The pan-Canadian Tiered Pricing Framework and Chinese National Volume-Based Procurement: A comparative study using Donabedian’s structure-process-outcome framework

BACKGROUND: Generic drugs have been seen as a potentially powerful way to alleviate the financial burden on patients and health care systems. Two strategies for achieving rational prices of generic drugs are tiered pricing framework and pooled purchasing power. We compare the pan-Canadian Tiered Pricing Framework (TPF) and the Chinese National Volume-Based Procurement (NVBP) as comparators to explore the similarities and differences between the two mechanisms and summarise lessons for other jurisdictions. METHODS: This comparative study applies Donabedian’s structure-process-outcome framework to systematically analyse the macro contexts, procedures, and long- and short-term results of each pricing mechanism, and the interactions between them. RESULTS: Structure: TPF is an upstream initiative aimed at lowering the prices of generic drugs and increasing coverage and price consistency. NVBP is a downstream national initiative prioritised for reducing drug prices to achieve value-based purchasing. Process: By associating the number of manufacturers with price cuts, TPF leaves the choice to manufacturers to decide if they want to enter a specific market. In contrast, the Chinese government determines NVBP list and has the authority to choose manufacturer(s) with the lowest price(s). TPF provides clear price information to potential suppliers with unclear order quantity. The NVBP drug price is determined by tendering, while procurement volume is clear and massive. Outcome: The effectiveness of TPF and NVBP is similar, with both achieving a 53% price cut. Both TPF and NVBP experienced efficiency improvement since their establishment, with 98 and 86 drugs priced per year. By comparing 60 drugs covered by both programmes, the NVBP price is 57% of that of the TPF counterpart on average (1.1 to 301.6%), by purchase power parity. CONCLUSIONS: The tiered pricing scheme is feasible in regions with a stable and mature pharmaceutical market, typically seen in high-income countries, while tendering is more workable in low- and middle-income countries where the pharmaceutical market is weak and unstable. Experience in the two countries shows that a coordinated pricing mechanism involves many piecemeal interactive problems, which a sophisticated system with a robust long-range plan may address better.