Global Health Policy
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March 17, 2008
Tearing Down the Barriers: Increasing Access in Emerging Pharmaceutical Markets
Posted by Jessica Pickett at 07:20 PM
Yesterday, the Financial Times reported GlaxoSmithKline's exciting new strategy to expand markets and increase access to medicines in low- and middle-income countries. Through an internal policy known as "tearing down the barriers," the company has established differential pricing schemes within and between India, South Africa and other developing countries, in hopes of shifting to a new low price, high volume business model. While similar initiatives have existed for AIDS antiretrovirals (in part through the work of the Clinton Foundation), the GSK strategy notably moves beyond the "Big Three" infectious diseases to tackle the growing challenge of diabetes and other noncommunicable diseases with a dual market among the rich and poor.
Although variants on this idea have been around for quite some time (for example, see related papers by Jenny Lanjouw or Patricia Danzon), GSK is the first company to implement such a policy openly and systematically across a broad range of products. But they almost certainly won't be the last. Tiered pricing and the "middle markets" were prominent themes throughout last week's Partnering for Global Health Forum, where biotechnology leaders came together with pharmaceutical manufacturers and global health funders to identify opportunities for collaboration in this new environment. Several biotech companies are seeking opportunities in emerging markets and are seeking novel business approaches that would serve the full spectrum of needs and abilities to pay in those countries. Here, too, the conversation frequently turned towards ways to price products to better serve the poor without eroding prices in their major markets. (Keep tabs on the Kaiser Family Foundation's HealthCast, which should be broadcasting many of the sessions soon.)
Here at CGD, we hope to continue the dialogue over the next several months under the auspices of our new Global Health Frontiers project. It will be interesting to see whether the low-price high-volume approach taken by GSK can be sustainably extended to other companies and product areas, and whether there are other business models (such as joint ventures, in-country manufacturing, or voluntary licensing) that could profitably serve both those who can afford to pay a lot alongside those who can only afford to pay a little. It seems that some forward looking companies are willing to step into the new frontiers. This is a delicate time when the public health community can be either be supportive of these early efforts or send companies scurrying for less risky opportunities.
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Comments
GSK's initiative is indeed a positive development. What is missing from the FT article, however, is that such a strategy is probably as driven by market forces as it is by corporate social responsibility. The large R&D manufacturers see the huge growth of generic manufacturers (mostly from Asia) that are typically pursuing high volume, low margin strategies in the developing world. They realize if they do not counter with their own version of such strategies they stand to massively lose market share. This trend has been happening in the market for contraceptives and if it spreads to other health products, so much the better.
Posted by: Jeff Barnes at March 19, 2008 11:38 AM