A/HRC/23/42 the price of a specific medicine in one or several countries is used as a benchmark to set or negotiate the price of medicines in a given country. Regrettably, some developing countries select developed countries, with higher medicines prices, as reference countries, resulting in substantially higher medicines prices. For example, in 23 developing countries, public sector prices for generic medicines were 1.9 to 3.7 times higher than even the international reference price (calculated at the median price of multi-sourced medicines offered to developing countries by different suppliers) and for originator brands, 5.3 to 20.5 times the international reference price.33 To secure the lowest price for medicines and enhance affordable and equitable access to essential medicines, purchasing States should therefore select reference countries whose level of economic development is similar to theirs.34 If States use high-price countries for referencing, they should adjust the benchmark price to the levels of local income per capita when setting prices. 24. The Special Rapporteur was informed that pharmaceutical companies adopt various methods to reduce price transparency in order to work around any loss incurred from ERP. They introduce their products in high-price markets first, to be used as reference countries, thus maximizing the price. Additionally, transparency is reduced when companies list high prices in a country while granting discounts and rebates on the condition of confidentiality.35 25. Under the right to health, access to information includes providing consumers with information on the prices of medicines. This has been a good practice adopted in some States, which require by law that the maximum retail price of medicines be printed on medicine packages.36 26. About half of the surveyed States use TRP to set the ceiling price of medicines. TRP is applied generally in developed countries, where the reimbursement price of a medicine is fixed at the average or lowest price of other drugs in its therapeutic class that are available on the internal market. Manufacturers may price their medicines at a higher level and if the patient decides to purchase a medicine which is not covered by the reimbursement limit, they will have to pay the difference. States informed the Special Rapporteur that they offered alternatives to companies to set their prices below that limit, thus avoiding the extra cost to the patient. TRP allows doctors and patients to select the lowest price medicine from a range of alternatives within a therapeutic group, improving consumer awareness about options available and thereby helps increase transparency in the market. 27. States also exercise other forms of direct regulation through cost-based pricing, which is based on actual costs of production, a profit margin and a percentage, fixed or regressive, towards distributors’ mark-ups. Determining actual costs of production, however, requires reliable and documented evidence of actual local costs of production, which is difficult to obtain given the global dimension of pharmaceutical production. Alternative methods to determine costs of production have included proxies, for example tax paid on manufacturing costs through excise returns and customs duties on landed costs of active pharmaceutical ingredients (APIs).37 Transparency in providing costs of production is important to ensuring fair pricing of medicines, while allowing for a profit 33 34 35 36 37 Alexandra Cameron et al, “Medicines Prices, Availability and Affordability”, in The World Medicines Situation 2011 (World Health Organization, 2011), pp. 5-6. A/HRC/20/15/Add.2, p. 12. Jaime Espin et al, “External Reference Pricing” (see Note 33 above), p. 22. WHO, “Public-Private Roles in the Pharmaceutical Sector: Implications for equitable access and rational drug use”, Health Economics and Drugs Series, No. 005 (1997), pp. 61-62. Sakthivel Selvaraj and Habib Hasan Farooqui, “India: Draft Drug Policy 2011: Legitimising Unaffordable Medicine Prices?”, Economic and Political Weekly, vol. XLVII, No. 46 (2012), pp. 1317, p. 14. 9