Collective international action to increase access to costly drugs: pooled procurement and equity based tiered pricing

Bargaining power

In recent decades, the European Union and individual countries have introduced policies to encourage the drug industry to invest in areas of high unmet medical need and public health priorities. However, these policies have not overcome persistent challenges in securing affordable access to costly drugs. Even wealthier European countries see delayed access to effective drugs that were developed with the support of public financing. The problem is particularly acute for lower income and smaller countries, and access remains highly unequal between countries.23

Inequities are driven by differences in gross domestic product (GDP) per capita, healthcare spending, drug pricing, and rates of use.4 A key contributor to these inequities is that drug pricing and reimbursement is nearly always set nationally. This limits the ability of smaller and lower income countries to negotiate effectively with drug companies, which prioritise larger, wealthier markets. As a result, these countries may face higher prices, delayed launches, or complete exclusion from access to innovative treatments. Fragmented markets and political tensions also hinder joint procurement efforts that could improve bargaining power and reduce inequities across countries.

Current approaches to pricing and their limitations

Current national frameworks for drug pricing promote inequitable access to costly drugs, particularly in lower income countries. External reference pricing is a widely used practice in which a country determines drug prices based on prices in other jurisdictions. Although this method aims to reduce drug costs by referencing lower prices elsewhere, it can increase inequity when wealthier countries benchmark against poorer ones. For example, wealthier nations such as Belgium and Austria have referenced poorer countries such as Romania and Bulgaria to set medicine prices, despite the GDP per capita of these reference countries being a third or less of that in the wealthier countries.5 This practice may discourage drug companies from launching their drugs with lower prices in lower income countries to maintain drug prices in higher income countries.6 A restricted price range for a drug can ultimately limit access, because drug prices in higher income countries are not affordable for lower income countries.7

Additionally, drug companies may avoid launching products in lower income countries to protect their pricing strategies in wealthier, more lucrative markets, denying timely access to life saving treatments in lower income settings.8 External reference pricing can contribute to short term cost containment, but this effect is highly dependent on system design and implementation.7 An investigation into pharmaceutical list prices in European countries concluded that external reference pricing has only a minor association with drug prices because companies can raise the minimum price to avoid lowering prices altogether; instead companies use compensatory strategies such as confidential discounts and delayed launches.8

Another approach, price discrimination, where manufacturers adjust drug prices based on what each market can bear, achieves more affordable prices in lower income countries while still generating profits that incentivise investment in innovation. However, it does not ensure equitable or affordable pricing. For example, research shows that lower income countries sometimes pay more for drugs for cancer treatment when adjusted for purchasing power parity, highlighting the inequitable impacts of such pricing strategies.9 Higher income countries often secure better discounts through confidential agreements (often in the form of rebates) owing to their larger market potential10; however, even these prices may remain unaffordable or strain the sustainability of health systems. Additionally, limited transparency about real prices can prevent key stakeholders, including prescribers and patients, from making value based decisions.

Fragmented markets and siloed procurement processes diminish the negotiating power of less populous or lower income countries, leading to delayed or limited access to costly treatments. Confidential pricing agreements could further exacerbate inequities, as wealthier countries often secure better discounts, leaving smaller markets to pay disproportionately higher prices relative to their income. These dynamics highlight the need for alternative procurement and pricing models designed to tackle systemic imbalances.

Collective action to improve accessibility to costly drugs

Recent initiatives of the European Commission, such as the European Health Union and the European Union Health Technology Assessment regulation, have facilitated collective actions designed to improve the accessibility of European patients to health technologies. Pooled procurement and equity based tiered pricing may further leverage collective action to overcome the limitations of fragmented markets and disparities in purchasing power, fostering more equitable access to essential drugs.

Equity based tiered pricing is based on the principle that reference countries in external reference pricing should be selected based on similarities in economic status.3 This implies that price setting should be proportionate to a country’s economic capacity, such as GDP per capita or healthcare spending. This approach aims to ensure that lower income countries pay less for the same drug, aligning pricing more closely with their financial realities. Pooled procurement involves multiple countries jointly negotiating with drug companies for the purchase of drugs.

