Price Considerations
for TB Drugs
Goals of Effective Procurement
• Selecting appropriate medicines
• Meeting required quality standards
• In right quantities
• Delivered in a timely manner
• At lowest possible purchase price
The cost of the necessary medicines for a
short-course regimen of 6–8 months is
between USD 10 and USD 40 for first-line
regimens.
Price Ranges
Impact of Hidden Costs on Total Cost
Buyer
– Reliable/prompt payment history of buyer
– Competition
– Long term agreements
– Standardization
– Accurate forecasting
Factors influencing Price - 1
Manufacturer
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–
–
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Quality
Packaging/Product Information
Additional services
Product inputs affected by global markets
Market entrance
• Depending on IncoTerms and shipment method - unit product price
will increase to include risk of loss and cost and insurance for
shipment, security system, quality control during shipment, distance,
weight of product, other
• Profit - for new innovator products much higher to recoup some of the
development costs outlined above; for generic products
not so high because are recouping cost of production & testing
Factors influencing price - 2
Supplier
– unit price has to do with supplier acquisition, handling and
IncoTerm decisions
– no product development necessary - therefore no added cost
– get better acquisition price from manufacturer or other supplier if
ordering in bigger quantities (economies of scale)
– must pay staffs to procure and manage inventories
– must train staffs
– must pay for real estate (storage facility)
– must add cost for shipment, insurance, delivery, as appropriate with
contract
Factors influencing price - 3
Procuring Institutions
– Institution (MoH, other) determines (quantifies) its needs for
individual drugs
– Does a price comparison to determine “market prices.”
– Decides on special markings such as embossing on tablet or
packaging to indicate a MoH product, or special colours, packaging
such as FDCs, patient kits, blisters, etc
– Reviews in-country supply system to remember capacity for
receiving, delivery system and frequency needed for distribution to
various health system levels, size of warehouses/storerooms at
different levels
Factors influencing price – 4.0
Procuring Institutions
– Based the above aspects the procuring institution will tender based
on the following options; each option would of course affect the
procurement price:
• Quantities to order - higher price if ordering fewer products (economies of
scale)
• Little or no capacity for most of the above aspects if centralized system or if
procurement and supply system is decentralized - highest price since
supplier may need to decrease delivery quantities at a given time, ship to
port, pay handler to pass through customs, assure quality during delivery,
cover in-country transportation costs, maintain documentation system for all
activities
• Capacity to receive order, clear through port, store large quantities
at central level and adequate in-country delivery system - price
not so high but country is paying for real estate, staffs, vehicles and
managers to carry out the in-country activities
Factors influencing price – 4.1