How poor regulation inflates cost of drugs in developing nations

Low- and middle-income countries such as Kenya are paying more for medicines than rich States, according to a new report from the Centre for Global Development.

The report published this week indicates that patients in low- and middle-income countries pay as much as 20 to 30 times above the minimum international reference price for basic generic medicines like omeprazole, used to treat heartburn, or paracetamol, a common pain reliever.

The biggest contributor to these price variations, the reports shows, is the fact that those countries tend to buy the most expensive drugs as opposed to opting for the cheaper unbranded generics.

“In the poorest countries, branded generics — which command a price premium — make up about two-thirds of the market by volume and value. Unbranded generics, usually the least expensive option, are a tiny sliver, only five percent of the market by volume and three percent by value.

In contrast, in the United States (US) and the United Kingdom, unbranded quality-assured generics account for 85 percent of the pharmaceutical market by volume, but only about a third by cost,” shows the report.

Medicines often have more than one name — a generic name given to the active ingredient and a brand name.

The brand name is chosen by the manufacturer to help with marketing. For example, Lipitor is the brand name given by Pfizer to the generic medicine atorvastatin, which is used to reduce the risk of heart attack.

Medicines also contain inactive ingredients, which are used to formulate the active ingredient into a tablet, liquid or cream, and these can vary.

This is why medicines containing the same active ingredient, but made by different manufacturers, may look different. These differences are rarely significant, which is why generic and branded medicines are almost always interchangeable.

The report states that rich countries are able to rely on the unbranded generic drugs because their governments have well-functioning regulatory systems that assure their citizens that the generic medicines meet the quality standards.

By contrast, patients in low- and middle-income counties often cannot rely on regulatory systems to keep poor-quality drugs off the shelves and as a result, use of and expenditure on cheap unbranded generics is relatively low.

And because of the quality query it is difficult for the unbranded generics to compete with the branded variety, leaving patients with little choice but to dig deeper into their pockets for the expensive drugs.

Another contributor to the price variation, the report shows, is the barriers to entry of new drugs which it says prevent new suppliers from entering the market and may allow existing manufacturers to keep prices above market-clearing levels.

“Studies suggest that limited country-level competition may directly affect the prices paid by consumers and public procurers.

In the US, a 2005 study showed that a first generic competitor is priced at a modest discount from the originator brand, but additional entrants push down average generic pricing substantially — from 94 percent of the originator price for the first generic entrant to 52 percent after the second entrant, 33 percent after the fifth entrant, and as low as six percent once there are 19 generic products competing in the marketplace,” the report states.

The report comes at a time when insurers in Kenya estimate that patients are paying at least 50 percent more for their medications due to over-prescription of branded drugs.

In a recent interview, Jubilee Holdings chairman Nizar Juma said that Kenyans still prefer branded drugs over the generics.

“In Kenya, we are using more brands than generics yet economies like the US use 80 percent generics despite being richer than us. Doctors, patients and hospitals are united in this,” said Mr Juma.

The debate has sparked a row between insurers and doctors and insures who believed that the cost of medication could be cut down extensively with introduction of more unbranded drugs into the market.

Madison General Insurance, this year directed doctors to only prescribe generic medicines for its customers, kicking up a storm after medics vowed to defy the order.

Doctors argued that although generic drugs have the same active ingredient as branded drugs, they are composed differently. This means that they may have different bioavailability from either the branded drugs or, indeed, other generic drugs of the same class.

Typically, this would not affect the patient in terms of efficacy and safety, but in drugs with a narrow therapeutic index, this could potentially lead to adverse effects, the doctors said.

The report recommends greater global co-operation and reforming World Health Organisation policy as well as policy in targeted countries to improve procurement practices.

It states that low- to middle-income countries "have little ability to negotiate prices down and quality assure products" and there are lots of markups, often due to taxes and corruption.