Public Sector Pricing Research Articles

What Have We Learned? Implementation of a Shared Learning Agenda and Access Strategy for the Hormonal Intrauterine Device.

In 2015, a global learning agenda for the hormonal intrauterine device (IUD) was developed with priority research questions regarding use of the method in low- and middle-income countries. In addition, members of the Hormonal IUD Access Group aligned on a strategy to expand access in the context of volunteerism and contraceptive method choice. This article synthesizes evidence generated since then and describes steps taken to address demand- and supply-side barriers to access. Findings demonstrated high continuation rates and satisfaction among hormonal IUD users that are comparable to other long-acting reversible contraceptives (LARCs). Across studies, a sizable number of users reported they would have chosen a short-acting method or no method at all if the hormonal IUD were not an option, which suggests that women did not see the hormonal IUD as interchangeable with other LARC options and thus it may fill an important niche in the market. With several countries now poised to scale up the method, resource mobilization will be key. On the demand side, investments in implementation research will be critical to understanding how best to launch and scale the method, while ensuring the sustainability of multiple quality-assured suppliers with affordable public-sector pricing will be necessary on the supply side.

Forecasting essential childhood cancer drug need: An innovative model-based approach.

Childhood cancer outcomes in low-income and middle-income countries have not kept pace with advances in care and survival in high-income countries. A contributing factor to this survival gap is unreliable access to essential drugs. The authors created a tool (FORx ECAST) capable of predicting drug quantity and cost for 18 pediatric cancers. FORx ECAST enables users to estimate the quantity and cost of each drug based on local incidence, stage breakdown, treatment regimen, and price. Two country-specific examples are used to illustrate the capabilities of FORx ECAST to predict drug quantities. On the basis of domestic public-sector price data, the projected annual cost of drugs to treat childhood cancer cases is 0.8 million US dollars in Kenya and 3.0 million US dollars in China, with average median price ratios of 0.9 and 0.1, respectively, compared with costs sourced from the Management Sciences for Health (MSH) International Medical Products Price Guide. According to the cumulative chemotherapy cost, the most expensive disease to treat is acute lymphoblastic lymphoma in Kenya, but a higher relative unit cost of methotrexate makes osteosarcoma the most expensive diagnosis to treat in China. FORx ECAST enables needs-based estimates of childhood cancer drug volumes to inform health system planning in a wide range of contexts. It is broadly adaptable, allowing decision makers to generate results specific to their needs. The resultant estimates of drug need can help equip policymakers and health governance institutions with evidence-informed data to advance innovative procurement strategies that drive global improvements in childhood cancer drug access.

Centers for Disease Control and Prevention as a Strategic Agent in the Pediatric Vaccine Market: An Analytical Approach

Problem definition: Pediatric vaccine markets in the United States are vulnerable to the development of monopolies due to few manufacturers and high research and development costs. This work addresses how the government can ensure the cost-effective procurement of pediatric vaccines by all U.S. children from private manufacturers. The Centers for Disease Control and Prevention’s (CDC) significant patronage of pediatric vaccines affords them leverage in negotiating public-sector prices that prevent the formation of monopolies, but existing vaccine pricing literature excludes the CDC as a rational player. Academic/practical relevance: We combine optimization and game theoretic techniques to address cost-effective immunization of all U.S. children. Methodology: Our optimization model from the CDC’s perspective minimizes negotiated government costs while ensuring adequate national vaccination levels, linking dynamics in public and private sectors, and incorporating competitive manufacturer behavior. The optimization model embeds an extant game theoretic price model to capture competitive interactions among manufacturers in the private sector, where they compete independently of the CDC. The model is validated in an extended case study of the Infanrix–Daptacel vaccine duopoly. Results: The study indicates that dissimilar products advantageously segment markets with asymmetric manufacturers. Furthermore, markets are at lower risk when high-capacity manufacturers have moderate target profits, especially in cases of high demand and asymmetry. We demonstrate that our model can help restabilize a market that experiences a vaccine shortage and that the CDC might mitigate the same shortage using strategies that depend on which manufacturer is limited. We also underline scenarios in which the CDC may be able to prevent monopolies through financial incentives to manufacturers. The results support a paradigm shift from annual contracts to ongoing negotiations, which would enable the CDC to exercise control over high-risk markets. Managerial implications: Our study demonstrates an analytical approach for managerial government officials to influence pediatric vaccine prices via the procurement of public-sector goods.

