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Preferential pricing

There are many barriers to healthcare in developing countries. Most significantly, poverty, and a lack of political will, have led to a lack of medical infrastructure - hospitals, clinics and medical professionals - that prevents poor people accessing the healthcare they need.

The affordability of medicines is also important and there are two elements to this. First is the ability of governments or patients to pay for medicines. Solving this problem will require developed country governments and inter-governmental agencies to make significant additional financial resources available to developing countries.

The second element is the price at which medicines are sold, an area GSK can help to address. We are making key medicines available to developing countries at more affordable prices and in sufficient quantities for as long as they are required. This is a major commitment that we call ‘preferential pricing’.

All our AIDS and malaria treatments are available at not-for-profit prices to public sector customers and not-for-profit organisations in over 100 developing countries, including all the countries covered by the US President’s emergency plan for AIDS Relief (PEPFAR). Our prices are sustainable - we do not make a profit on them, but we do cover our manufacturing and distribution costs. Therefore we can sustain supply of these products for as long as they are needed.

We aim to reduce not-for-profit prices for our ARVs and anti-malarial medicines whenever improvements in manufacturing, or economies of scale, allow. For example, Combivir, one of our key ARVs, is now available at $0.65 a day, compared with $1.70 in April 2003. This equates to around $237 per patient per year and includes delivery costs, which compares favourably with generic tablets. The February 2005 pricing report by Medecins Sans Frontieres shows that the average cost of generic equivalents is $0.75 a day and the lowest priced generic equivalent costs $0.55 a day.

In addition, we negotiate public sector prices with middle-income developing countries on a case-by-case basis. These combine a viable and sustainable commercial return for GSK with increased affordability for the healthcare systems concerned.

GSK vaccines are also available at preferential prices. Here we work with multinational organisations such as UNICEF, the World Health Organisation and the Pan American Health Organisation, governments and non-governmental organisations, to provide appropriate and affordable vaccines for the developing world.

Progress in 2004

• In 2004 we shipped 32.7 million preferentially-priced Combivir tablets to the developing world, with over 80% of these going to Africa. This is nearly three times the 11 million tablets shipped in 2003. We do not routinely collect data for our other preferentially-priced medicines but a similar increase has been experienced for Epivir, another of our ARVs. Overall shipments are still low given the scale of the AIDS epidemic in Africa but the growth is encouraging. More doctors, hospitals and clinics are needed to treat more patients and ensure better take up of preferentially priced medicines.

2001	2002	2003	2004
(millions of tablets)
3.5	6	11	32

• It is difficult to estimate the number of patients treated as a result of our preferential pricing agreements, since GSK does not control healthcare provision. A report from the UN-led Accelerating access initiative (AAI), suggests that by September 2004 more than 333,000 patients in developing countries were receiving ARV treatments supplied by the seven pharmaceutical companies in the AAI. This includes 157,500 patients in Africa, a 50% increase since September 2003. For more on GSK’s work with the AAI see Accelerating Access Initiative.
• At the end of 2004 we had 208 arrangements to supply preferentially-priced ARVs in 57 countries. This includes 30 agreements with private employers.
• We added new supply agreements with a number of middle-income countries during 2004. These include an agreement with the Chinese Ministry of Health for preferentially priced Epivir tablets to support China’s national HIV treatment programme, and a number of arrangements in Central and Eastern Europe.
• We are also introducing discount cards for senior citizens in several middle-income countries, see Developed world.

	2000				2001				2002
	q4	q1	q2	q3	q4	q1	q2	q3	q4	q1	q2	q3
AAI	2	4	10	13	17
Govt non					4
AAI					12
NGOs
Public				5
hospitals		8	13	19	31
Employers				2	13

	2003				2004
	q4	q1	q2	q3	q4	q1	q2	q3
AAI	2	4	10	13	17
Govt non					4
AAI					12
NGOs
Public				5
hospitals		8	13	19	31
Employers				2	13

• Product diversion, where not-for-profit medicines are illegally shipped back for sale in wealthier countries, undermines our ability to provide not-for-profit prices and denies treatment to the intended patients in poorer countries. We can only afford to supply products at low prices in the world’s poorest countries if we can still make an adequate return on them in wealthier markets. We have introduced different packaging and tablet colours for many of our not-for-profit medicines to help prevent product diversion. Special tri-lingual ‘access packs’ are now approved for Combivir, Epivir and Trizivir in over 50 countries, and we are now receiving regulatory approvals for the red Epivir and Combivir tablets. GSK has nine ARVs registered under the EU’s Anti-Diversion Regulation. We are the only company to have registered products under this Regulation.
• We have set up five pilot projects in collaboration with NGOs in Tanzania, Uganda, Nigeria, Zambia and Malawi to assess the impact of extending preferential pricing to a wider range of products. Initial results show that lack of healthcare capacity and infrastructure are major barriers. When capacity (for example the number of healthcare professionals) or funding is improved there is an increase in take up of preferentially-priced medicines. For example two of the pilot sites have received funding from the US President’s Emergency Plan for AIDS Relief for the treatment of opportunistic infections. This has led to an increase in orders for antibiotics. A report on the findings from the pilots will be prepared at the end of 2005.

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