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Human Rights and HIV/AIDSBox 4.14The role of equitable pricing in ensuring accessEquitable pricing—or differential or tiered pricing—refersto the concept of pricing products in different marketsaccording to the consumers’ ability to pay as measuredby their income levels. By pricing ARV drugs at differentprices for different consumers, companies can hopeto partially recover costs while, at the same time,making these drugs available to as many patients aspossible. Segmentation of markets for the purpose ofequitable pricing can be done using the HumanDevelopment Indices (HDI) in a coordinated andtransparent manner, since this measure would factorin public provision of health along with individual abilityto pay. Differential pricing has clear benefits and risks.However, the risks can be mitigated through carefulpolicy planning.BENEITSIncreased access: This can be ensured through greateraffordability. Since affordability is a graded, and not azero-one, concept, differential pricing ensures accessto far more patients than would otherwise be possible.In other words, every additional dollar reduced inprices makes the drug more affordable for a newpatient.Increased revenues: A single, universal price will keeppharmaceutical companies out of low-income countries,which are potential markets. By using equitable pricing,companies can increase revenues in absolute terms.The financial impact of pricing to market, therefore,should be seen in terms of revenue gained from enteringmarkets as opposed to revenue lost from charging lowerprices.RISKSParallel re-importation: The most obvious risk is thatof leakages. Pharmaceutical companies have voicedthe dangers of low-priced drugs being illegallytransported back to developed country markets,thereby lowering prices in the high-priced markets.Clearly, if markets are not segmented, prices can fallin both markets to the lower level.However, this risk can be countered by nationalgovernments through carefully designed policies thatprevent re-importation 60 of these drugs to developedmarkets. The experience from other differentially priceddrugs and products has been encouraging and therehas been little evidence of large-scale re-entry ofcheaper products back to developed markets.Sustainability concerns: Since differential pricing isprimarily a producer-driven initiative, there are concernsover whether it can be seen as a stand-alone solution.There is also no guarantee that prices will be the lowestpossible, since it depends essentially on the discretionof the firms. It also faces the danger of being used asa bargaining tool to extract reciprocal concessions onintellectual property rights (IPR) law design, and othercritical issues.Some of these shortcomings could be mitigated ifdifferential pricing is part of a global initiative with clear,transparent rules. The private, not-for profit andgovernment sectors will need to work together to ensurethat pricing is based on marginal cost for the poorestcountries, that all essential drugs are covered and thatequitable pricing is just one, and not the only, strategyto ensure access to drugs. 61There have been several attempts bypublic-private collaborations to offer ARTdrugs at decreased prices, the mostimportant of these being the AcceleratingAccess Initiative. Till March 2002, 78countries had expressed interest inparticipating in the Initiative. Each ofthese countries has committed itself to,and is in the process of, developingnational care and treatment plans. So far,18 countries (12 from Africa, five fromLatin America and the Caribbeancountries and one from Europe) haveactually reached an agreement with thedrug companies. While the initiative is auseful attempt to lower the price of drugs,it clearly needs to be supplemented byother measures as well.4.5.3 The role of patentsPatents are a major factor in restrictingaccess to ARV drugs. Pharmaceuticalcompanies in high-income countriesdevelop these drugs after years of researchRegional Human Development Report100 HIV/AIDS and Development in South Asia 2003