$$\lambda $$ envy-free pricing for impure public good

In this paper, we examine the provision and pricing of an excludable public good with congestion under lump-sum tax/transfer, constrained by the reduction of envy. We adopt the $$\lambda $$ envy-free constraint as a weaker equity concept of no-envy and characterize the optimal public sector pricing rule depending on envy reduction concerns, which is different from the pricing rule contingent on utilitarian distributive concerns. We find that the two fairness concerns are countervailing with regard to the surcharge fee.

Optimizing Economic Equity through the Use of Pricing Premiums and Discounts

Amelioration of economic inequality is a central tenet of the social justice movement. This paper demonstrates the potential role of park and recreation pricing policies in exacerbating or ameliorating social injustice. Tension in public sector pricing invariably revolves around reconciling pricing’s two guiding concepts of fairness: The Benefit Principle, which states that each taxpayer’s or service user’s contribution should reflect the benefits he or she receives from a service; and The Ability to Pay Principle which requires that no residents should be excluded from participation because they lack the funds to do so. Operationalizing the Ability to Pay Principle requires offering discounts to the economically disadvantaged, unemployed residents, children, and large households. Principles, rationales, administrative mechanisms, and challenges associated with implementation for each of these concepts are discussed. Social injustice is exacerbated when regressive property and sales taxes are used to subsidize recreation participants who are not economically disadvantaged. This occurs in contexts where the economically disadvantaged are relatively infrequent users of recreation programs. In those situations, both the Ability to Pay and the Benefit Principles are abrogated. Similarly, when discounts are provided to groups that are not economically disadvantaged, the subsidies usually are paid for by regressive property and sales taxes. Seniors are the most prominent cohort to whom inappropriate discounts are provided. All financial indicators show that, on average, they have greater assets and more income than non-seniors. Nevertheless, in many communities, discounts are available; indeed, the trend has been to incrementally lower the age at which “seniors” become eligible for discounts. Situations in which multi-use passes exacerbate income inequality are also discussed. Strategies for removing these sources of social injustice are suggested.Both the Ability to Pay and the Benefit Principle direct that social justice is served when agencies capture consumers’ surplus through the use of premiums. This may be done when individual users pay for extra benefits in the form of reservations, peak time use, receiving a higher quality offering than the regular service provides, or by bids/auctions designed to offer an improved service. It is also justified when nonresidents use public facilities. Subscribe to JPRA

Cost-effectiveness of a fixed-dose combination pill for secondary prevention of cardiovascular disease in China, India, Mexico, Nigeria, and South Africa: a modelling study

