throughout the Americas

Washington, D.C. (September 30, 2008) – Today, key healthcare stakeholders from across the Americas came together to send a unified message to members of the Pan American Health Organization (PAHO) – protect the health of future generations by fostering a strong environment for medical innovation.  This statement coincides with the gathering of PAHO delegates in Washington D.C. for their annual assembly where they will discuss, amongst other topics, the World Health Organization’s draft strategy on public health, innovation and intellectual property.

“The WHO’s proposed strategy was intended to address the need for new treatments and to improve access to medicines in developing countries.  While we certainly support this objective, we are among many patient groups who fear that components of the proposed plan will have serious negative consequences for patients in developed and developing countries,” said James Sykes, Director of Global Programs, Policy and Advocacy for The AIDS Institute.

“Medicines that patients are using today, whether they are patented medicines or generic copies, are available because of policies and laws that encourage innovation,” said the Honorable Ralph Oman, Fellow of the Creative and Innovative Economy Center at George Washington University Law School and former U.S. Register of Copyrights.  “Strong patent rules and other appropriate incentives that encourage pharmaceutical research, development and innovation offer the best hope to patients with life threatening diseases.”

“As medical practitioners, we see firsthand the benefits conferred by innovative pharmaceutical therapies,” said Elena Rios, President and CEO of the National Hispanic Medical Association.  “We recommend that PAHO support measures that maintain intellectual property rights and encourage innovation while improving access to medicines.”

“The focus of PAHO’s efforts to improve access to medicines and healthcare, which is of particular importance to patients in Latin America, should be less on intellectual property, and more on creating long-term solutions,” said Elena Alvarado, President and CEO of the National Latina Health Network.  “This will require a multi-faceted approach that tackles poverty, lack of infrastructure, lack of health care workers and other basic barriers to access.”

“Public-private partnerships and technology transfer arrangements are just a few examples of the innovative collaborations taking place between the pharmaceutical industry, governments, NGOs, academics and other stakeholders to achieve a common goal – improving public health,” said Richard Kjeldgaard, Associate Vice President for the Pharmaceutical Research and Manufacturers of America.  “These initiatives complement the current IP system and have been effective in improving regional health outcomes.”

A Patient Declaration on Medical Innovation and Access further supports this call for the protection of a strong environment in the Americas for medical innovation.  Signed by over 110 patients and patient representatives from 26 countries around the world, the Patient Declaration recommends that the WHO and PAHO:

• Ensure effective healthcare infrastructure in developing countries to help prevent disease and optimize use of medicines; 
• Support strategies to improve access to safe treatments; 
• Ensure strong incentives for continued R&D and innovation; 
• Investigate and adopt other access initiatives such as the GAVI Alliance and public-private partnerships.

As the Pan-American Health Organization meets this week, it is important that delegates understand the importance of fostering a strong environment for medical innovation to protect the health of future generations.

This event was supported by PhRMA, which shares the stakeholders’ views on the need for a comprehensive approach to providing health care and innovative medicines in the Americas.