Determinants of the Global Prices of Ready-to-Use Therapeutic Foods

Abstract

Background: A therapy based on ready-to-use therapeutic food (RUTF) in outpatient settings is considered the gold standard in the treatment of severe acute malnutrition in children younger than 5 years. The price of RUTF is the key cost driver of the therapy. However, no studies to date have systematically examined the determinants of RUTF prices. Objective: This article presents the first analysis of factors associated with the prices of RUTF, focusing on the impact of competition and tendering. Methods: This article examines data on the prices of RUTF purchased by UNICEF Supply Division from 2006 through 2015 (90% of RUTF purchased globally). To assess the association between price, competition, and tender introduction, controlling for potential confounding factors, regression analysis using a generalized estimating equation was used. Results: Competition, measured as the number of suppliers, was negatively associated with RUTF price. On the other hand, no statistically significant association was found between RUTF price tendering. Quantities sold were also significantly associated with RUTF prices. Conclusions: Significant price reductions have been achieved by increasing competition in the RUTF market. In contrast, introduction of tendering did not result in decreases in prices. Tendering is an effective price-lowering mechanism because it awards the bidder(s) with the lowest price with market exclusivity. However, the current tender system promotes market fragmentation and reduces the incentives for price reductions. Further reduction in RUTF prices can likely be achieved by modifying the current tendering procedures and putting a greater emphasis on price competition.