Fewer than 25% of patients with atherosclerotic cardiovascular disease in countries of low and middle income (LMICs) use guideline-directed drugs for secondary prevention. A fixed-dose combination polypill might improve cardiovascular outcomes by increasing prescription rates and adherence, but the cost-effectiveness of this approach is uncertain. We developed microsimulation models to assess the cost-effectiveness of a polypill containing aspirin, lisinopril, atenolol, and simvastatin for secondary prevention of atherosclerotic cardiovascular disease compared with current care in China, India, Mexico, Nigeria, and South Africa. We modelled baseline use of secondary prevention drugs on the Prospective Urban Rural Epidemiological study. In the intervention arm, we assumed that patients currently prescribed any prevention drug for atherosclerotic cardiovascular disease would receive the polypill instead, which would improve adherence by 32% (from a meta-analysis of two randomised trials in LMICs). We assessed the cost-effectiveness of the polypill at prices in the public sector and on the retail market. Key outcomes were major adverse cardiovascular events (cardiovascular death, non-fatal myocardial infarction, or non-fatal stroke) over a 5-year period and the incremental cost-effectiveness ratio (ICER) from the perspective of the health-care sector and a lifetime analytical horizon. We assumed a cost-effectiveness threshold equal to each country's per capita gross domestic product (GDP) per disability-adjusted life-year (DALY) averted. In sensitivity analyses, we examined the population health effect achievable by increasing the uptake of the polypill in the eligible population. Among adults aged 30-84 years with established atherosclerotic cardiovascular disease, adoption of the polypill for secondary prevention compared with current care was projected to avert 40-54 major adverse cardiovascular events for every 1000 patients treated for 5 years and produce between three and ten additional serious adverse events. Assuming public-sector pharmaceutical prices, the ICER of the polypill compared with current care over a lifetime analytical horizon was Int$168 (95% UI 55 to 337) per DALY averted in China, $154 (57 to 289) in India, $88 (15 to 193) in Mexico, $364 (147 to 692) in Nigeria, and $64 (cost-saving to 203) in South Africa, amounting to 0·4-6·2% of the per capita GDP in these countries. The ICER of the polypill compared with current care increased to 3·3-14·6% of the per capita GDP at retail market pharmaceutical prices. Use of the polypill at current rates of prescription of secondary prevention drugs would produce modest health benefits, reducing DALYs from atherosclerotic cardiovascular disease among patients with established disease by 3·1-10·1% over 10 years. Increasing use to 50% or 75% of the eligible population would produce substantially larger health gains (up to 24·3% atherosclerotic cardiovascular disease DALYs averted). The polypill is projected to be cost-effective compared with current care for secondary prevention of atherosclerotic cardiovascular disease in China, India, Mexico, Nigeria, and South Africa, particularly if it is made available at public-sector pricing. However, achieving meaningful improvements in cardiovascular health will require simultaneous investments in health infrastructure to increase the uptake of the polypill among patients with established atherosclerotic cardiovascular disease. Richard A and Susan F Smith Center for Outcomes Research in Cardiology, Hellman Family Foundation, Department of Veterans Affairs, and University of California at San Francisco.

Envy-Free Pricing for Impure Public Good

In this paper, we study optimal public good provision with congestion and user fees to exclude some agents under lump-sum tax/transfer, constrained by the condition of reduction of envy. We adopt the λ envy-free constraint proposed by Diamantaras and Thomson(1990), and employ the exclusion technique used in Hellwig(2005), i.e., the policymaker decides the level of provision and user fee paid by people accessing a public good, as well as a uniform level of tax/transfer. We characterize the optimal public sector pricing rule that depends on utilitarian distributive concerns and envy reduction concerns, which are in conflict with each other. We show that if the social welfare function is strictly increasing and strictly concave and the government is not concerned with reducing envy, the user fee is greater than the marginal congestion cost. Additionally, we show that if the government reflects the notion of equality of opportunity under the reduction of envy, the user fee is lower than the marginal congestion cost. These results imply that the two fairness concerns are countervailing with regard to the surcharge fee. Furthermore, by numerical computation, we observe that both provision level of the public good and its user fee decrease as the intensity of envy increases under the binding ethical constraint.

The per-patient costs of HIV services in South Africa: Systematic review and application in the South African HIV Investment Case.

