The Future of Global Health Procurement: Issues around Pricing Transparency

Berdud, M., Chalkidou, K., Dean, E., Ferraro, J., Garrison, L., Nemzoff, C. and Towse, A.

Research Paper
March 2019

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This OHE Research Paper focuses on the role that price transparency may play in the efficient and effective procurement of medicines by Middle and Low Income Countries. Will making prices publicly available make procurement more efficient and cost-effective medicines more accessible?

This study was commissioned and funded by The Center for Global Development as research to support its Working Group on the Future of Global Health Procurement. Over the next few years, many Middle Income Countries will increase their GDPs such that they lose their eligibility for aid. Some Low Income Countries will also grow rapidly and lose eligibility. Countries have then to implement strategies to increase the domestic resources allocated for health, manage their resources more effectively, and make wise purchasing decisions, including both off-patent and on-patent medicines. 

The paper concludes that transparency of the procurement processes significantly lowers costs by encouraging bidders. The authors do not recommend price transparency for on-patent medicines as the effect will be to slow the diffusion of innovative products to low income countries. Differential pricing is important and can best be achieved in the current environment via confidential discounts. Developing country markets are, however, dominated by generic products. Price transparency for off-patent products could improve market efficiency if capacities are there to use the data to inform procurement decisions.  whilst protecting against supplier collusion. However, price transparency increases the opportunity for collusion by enabling generic suppliers to observe one another’s prices. Any consideration of price transparency must take this possibility into account. The report recommends consideration of one-sided disclosure of multi-source prices, i.e. buyers should share price data for off-patent medicines amongst themselves.