In March 2025 the European Commission specifically proposed pooled procurement to tackle availability and access disparities of critical drugs and other drugs of common interest in the Critical Medicines Act, which will be implemented by the commission at the request of member states.11 This approach can centralise demand and enhance bargaining power of purchasers in dealing with sellers. These approaches have shown success in other contexts, including vaccines and treatments for infectious diseases, where they have improved affordability and access.12 However, their application to costly, innovative drugs is limited.

Pooled procurement

Demand and capacity pooling, possibly supported by public commitments to purchase drugs before development, consolidate the market power of multiple healthcare payers. This approach, whether applied at national or multi-country levels, can be more effective at lowering prices and increasing access than solo efforts, particularly for payers with a small market share.2 Benefits for payers can include reduced administrative burdens and more efficient efforts for generating real world evidence, especially about the effects of advanced therapies in rare diseases.13 For drug companies, demand pooling is attractive because it reduces the burden of multiple negotiations and can expand the volume of purchases beyond what individual negotiations would yield.2 Because drug companies may change the information they use in pricing negotiations and can adjust their negotiation strategies based on experiences with different payers in multiple countries, larger and wealthier countries are also attracted to pooled procurement initiatives owing to the benefits of pooled information and experience in a market characterised by significant information asymmetry and lack of transparency, in addition to the draw of securing drugs at lower costs.

Various pooling initiatives have been implemented, particularly in low and middle income countries to tackle infectious diseases.14 Examples include the Pan American Health Organization Revolving Fund, established in the late 1970s to purchase vaccines collectively; the Organisation of the Eastern Caribbean States Pharmaceutical Procurement Service (formerly the Eastern Caribbean Drug Service15); and various initiatives during the AIDS epidemic, which led to the formation of global health organisations like the Global Fund, Global Drug Facility, the US President’s Emergency Plan for AIDS Relief (PEPFAR), and Gavi, the Vaccine Alliance. More recently, the covid-19 pandemic prompted pooled procurement for vaccines and personal protective equipment across various regions, including Europe.16 Between August 2020 and November 2021, the European Commission signed 11 contracts with eight vaccine manufacturers providing access to up to 4.6 billion vaccine doses. Although the EU started the procurement process later than the US, by the end of 2021 the fully vaccinated population was around 8% higher in the EU.17 Overall, the EU pooled procurement cases provided more affordable drugs and vaccines, greater efficiency, quality improvements, and increased access to drugs.

The Gulf Joint Procurement mechanism, established in 1978,18 offers an example of pooled procurement among higher income countries for a wide range of drugs. A review of various demand pooling initiatives for drugs in Europe (for example, Beneluxa Initiative, Nordic Pharmaceutical Forum)19 showed that companies engaged in international collaboration reported positive experiences. These initiatives enabled the procurement of drugs that otherwise would not be accessible in member countries’ markets. Critical success factors included strong leadership, adequate resource allocation, and a commitment to overcoming barriers inherent in working across structurally different health systems.19

To set up and sustain a pooled procurement mechanism, alignment among actors involved is essential. Successful pooled procurement mechanisms require buyers with sufficient technical capacity, financial capacity, and compatible laws and regulations; a pooled procurement organisation with adequate financial and technical capacity and independent operations; and suppliers with sufficient incentives, such as a large market and a prompt payment mechanism.14

Transparency is critical to build the trust needed to expand on efforts such as these by facilitating the information sharing needed to accomplish key objectives of demand pooling initiatives (box 1).

Equity based tiered pricing

Equity based tiered pricing adjusts a product’s price according to a country’s ability to pay or local value it provides, with higher income countries paying more and lower income countries paying less. Unlike differential pricing implemented by drug companies, the mechanisms and algorithms of the policy are decided by policy makers instead of industry actors.