BackgroundIn economic analyses of HIV interventions, South Africa is often used as a case in point, due to the availability of good epidemiological and programme data and the global relevance of its epidemic. Few analyses however use locally relevant cost data. We reviewed available cost data as part of the South African HIV Investment Case, a modelling exercise to inform the optimal use of financial resources for the country’s HIV programme.MethodsWe systematically reviewed publication databases for published cost data covering a large range of HIV interventions and summarised relevant unit costs (cost per person receiving a service) for each. Where no data was found in the literature, we constructed unit costs either based on available information regarding ingredients and relevant public-sector prices, or based on expenditure records.ResultsOnly 42 (5%) of 1,047 records included in our full-text review reported primary cost data on HIV interventions in South Africa, with 71% of included papers covering ART. Other papers detailed the costs of HCT, MMC, palliative and inpatient care; no papers were found on the costs of PrEP, social and behaviour change communication, and PMTCT. The results informed unit costs for 5 of 11 intervention categories included in the Investment Case, with the remainder costed based on ingredients (35%) and expenditure data (10%).ConclusionsA large number of modelled economic analyses of HIV interventions in South Africa use as inputs the same, often outdated, cost analyses, without reference to additional literature review. More primary cost analyses of non-ART interventions are needed.

PCN231 - PRICING, AVAILABILITY, AFFORDABILITY, PRICE COMPONENTS OF ESSENTIAL ANTICANCER MEDICINES IN ADDIS ABABA, ETHIOPIA

To investigate the price, availability, affordability and price components of essential anticancer medicines in Addis Ababa, Ethiopia. The survey assessed the pricing, availability, affordability and price components of essential anticancer medicines using the standardized WHO/HAI methodology. Data on the availability and patient prices of 17 anticancer medicines for both lowest priced generics (LPGs) and innovator brands (IBs) –15 from the global core list, and 2 supplementary anticancer medicines were collected from 2 national oncology Centers and 5 private pharmacies. Government procurement prices were collected from public procurement agency. Price component survey was conducted to identify various components contributing to the final patient medicine price. Median Price Ratios (MPR) were computed and the daily wage of lowest unskilled government worker used to assess affordability of the medicines. Cross sector and cross country comparison of prices and affordability was performed to reflect situations. The Mean availability of LPG anticancer medicines were fairly high (56.9%) in public but low (18.8%) in private sector. Generics were the only product type available in both sectors. The MPR, the public sector procuring LPGs, was 1.10 times the international reference prices. LPG anticancer medicines were sold at 1.29 and 2.62 times the international reference prices in the public and private sector respectively. Patient prices were increased by 45.3 % as a result of add-on costs in public sector and manufacturer selling price was the top contributor. However, these patient prices were 94.5% lower compared to private. The lowest price generics in both sectors were not affordable. International Comparison indicated better availability, higher prices, and worse affordability of anticancer medicines in Ethiopia than most of the other countries included in the analysis. Mixes of policies need to be implemented to make essential anticancer medicines more available and affordable particularly for the low income group of the population.

Hedonic indexes for public and private housing in Costa Rica

PurposeThis study aims to show how hedonic methods can be used to compare the performance of the public and private sector housing markets in Costa Rica.Design/methodology/approachHedonic price indexes are computed using the adjacent-period method. Average housing quality is measured by comparing hedonic and median price indexes. The relative performance of the public and private sector residential construction is compared by estimating separate hedonic models for each sector. A private sector price is then imputed for each house built in the public sector, and a public sector price is imputed for each house built in the private sector.FindingsThe real quality-adjusted price of private housing rose by 12 per cent between 2000 and 2013, whereas the price of private housing rose by 9 per cent. The average quality of private housing rose by 45 per cent, whereas that of public housing fell by 18 per cent. Nevertheless, the hedonic imputation analysis reveals that public housing could not be produced more cheaply in the private sector.Social implicationsThe quality of public housing has declined over time. The hedonic analysis shows that the decline is not because of a lack of competition between construction firms in the public sector. An alternative demand side explanation is provided.Originality/valueThis study applies hedonic methods in novel ways to compare the relative performance of the public and private housing sectors in Costa Rica. The results shed new light on the effectiveness of public sector housing programs.

