In May, I joined various members of governmental organizations, patient organizations and the life sciences industry at the 2017 Fair Pricing Forum, an invitation-only meeting to discuss “fair pricing” for medications in Amsterdam. Organized by the World Health Organization and the Dutch Ministry of Health, the meeting prompted a productive dialogue among stakeholders but also revealed a worrisome gap in the overall perception of the drug pricing discussion. The pharmaceutical industry’s viewpoint was widely underrepresented, with attendance heavily weighted toward governments and activists, and only a small industry delegation.
The main issues discussed at the two-day meeting were the supply and fair pricing of generics, voluntary collaboration among payers, new business models for R&D, and transparency on pricing and industry cost. The WHO is preparing a full report of the discussions, but in the meantime, I’d like to share a few of my observations:
1. The pricing conversation needs to dig deeper to reveal shared interests. There’s a clear need for continued dialogue between governmental organizations, the industry and the patient community. Though much of the meeting’s dialogue was constructive and participants endeavored to find joint solutions, it revealed a large gap in the understanding of mutual perspectives, which stands in the way of meaningful solutions. Given each entity’s somewhat different responsibilities and interests, complete alignment is unlikely, but understanding each other’s perspectives will help us find responsible solutions that work in the long run.
2. Price transparency builds trust and awareness in our communities. Government and patient organizations have sent strong signals for increased transparency in pricing and drug industry economics. Even though transparency is unlikely to provide solutions, the industry needs to address transparency within a broader perspective of drug company investment and the economics environment to find solutions in other areas. Government representatives and the public often lack a fundamental understanding of drug development economics, leading to an unproductive fixation on actual production costs in pricing discussions.
3. Payers should de-emphasize the use of tenders for low-volume generics. There was consensus among meeting attendees that drug procurement and tender processes for low-volume generics need to be less competitive and not exclusively focused on price. This approach would prevent companies from exiting the market and subsequently creating supply interruptions, quality problems and drastic price increases by remaining single suppliers.
4. Focus on fixing “neglected areas” rather than abolish the free market business model. Interestingly, the new business model discussions were entirely centered on pharmaceutical R&D. Industry and European Union government discussions typically focus on reform of drug financing and pricing-related business models, but the WHO is particularly focused on R&D in neglected diseases, including measuring R&D costs against the cost of innovative drugs.
Recent European discussions on antimicrobial resistance served as an example of a therapy area with insufficient incentives to develop drugs despite great medical need. In this case, lacking financial incentives are directly correlated with low volume potential due to the restrained use of highly effective last-resort options. Solutions also are needed for other therapy areas, particularly in developing countries that are juggling affordability issues and large unmet need.
While some participants seemingly preferred a “revolution” in terms of shifting R&D responsibilities to governments, most forum members seemed less interested in disrupting areas that work and more focused on finding solutions for areas with insufficient R&D investment incentives. Discussions related to antimicrobial resistance have demonstrated that the financing of additional incentives for globally oriented R&D efforts requires a sort of coalition or pooling of government resources across countries—a stumbling block that needs to be addressed foremost.
5. Looking at value-based versus affordability-based pricing. Most participants believe that drug prices are too high because drug companies set the prices to maximize profit. Most also think that governments need to intervene with price regulations, compulsory licensing or joint negotiations. Given the composition of the meeting audience, this result is perhaps not surprising, but the pharmaceutical industry should be concerned that the audience didn’t see a stronger link between innovation incentives and serving the long-term interests of finding cures for the many remaining challenging diseases. The perspective of many was, “What’s the point of having a cure if you can’t afford it?” I find it ironic that finding the cure for hepatitis C, for example, may be threatening society’s ability to address urgent needs in cancer, Alzheimer’s disease, multiple sclerosis and many other diseases.
Particularly, the WHO is challenging the use of “value-based pricing.” This is a clear deviation from most government payer systems, which tend to use some measure of demonstrated benefits and value in determining what these governments perceive as a fair price. A less understood component is that profit maximization is usually achieved where a product is priced to each country/customer at the perceived value and affordability. A drug that doesn’t reach a patient is of no value to society or to the drug manufacturer. The fundamental challenge of access to medicines for populations with lower affordability is the global community’s insistence in price transparency and freedom of flow of goods, which naturally leads to a single price for all, independent of geographic location, medical need and income status.
Much of the discussion focused on collaboration among governments following a recent collaboration between the Netherlands, Belgium, Austria and Luxemburg to jointly negotiate prices for hepatitis C drugs. The effort seems to have largely evolved into a joint health technology assessment, while leaving actual negotiations mainly with the individual budget authorities in each country. As such, this initiative is progressing along a similar path that the European Network for Health Technology Assessment followed over the last 10 years or so.
Joint assessments can have some advantages to the industry in terms of a more consistent approach toward recognized benefits—for example, through an agreed-upon comparator or acceptable clinical end point.
Despite the emotional character of the issues on the table, the event’s discussions were constructive and collaborative. However, the conversations revealed a large gap in stakeholders’ perspectives and overall understanding of the issues at hand. We need to address this information divide before we can find durable solutions to our industry’s most complex problems. The meeting concluded with the development of concrete actions to address generics supply issues and organize bundled resources for research in antimicrobial drugs. These solutions will be a good initial test case of the initiative’s contribution to achieving fair pricing while ensuring the pursuit of much needed medical solutions for so many devastating diseases.
Ed regularly shares information and insights on pharmaceutical pricing, value and access on his blog, The Price of Global Health. Subscribe today.