In the context of pharmaceutical or drug pricing the concept of differential pricing (or tiered pricing) is the adaptation of prices to the purchasing power of consumers in different geographical or socioeconomic areas. It is seen as an effective way in which to improve access to medicines for people living in lower and middle income countries. Pharmaceutical companies may set different prices based on that difference in purchasing power by charging lower prices in economically disadvantaged regions to ensure broader access while charging higher prices in wealthier regions to maximize revenue. The policy of doing this generally has widespread support as it improves access to medicines that would normally be too expensive.
There are a number of concerns about the setting different prices for the same medicine based on geography or economic status concerning fairness and equity in healthcare. It may be seen as prioritizing profit over patient welfare, especially for life-saving or essential medications. Differential pricing can also incentivize a parallel trade where medicines intended for a lower-priced market can be resold by the opportunists into the higher-priced markets. Larger purchasers of medicines can point to the cheaper prices in other countries as part of negotiations over prices with pharmaceutical companies, which defeats the purpose of the differential pricing concept.
Page last updated:
Comments are closed.