Strategic Pricing and Competitive Procurement in the Physician Services Market

We propose and test a model of the strategic interaction between public (e.g., Medicare) and private insurers in the physician services market. Our model nests two alternatives: 1) cost shifting, which predicts negative correlations between public and private prices and physician supply that is inelastic with respect to relative public and private prices; and 2) competitive procurement in which public and private prices are positively correlated and physician supply skews towards the more generous payer. These alternatives have contradictory implications for both public policy and structural estimation. Using a data set of private and public sector prices and public sector quantities, we find clear evidence favoring the competitive procurement model. Private sector insurers strongly mimic public sector price changes, consistent with recent findings. Moreover, providers supply Medicare beneficiaries 1%-14% fewer services for every 10% increase in private prices, ceteris paribus.

Informing pediatric vaccine procurement policy via the pediatric formulary design, pricing, and production problem

ABSTRACTThis research improves upon the monopsonist vaccine formulary design problem in the literature by incorporating several modeling enhancements and applying different methodologies to efficiently obtain solutions and derive insights. Our multi-objective formulation seeks to minimize the overall price to immunize a cohort of children, maximize the net profit shared among pediatric vaccine manufacturers, and minimize the average number of injections per child among the prescribed formularies. Accounting for Centers for Disease Control and Prevention (CDC) guidelines, we restrict vaccines utilized against a given disease within a given formulary to those produced by a single manufacturer. We also account for a circumstance in which one manufacturer's vaccine has a greater relative efficacy. For the resulting nonconvex mixed-integer nonlinear program, we bound the second and third objectives using optimal formulary designs for current public sector prices and utilize the ϵ -constraint method to solve an instance representative of contemporary immunization schedule requirements. Augmenting our formulation with symmetry reduction constraints to reduce the required computational effort, we identify a set of non-inferior solutions. Of practical interest to the CDC, our model enables the design of a pricing and purchasing policy, creating a sustainable and stable capital investment environment for the provision of pediatric vaccines.

Asymmetric Bertrand-Edgeworth-Chamberlin Competition with Linear Demand: A Pediatric Vaccine Pricing Model

Pricing strategies in the U.S. pediatric vaccines market are studied using a Bertrand-Edgeworth-Chamberlin price game. The game analyzes the competition between asymmetric manufacturers with limited production capacities and linear demand, producing differentiated products. The model completely characterizes the unique pure strategy equilibrium in the Bertrand-Edgeworth-Chamberlin competition in an oligopoly setting. In addition, the complete characterization of mixed strategy equilibrium is provided for a duopoly setting. The results indicate that the pure strategy equilibrium exists if the production capacity of a manufacturer is at their extreme. For the capacity regions where no pure strategy equilibrium exists, there exists a mixed strategy equilibrium. A duopoly setting provides the distribution functions of the mixed strategy equilibrium for both manufacturers. The proposed game is applied to the U.S. pediatric vaccine market, in which a few asymmetric vaccine manufacturers produce differentiated vaccines. The source of differentiation in the competing vaccines is the number of medically adverse events, the number of different antigens, and special advantages of those vaccines. The results indicate that the public sector prices of the vaccines are higher than the vaccine equilibrium prices. Furthermore, the situation when shortages of certain pediatric vaccines occur is studied. Market demand and degree of product differentiation are shown as two key factors in computing the equilibrium prices of the vaccines.

Measuring the value of externalities from higher education

This paper takes an innovative approach. We have used the idea of converting international evidence of the size of higher education externalities as a proportion of GDP into Australian-specific dollar equivalents and added these estimates to estimates of lifetime fiscal returns to graduates. This allows us to estimate the expected spillovers over a graduate’s lifetime, an opportunity that has so far not been taken elsewhere. We conclude that an additional year of higher education in an Australian context, valued at the time of a student’s enrolment, lies between $10,635 and $15,952 in 2014 terms. We also acknowledge that it is difficult and inappropriate to apply estimates of average externalities to issues related to public sector pricing. However, having some idea of the boundaries of the potential sizes of higher education spillovers is a valuable and interesting exercise.

