Competition effects in EU external aid supply tenders funded with the Pre-accession and Neighbourhood instruments

This paper investigates empirically the competition effects on procurement costs for Europe Aid funded supply tenders in countries benefiting from the EU Pre-accession (IPA) and Neighbourhood (ENI) financial instruments. We use a dataset created and curated by us from supply tender dossiers published by Europe Aid. We determine a reference price for each procured lot based on the contracting authority’s requirement to establish a participation tender guarantee. We estimate controlling for potential endogeneity how the entry of new bidders in the tendering procedure affects procurement cost savings regarding this reference price. Finally, we discuss the expected additional savings in the management of these funds that may be obtained by further promoting competition.

Reference Pricing for Healthcare Services

Problem definition: The traditional payment system between an insurer and providers does not incentivize providers to limit their prices, nor patients to choose less expensive providers, hence contributing to high insurer expenditures. Reference pricing has been proposed as a way to better align incentives and control the rising costs of healthcare. In this payment system, the insurer determines the maximum amount that can be reimbursed for a procedure (reference price). If a patient selects a provider charging more than the reference price, the patient is responsible for the entire portion above it. Our goal is to understand how reference pricing performs relative to more traditional payment systems. Academic/practical relevance: Our results can help healthcare leaders understand when reference pricing has the potential to be a successful alternative payment mechanism, what its impact on the different stakeholders is, and how to best design it. Methodology: We propose a game-theoretical model to analyze the reference pricing payment scheme. Our model incorporates an insurer that chooses the reference price, multiple competing price-setting providers, and heterogeneous patients who select a provider based on a multinomial logit choice model. Results: We find that the highest-priced providers reduce their prices under reference pricing. Moreover, reference pricing often outperforms the fixed and the variable payment systems both in terms of expected patient utility and insurer cost but incurs a loss in the highest-priced providers’ profit. Furthermore, we show that in general the insurer utility is often higher under reference pricing unless the insurer is a public nonprofit insurer that weighs the providers’ utility as much as its own cost. Managerial implications: Overall, our findings indicate that reference pricing constitutes a promising payment system for “shoppable” healthcare services as long as the insurer does not act similar to a public nonprofit insurer.

EXPRESS: Perceived vs. Negotiated Discounts: The Role of Advertised Reference Prices in Price Negotiations

Retailers routinely present a posted price together with a higher advertised reference price, in an effort to evoke a perception of the discount the consumer is receiving. If prices can be negotiated though, what impact does this initial perceived discount (IPD) have on the ultimate discount, demand, and revenue? With data from consumers of a large durable goods retailer, in a natural decision-making environment, this study provides evidence that a greater IPD is associated with smaller negotiated discounts. Then, a lab experiment involving negotiation and purchase decisions for multiple products, with randomly assigned values of the IPD, establishes that a $1 increase in IPD lowers the negotiated discount by 4.7 cents. Furthermore, 75% of this decrease can be attributed to reduction in the participants' likelihood to initiate a negotiation. Under bargaining, almost half of the increase in revenue from a higher IPD stems from an increase in the negotiated price, which is unlike fixed pricing, in which setting an increase in IPD affects revenue only through changes in demand. Sellers also have a greater incentive to set exaggerated advertised reference prices in bargaining contexts, compared with fixed pricing. These findings in turn have implications for researchers, retailers, and consumers.

Availability, pricing and affordability of essential medicines in Eastern Ethiopia: a comprehensive analysis using WHO/HAI methodology

Background Access to essential medicines is a universal human right and availability and affordability are the preconditions for it. In line with the sustainable development goals, World Health Organization (WHO) has outlined a framework that assists the policy makers to improve access to essential medicines for universal health coverage by 2030. However, the availability and affordability of essential medicines remains suboptimal in several low-income countries. Therefore, this study was designed to investigate the availability, pricing and affordability of essential medicines in eastern Ethiopia. Methods A cross-sectional study design was employed to conduct this study. Public and private health facilities found in Eastern Ethiopia and which fulfilled criteria set forth by WHO/Health Action International (HAI) guideline and essential medicines listed on WHO/HAI guideline and essential medicine list of Ethiopia were included. Accordingly, 60 medicine outlets were selected based on the WHO/HAI standardized sampling methodology. A standardized data collection tools developed by WHO/HAI, with necessary modifications, was employed to collect the data. Median Price Ratio (MPR) was computed as a ratio of median local buyers’ price to international buyers’ reference price. The Mann–Whitney U test was employed to compare the median buyers’ price between public and private health facilities. Kruskal–Wallis test was also run to explore the median price difference among all facilities. Treatment affordability was calculated based on the number of days of wage of the lowest-paid government employee of Ethiopia required to purchase the prescribed regimen. Results The overall percent availability of originator brand (OB) versions of essential medicines was found to be 3.6% (range: 0.0–31.7%), with the public and private sectors contributing 1.43% and 5.50%, respectively. The overall percent availability of lowest price generics (LPGs) was 46.97% (range: 1.7–93.3%) (Public: 42.5%; private: 50.8%). Only eight LPGs (16.0%) met the WHO target of 80%. The Mann–Whitney U test indicated that 64% drugs showed statistically significant median price difference between public and private settings (p < 0.05). The MPR value indicated that the median buyers’ price of drugs in private sector were more than four times the international reference price in 30% of drugs. The percentage of unaffordable medicine were 72.09 and 91.84% for public and private facilities, respectively, with 79.17% of the medicines were unaffordable when both settings were combined. Conclusion Only 16% of the surveyed medicines surpassed the WHO cut-off point of 80%. Nearly one-third of drugs in the private sector had a price of more than four times compared to the international reference prices. Moreover, four out of five drugs were found unaffordable when both settings were combined, demanded several days of wage of lowest paid government employee. This finding calls a prompt action from stakeholders to devise a strategy that help promote the access of essential medicines and rescue the struggling healthcare system of Ethiopia.