Focus: Governments evaluate policies, reforms as drug pricing debate rages on
pharmafile | May 9, 2016 | Feature | Manufacturing and Production, Medical Communications, Research and Development, Sales and Marketing |
By Anjali Shukla
Lawmakers in France are set to urge the leaders of G7 countries to put in place guidelines that will help arrest unfair drug price hikes, according to reports.
French Primer Francois Hollande will likely make the proposal at the upcoming meeting of G7 leaders in Ise-Shima, Japan on May 26-27. The idea, it is believed to formulate an international strategy to tackle the problem and aid better access to patients minus the spiralling costs.
The news comes close on the heels of Germany announcing new proposals to check price hikes by the drugmakers as the pricing debate spreads across continents. The voices of disapproval have grown stronger especially since late last year as an entire host of pharma companies came under the scanner for profiteering via disproportionate product price rises.
Over the past months lawmakers across geographies have come out in support of introducing and implementing regulations that will put brakes on the unbridled trend. The scrutiny has increased after the disproportionate product price bumping by the Canada-based Valeant Pharmaceuticals and Turing Pharma led by Martin Shkreli came to light late last year. The shocking revelation saw regulators and lawmakers intensify scrutiny on the drugmakers. Valeant stock took a beating and as the chips dropped they claimed a big chunk of the company’s market cap and ended in the departure of the chief executive. The firm is still reeling in the aftermath of the scandal with rumours of a sell off and name change doing the rounds. Shkreli, ousted from the company is facing charges in the US courts.
As scrutiny on pricing activities of drug companies gathers momentum, governments across geographies have been stepping up measures to closely analyse and check the practice.
German Plans
Germany, the largest market for drugs in Europe is preparing to take up the pricing battle to the drugmakers as it evaluates the national healthcare system for new medicines. The evaluation follows new data showing between 2011 and 2015, spending by Germany’s statutory health sector rose 19.7% to 202.1 billion euros ($227.4 billion). Spending on prescription drugs jumped 27.1% over the period.
As per the new proposals, pharma companies would be allowed to charge full price for new products, however, insurers in Germany would be required to start negotiating discounts once sales for a drug hit over about 250 million euros ($281 million).
In Germany, the drugmakers are allowed to pick a price for a patent-protected new prescription medicine for an initial period, which usually lasts a year. The bill for these drugs is passed on to the public sector insurers. Over this initial period, the German drug regulatory body, Institute for Quality and Efficiency in Health, undertakes the process of assessing the performance of the new product versus those already available in the market. A final recommendation decides the reimbursements and discounts for the insurers.
The Asian Angle: India, China
Counterparts in Asia have joined in to take on the pricing debate with India and China evaluating measures to bring down medicine costs. The Indian government is reportedly mulling plans to check the prices of patented drugs in a bid to make them affordable for the patients.
Official estimates peg the value of Indian pharmaceutical industry at $ 20 billion with an expected annual growth rate of 5%.
Late last year the government set up a committee to review the existing price control model after a Supreme Court ruling called the current mechanism irrational and unreasonable. The panel in March recommended capping the trade margins for expensive drugs at 35% of maximum retail price. The report has called for protecting the end-users via government intervention and regulation.
There is no ceiling on the trade margins since the new drug pricing policy was implemented in 2013.
In addition, the lawmakers are also evaluating other platforms to reduce prices of life-saving drugs and licencing them to domestic firms for manufacturing.
Natco Pharma was recently granted the licence to make a cheaper copy of Bayer’s cancer drug at a fixed rate of royalty to the latter.
In China, the central government has firmed up plans to reform the healthcare system and has assured to focus on checking the cost of drugs. The lawmakers have supported the need for reducing medicine prices via negotiations, cutting distribution costs and lowering use of some expensive therapies.
Healthcare spending in China, the world’s second-largest pharmaceutical market, is expected to grow between $155 billion and $185 billion a year by 2018, according to an IMS report.
Managing the regularly rising costs has become additionally significant in the backdrop of struggling public healthcare systems coupled with the spiking rate of health issues including diabetes, heart disease and cancers.
The Other Side: Drugmakers
The pharma firms, which form the other side of the ongoing debate, have also come out to take a stand on pricing and analyse the impacts, stressing the need for a balance. In a bid to hold productive discussions around pricing, the industry along with other stakeholders launched the PharmaDiplomacy Dialogue initiative. The idea is to bring together the drugmakers, healthcare payers and providers, patients and investors to discuss the issues around pricing of pharma products.
Sir Andrew Witty, Chief Executive, GlaxoSmithKline, says: “Pricing of medicines must balance the needs of multiple stakeholders, striking a fair balance between rewarding innovation, managing cost pressures in healthcare systems, and ensuring patient access to the medicines they need. Achieving that balance requires new thinking, improved collaboration and creativity.”
The pharma firms have identified lack of trust towards the drugmakers as the biggest sticking point in the pricing issue vis a vis the value versus what the market will bear. The overall belief is that the pharma companies do not ask for a fair price. The distrust may not be entirely misplaced as a recent study showed on average price of new cancer drugs over the last 15 years jumped to 100,000 pounds a year from 10,000 pounds.
The pharma industry has refuted the claims saying the public rhetoric around pricing is in fact a ruse to distract attention from the inadequate health systems and limited investment in infrastructure.
The industry has argued that pharma products as a component of the healthcare system have had a set value for over 50 years and that things are not set to change anytime soon. In addition, the healthcare system passes on the financial burden of increased insurance premiums and hospital costs to the patients however it is the drugmakers that get the majority of the blame.
On the other hand, lack of transparency while deciding price points for new drugs has only fuelled the fire.
French drug firm Sanofi has argued the government should not place the entire burden of ensuring access to healthcare on drugmakers, after the Indian lawmakers placed additional pharma products to its price control list.
Even if the G7 group that includes Canada, Germany, Italy, Japan, the US, the UK and France agree to a uniform strategy, implementing any radical reforms will not be possible anytime soon. Jointly the seven nations constitute a huge market for pharmaceutical products and any collective move will be a powerful one. However, formulation and implementation of sustainable and effective reforms will need time and consent.
Going ahead, it is unlikely the issues will meet with a positive resolution in the near term and as such the scrutiny will continue on drug pricing. In the absence of concrete structural reforms as well as lack of transparency the overall public resentment will more likely rise. However, on the positive side pharma industry and the regulators are trying to devise measure to aid mutually agreed pricing via different approaches including market access agreements and pay for performance deals.
Charlotte Ersbøll, Corporate Vice President, Novo Nordisk, says: “We have landed ourselves in an unsustainable situation that offers us two options. To go down an increasingly antagonistic route where everyone loses, but mostly the patient. Or to start a new conversation, built on mutual trust, to ensure that everyone’s interests are respected and taken into consideration. That is what we call pharma-diplomacy. With the tool we have developed, we hope we can operationalise a new way of collaborating where everyone wins, not least the patients.”