Impact of BRICS' investment in vaccine development on the global vaccine market.

Brazil, the Russian Federation, India, China and South Africa--the countries known as BRICS--have made considerable progress in vaccine production, regulation and development over the past 20 years. In 1993, all five countries were producing vaccines but the processes used were outdated and non-standardized, there was little relevant research and there was negligible international recognition of the products. By 2014, all five countries had strong initiatives for the development of vaccine technology and had greatly improved their national regulatory capacity. South Africa was then the only BRICS country that was not completely producing vaccines. South Africa is now in the process of re-establishing its own vaccine production and passing beyond the stage of simply importing, formulating and filling vaccine bulks. Changes in the public sector's price per dose of selected vaccines, the global market share represented by products from specific manufacturers, and the attractiveness, for multinational companies, of partnership and investment opportunities in BRICS companies have all been analysed. The results indicate that the BRICS countries have had a major impact on vaccine price and availability, with much of that impact attributable to the output of Indian vaccine manufacturers. China is expected to have a greater impact soon, given the anticipated development of Chinese vaccine manufacturers in the near future. BRICS' accomplishments in the field of vaccine development are expected to reshape the global vaccine market and accelerate access to vaccines in the developing world. The challenge is to turn these expectations into strategic actions and practical outcomes.

Comparison of laboratory costs of rapid molecular tests and conventional diagnostics for detection of tuberculosis and drug-resistant tuberculosis in South Africa

BackgroundThe World Health Organization has endorsed the use of molecular methods for the detection of TB and drug-resistant TB as a rapid alternative to culture-based systems. In South Africa, the Xpert MTB/Rif assay and the GenoType MTBDRplus have been implemented into reference laboratories for diagnosis of TB and drug-resistance, but their costs have not been fully elucidated.MethodsWe conducted a detailed reference laboratory cost analysis of new rapid molecular assays (Xpert and MTBDRplus) for tuberculosis testing and drug-resistance testing in South Africa, and compared with the costs of conventional approaches involving sputum microscopy, liquid mycobacterial culture, and phenotypic drug sensitivity testing.ResultsFrom a laboratory perspective, Xpert MTB/RIF cost $14.93/sample and the MTBDRplus line probe assay cost $23.46/sample, compared to $16.88/sample using conventional automated liquid culture-based methods. Laboratory costs of Xpert and MTBDRplus were most influenced by cost of consumables (60-80%).ConclusionsAt current public sector pricing, Xpert MTB/RIF and MTBDRplus are comparable in cost to mycobacterial culture and conventional drug sensitivity testing. Overall, reference laboratories must balance costs with performance characteristics and the need for rapid results.

Diagnosing Xpert MTB/RIF negative TB: Impact and cost of alternative algorithms for South Africa

Use of Xpert MTB/RIF is being scaled up throughout South Africa for improved diagnosis of tuberculosis (TB). A large proportion of HIV-infected patients with possible TB are Xpert-negative on their initial test, and the existing diagnostic algorithm calls for these patients to have sputum culture (Xpert followed by culture (X/C)). We modelled the costs and impact of an alternative diagnostic algorithm in which these cultures are replaced with a second Xpert test (Xpert followed by Xpert (X/X)). An existing population-level decision model was used. Costs were estimated from Xpert implementation studies and public sector price and salary data. The number of patients requiring diagnosis was estimated from the literature, as were rates of TB treatment uptake and loss to follow-up. TB and HIV positivity rates were estimated from the national TB register and laboratory databases. At national programme scale in 2014, X/X (R969 million/year) is less expensive than X/C R1 095 million/year), potentially saving R126 million/year (US$17.4 million). However, because Xpert is less sensitive than culture, X/X diagnoses 2% fewer TB cases. This is partly offset by higher expected treatment uptake with X/X due to the faster availability of results, resulting in 1% more patients initiating treatment under X/X than X/C. The cost per TB patient initiated on treatment under X/X is R2 682, which is 12% less than under X/C (R3 046). Modifying the diagnostic algorithm from X/C to X/X could provide rapid results, simplify diagnostic processes, improve HIV/TB treatment outcomes, and generate cost savings.