Adoption of a formalised tiered pricing policy for a limited number of costly, effective drugs could help achieve more equitable and affordable access across a pool of countries with varying income levels.23 In situations where competition is not feasible, as is sometimes the case for patented drugs for an important unmet medical need, tiered pricing may be an effective approach to improve affordability.22

Value based tiered pricing supported by joint technology assessment defines relative price levels based on clinical and economic value, affordability, and other metrics.23 It could increase the negotiating power of healthcare payers and reduce benchmark prices by increased purchasing volumes. Preparation for the European Union Health Technology Assessment (EU HTA)regulation took more than 15 years, but the joint assessment process provides an opportunity to judge jointly the clinical value of new drugs, the initial step in the implementation of value based differential pricing.

The shortcomings of price discrimination presently applied by industry (that is, through negotiated confidential agreements) have generated interest in equity based tiered pricing (that is, price differentiation according to economic status) among both industry and policy makers.24 Tiered pricing may present advantages to companies seeking to maximise profit—possibly a boon to research and development and new product generation—and to lower income countries that tend to pay higher prices relative to their income.8 To successfully implement tiered pricing, higher income countries would need to agree to pay more than their lower income peers do, benchmark prices would need to be affordable and sustainable for high income countries, and transparency in price negotiations would also be necessary. Currently, real world experience and resources commenting on the potential implementation of such models23 is limited mainly to developing countries, with a focus on vaccines and antiretroviral drugs. According to WHO, the Gavi Vaccine Alliance has helped to immunise over 800 million children and to halve child mortality in 73 developing countries since its inception in 2000.25 These models are coordinated by international institutions and achieved improved access for under-supplied markets instead of price reductions; additionally, they do not include costly new products.26

In the context of costly drugs and higher income European countries, tiered pricing could be piloted with a suitable candidate product—ideally a durable or curative therapy expected to be offered at a high price and with low resale risk. A benchmark price reflecting the drug’s relative value—ideally judged by the joint clinical assessment according to EU HTA regulations—would need to be negotiated and agreed with the manufacturer. The manufacturer would be incentivised to agree to a base price lower than the maximum level achievable to entice higher income countries to participate in collective negotiations, saving manufacturers from having to negotiate with each participating country individually. Income related price differentials would need to be agreed based on specified national income tiers, with payers and the manufacturer committing to price transparency. Mechanisms to inhibit export of the product outside the intended market could be implemented through transparent rebates, rather than upfront discounts, and stringent policy monitoring. Including a larger group of countries may increase the likelihood of achieving policy objectives but may pose challenges for agreeing solutions, as highlighted by a feasibility study for equity based tiered pricing in EU member states.27

Finally, implementation of tiered pricing requires transparency in pricing and transparency in the research and development costs of drugs. The former is required to establish relative prices between countries; the latter would help in assessing the adequacy of prices for cost recoupment and profit generation, especially related to public incentives and co-funding of new drugs by the public sector. Both types of transparency might help to develop the trust needed for fruitful partnerships and promote accountable management of public resources, potentially in pilots facilitated by WHO Europe with the input of multiple stakeholders.

Principles for improving outcomes in a global market

Most EU member states are small actors in the global pharmaceutical market, with varying capacities to manage challenges of economic incentives of global drug pricing. Collaborative efforts between countries may be more effective than independent action in obtaining price concessions and directing industry to meet priority health needs. Additionally, public and private sectors have shared interests and co-dependency related to facilitating patient access to costly innovative drugs. With this recognised, collective, multi-stakeholder efforts to design and pilot scalable models for joint procurement and pricing may create sustainable, win-win solutions for health systems and the drug industry. As a next step, implementation of such collective actions requires a detailed implementation roadmap, which clarifies different actors’ roles, the barriers, and how these might be overcome.

EU policy makers and stakeholders could adopt a different stance towards the black boxes and confidentiality agreements that have characterised many aspects of pharmaceutical decision making to reduce information asymmetries. These include development and manufacturing costs, prices, discounts, and similar price reducing arrangements, and clinical evidence from trials and the real world. Such information is presently in short supply for reasons relating to proprietary business considerations, which may need to be negotiated considering the public health and financing considerations at stake. Putting more information in the public domain, including on the procurement process and decision making criteria, could help to spark and support the kind of discussions needed to take on the fundamental question of what constitutes a fair and appropriate market price for effective drugs, a topic further examined by other papers in this series.28