Laying bare the complexities of the pricing issue
26.11.15
The pharmaceutical industry is by no means the main driver in rising health systems costs and with this in mind, let’s take a look at the fundamentals of pricing. Moreover innovative medicines not only promote improved patient outcomes, they also offer value to both health systems and wider society. All of these elements must be considered in pricing and reimbursement decisions.
From the outset, though, let me be absolutely clear: pharmaceutical companies to do not set prices on a whim with a focus on securing the widest margins. Where treatments already exist, we scrutinise the value of a medicine against that of alternative, innovative treatments. To do this we engage with physicians, patients and payers to understand the medicine’s clinical, economic and societal benefits and develop an evidence-based estimate of its value. In terms of the new product, we assess its added value by looking at additional efficacy, improved safety, a reduction in related healthcare costs, increased productivity and/or other benefits to the patient and society.
Where no treatments exist for a condition and there is no innovator standard of care, value created by a new medicine is assessed relative to other medical innovations that offered similar value. Prices of other medicines and treatments that have provided similar value are analysed in the process of establishing a fair price.
While some sections of the media address the pricing issue in black and white, this is a tactic that is misleading, unrealistic and unhelpful. For the most part, they focus on list prices – preliminary, unadulterated prices set by the manufacturer. In many cases, these do not incorporate any discount that may have been negotiated in confidence between the pharmaceutical company and the payer.
So why the confidentiality? We favour transparency in most of our dealings, but in this case it would be detrimental not only to the industry, but also to payers and, ultimately, to patients.
By ensuring the confidentiality of net prices – those secured through negotiations – prices can be varied across Europe, allowing for positive “price discrimination”. This means that poorer countries will pay less, while richer countries will pay more for the same product – so a price suitable for Germany would be inappropriate for Bulgaria. This balancing mechanism addresses the affordability issue, enhances value for money and is an essential vehicle for widening patient access to medicines. A single European price would, in our view, exacerbate what are already significant inequalities in access to medicines and health outcomes in Europe.
Entering into confidential agreements on a net price therefore ensures that health systems get an “optimal” deal that reflects both the value of the medicine as well as the specific circumstances of its use – including affordability, disease burden, likely clinical practice, etc.). Confidentiality helps to prevent other markets with superiors levels of affordability from referencing or misusing the price, thereby eroding it further and rendering it unsustainable for all parties.
I acknowledge, nevertheless, that more countries than today must be equipped to be “good buyers”; that is they should be knowledgeable about the products and the needs in their countries. Good deals come from two equally clever negotiators.
This leads us to the current discussion onto the purpose and value of cross border pricing initiatives, such as the recent agreement between Belgium, the Netherlands and Luxembourg. This will focus on a cooperative approach towards medicines assessment, horizon scanning and joint negotiations on the pricing of orphan medicinal products.
If this were to move in the direction of a tendering process, then this would need to ensure that the products in focus are genuinely interchangeable. Where this is not the case, cost must not be the sole evaluation criteria. It is vital to look at: quality; clinical value; service; ability to supply; and long term competition and innovation capability.
The industry too is investing in a number of interesting tools to address the pricing issue and broaden the positive aspects of this debate.
Companies have, for example, signed up to managed entry agreements (MEAs) for individual products, to facilitate patient access. These may include price variations, volume agreements or agreements to collect data. Italy is forging ahead on this front, and is also working on “pricing by indication and pricing for combination use”.
The Medicines Adaptive Pathways to Patients (MAPPs) project, created within the framework of the Innovative Medicines Initiative 2 is looking to make development and decision-making pathways for medicines more flexible – so they reach patients rapidly. It will simultaneously promote the collection of further data on the benefits and risks of new medicines. If this succeeds in bringing medicines to market faster, it will help reduce R&D cost, which should lead to lower prices.
There are, of course, detractors, but I do not understand why people think these adaptive approaches would lower standards: if every patient were actively tracked for safety and efficacy/effectiveness, using registries or other real-world evidence, standards would consequently improve, rather than decline. Is the situation really optimal with a 10,000-patient clinical trial before approval, followed by a wide product launch with no active monitoring? Surely not.
The ultimate tool to lower healthcare expenditure, though, will be dependent on joint effort, action and understanding: transitioning from a transactions-oriented to an outcomes-based approach to health. We need systems that focus on improving patients’ health in a holistic and evidence-based way and that systematically allocate resources towards interventions that deliver the best possible outcomes at the expense of those that don’t. In the long term this should be less expensive and capability of providing the sustainable environment we all need.
