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Analysis of prices paid by low-income countries: how price sensitive is government demand for medicines?

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  • Srivastava, Divya
  • McGuire, Alistair
Abstract
Background:- Access to medicines is an important health policy issue. This paper considers demand structures in a selection of low-income countries from the perspective of public authorities as the evidence base is limited. Analysis of the demand for medicines in low-income countries is critical for effective pharmaceutical policy where regulation is less developed, health systems are cash constrained and medicines are not typically subsidised by a public health insurance system Methods:- This study analyses the demand for medicines in low-income countries from the perspective of the prices paid by public authorities. The analysis draws on a unique dataset from World Health Organization (WHO) and Health Action International (HAI) using 2003 data on procurement prices of medicines across 16 low-income countries covering 48 branded drugs and 18 therapeutic categories. Variation in prices, the mark-ups over marginal costs and estimation of price elasticities allows assessment of whether these elasticities are correlated with a country’s national income. Results:- Using the Ramsey pricing rule, the study’s findings suggest that substantial cross-country variation in prices and mark-ups exist, with price elasticities ranging from -1 to -2, which are weakly correlated with national income. Conclusions:- Government demand for medicines thus appears to be price elastic, raising important policy implications aimed at improving access to medicines for patients in low-income countries.

Suggested Citation

  • Srivastava, Divya & McGuire, Alistair, 2014. "Analysis of prices paid by low-income countries: how price sensitive is government demand for medicines?," LSE Research Online Documents on Economics 60341, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:60341
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    File URL: http://eprints.lse.ac.uk/60341/
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    References listed on IDEAS

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    Cited by:

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    3. Wang, Fan & Xu, Danni & Zhuo, Xiaopo & Zhang, Chao & Liu, Yaoqi, 2022. "Improving consumer welfare in vaccine market: Pricing, government subsidies and consumer awareness," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 167(C).

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    More about this item

    Keywords

    Medicines; Low-income countries; Pharmaceutical policy; Health policy; Government procurement;
    All these keywords.

    JEL classification:

    • N0 - Economic History - - General

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