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Examining the production costs of antiretroviral drugs

Pinheiro, Eloana; Vasan, Ashwinb; Kim, Jim Yongb,c; Lee, Evand; Guimier, Jean Marcd; Perriens, Josepha

doi: 10.1097/01.aids.0000242821.67001.65
Epidemiology and Social

Objectives: To present direct manufacturing costs and price calculations of individual antiretroviral drugs, enabling those responsible for their procurement to have a better understanding of the cost structure of their production, and to indicate the prices at which these antiretroviral drugs could be offered in developing country markets.

Methods: Direct manufacturing costs and factory prices for selected first and second-line antiretroviral drugs were calculated based on cost structure data from a state-owned company in Brazil. Prices for the active pharmaceutical ingredients (API) were taken from a recent survey by the World Health Organization (WHO). The calculated prices for antiretroviral drugs are compared with quoted prices offered by privately-owned, for-profit manufacturers.

Results: The API represents the largest component of direct manufacturing costs (55–99%), while other inputs, such as salaries, equipment costs, and scale of production, have a minimal impact. The calculated prices for most of the antiretroviral drugs studied fall within the lower quartile of the range of quoted prices in developing country markets. The exceptions are those drugs, primarily for second-line therapy, for which the API is either under patent, in short supply, or in limited use in developing countries (e.g. abacavir, lopinavir/ritonavir, nelfinavir, saquinavir).

Conclusion: The availability of data on the cost of antiretroviral drug production and calculation of factory prices under a sustainable business model provide benchmarks that bulk purchasers of antiretroviral drugs could use to negotiate lower prices. While truly significant price decreases for antiretroviral drugs will depend largely on the future evolution of API prices, the present study demonstrates that for several antiretroviral drugs price reduction is currently possible. Whether or not these reductions materialize will depend on the magnitude of indirect cost and profit added by each supplier over the direct production costs. The ability to achieve price reductions in line with production costs will have critical implications for sustainable treatment for HIV/AIDS in the developing world.

From the aDepartment of HIV/AIDS, World Health Organization, Geneva, Switzerland

bPartners In Health, Boston, USA

cDepartment of Social Medicine, Harvard Medical School, Boston, Massachusetts, USA

dManagement Sciences for Health – Europe, Ferney Voltaire, France.

Received 23 January, 2006

Accepted 12 June, 2006

Correspondence to Ashwin Vasan, Partners In Health, 641 Huntington Avenue, 1st Floor, Boston, Masschusetts 02115 USA. E-mail: avasan@pih.org

© 2006 Lippincott Williams & Wilkins, Inc.