Size of clinical trials and Introductory prices of prophylactic vaccine series

Costs of completing the recommended immunization schedule have increased over the last decade. Access to prophylactic vaccines may become limited due to financing obstacles within current delivery systems. Vaccine prices reflect research and development expenses incurred by vaccine manufacturers, including costs associated with evaluating candidate vaccines in human subjects. If the number of subjects in clinical trials is increasing over time and associated with vaccine price, this may help explain increases in prices of vaccine series. We examined whether: (A) the initial public- and private-sector prices for recommended prophylactic vaccine series licensed and recommended in the US increased from 2000–2011, (B) the number of human subjects per licensed vaccine increased during the time period, and (C) the number of human subjects was associated with the initial public–and private–sector prices of the vaccine series. In regression analyses of 13 vaccines, approval year was not significantly associated with the number of human subjects, initial public-sector prices, or initial private-sector prices. While the number of phase II subjects was not significantly associated with prices, the numbers of phase III and combined late phase (phases II + III) subjects were significantly associated with initial public- and private-sector series prices (p < 0.05). The association between number of subjects and initial prices demonstrated diminishing marginal increases in price with increasing numbers of subjects. These findings may help guide the number of subjects required by the FDA in clinical trials, in order to reduce expenses for manufacturers and thereby help mitigate increases in initial vaccine series prices.

Allocating scarce financial resources for HIV treatment: benchmarking prices of antiretroviral medicines in Latin America

Public sector price analyses of antiretroviral (ARV) medicines can provide relevant information to detect ARV procurement procedures that do not obtain competitive market prices. Price benchmarks provide a useful tool for programme managers and policy makers to support such planning and policy measures. The aim of the study was to develop regional and global price benchmarks which can be used to analyse public-sector price variability of ARVs in low- and middle-income countries using the procurement prices of Latin America and the Caribbean (LAC) countries in 2008 as an example. We used the Global Price Reporting Mechanism (GPRM) data base, provided by the World Health Organization (WHO), for 13 LAC countries' ARV procurements to analyse the procurement prices of four first-line and three second-line ARV combinations in 2008. First, a cross-sectional analysis was conducted to compare ARV combination prices. Second, four different price 'benchmarks' were created and we estimated the additional number of patients who could have been treated in each country if the ARV combinations studied were purchased at the various reference ('benchmark') prices. Large price variations exist for first- and second-line ARV combinations between countries in the LAC region. Most countries in the LAC region could be treating between 1.17 and 3.8 times more patients if procurement prices were closer to the lowest regional generic price. For all second-line combinations, a price closer to the lowest regional innovator prices or to the global median transaction price for lower-middle-income countries would also result in treating up to nearly five times more patients. Some rational allocation of financial resources due, in part, to price benchmarking and careful planning by policy makers and programme managers can assist a country in negotiating lower ARV procurement prices and should form part of a sustainable procurement policy.

Optimal public rationing and price response

Abstract We study optimal public health care rationing and private sector price responses. Consumers differ in their wealth and illness severity (defined as treatment cost). Due to a limited budget, some consumers must be rationed. Rationed consumers may purchase from a monopolistic private market. We consider two information regimes. In the first, the public supplier rations consumers according to their wealth information (means testing). In equilibrium, the public supplier must ration both rich and poor consumers. Rationing some poor consumers implements price reduction in the private market. In the second information regime, the public supplier rations consumers according to consumers’ wealth and cost information. In equilibrium, consumers are allocated the good if and only if their costs are below a threshold (cost effectiveness). Rationing based on cost results in higher equilibrium consumer surplus than rationing based on wealth.