Pressure for Price Transparency
Concern about high prices for new breakthrough medicines is prompting a push for greater transparency on pricing and reimbursement, with growing demand for the sharing of information on actual market (net) prices in a way that threatens the confidentiality of the pricing deals companies negotiate with payers in individual markets.
Pharma firms are fiercely protective of their ‘list’ prices and the confidentiality of the negotiated deals that reduce these prices to the prices actually paid by payers across global markets. Keeping their list prices confidential enables companies to maintain benchmark prices at global level while still being able to respond to the economic conditions in particular countries. However, pressure is growing for greater transparency in drug pricing that threatens to erode the confidentiality of negotiated agreements.
WHA Resolution
The World Health Assembly in May this year adopted a resolution, proposed by Italy, on improving the transparency of markets for medicines, vaccines and other health products in an effort to expand access. The language of the resolution asks WHO member states to “take appropriate measures to publicly share information on the net prices of health products … the net price or effective price or net transaction price or manufacturer selling price [that] is the amount received by manufacturers after subtraction of all rebates, discounts, and other incentives”. It also requests the WHO secretariat to support efforts towards transparency and monitor the impact of transparency on affordability and availability of health products, including the effect of differential pricing.
Amid considerable controversy the language in the final resolution, from which the UK, Germany and Hungary had dissociated themselves, was watered down. However, senior WHO officials described it as a landmark measure that could have a lasting impact on reducing prices in markets for urgently needed health products.
A major stumbling block to price transparency for medicines will be opposition by the industry to disclosure of R&D/clinical trial costs. One of the most fiercely debated elements of the WHA resolution related to disclosure of R&D costs, notably for clinical trials, which may be offered in support of high drug prices. This was watered down to emphasise the non-mandatory nature of such disclosure.
Risk Sharing
The prices actually paid for expensive new medicines are now heavily disguised in many countries by a variety of increasingly complex confidential pricing agreements struck between pharma firms and payers. These risk-sharing/managed-entry schemes may be financial or performance-based. For example:
straight discounts
rebate/recovery arrangements requiring the manufacturer to pay back a percentage of the payer’s expenditure on the product once a subsidy cap has been exceeded
price/volume arrangements, under which a price reduction is triggered when expenditure on the product exceeds an agreed threshold
outcomes-based arrangements (also described as pay-for-performance or pay-for-success deals) where payers will pay the asking price for a drug only if it achieves desired outcomes
data provision arrangements under which the collection of additional evidence (usually related to cost-effectiveness) is required, and at the end of the data capture period the drug’s price/listing status is reviewed in the light of the evidence gathered
European Cooperation
In Europe, concerns about the price of Gilead’s hepatitis C drug Sovaldi some years ago prompted several governments to move towards the sharing of pricing information with each other. For example, the Netherlands and Belgium, then joined by Luxembourg and Austria, launched the BeNeLuxA initiative with four main areas of cooperation: horizon scanning; health technology assessment; exchange of strategic information; and pricing/reimbursement negotiations. Ireland subsequently joined, and Switzerland, France and Italy are said to have expressed an interest.
The first successful joint BeNeLuxA HTA appraisal and price negotiation was completed in July 2018 for Biogen’s Spinraza for spinal muscular atrophy, although this applies only to Belgium and the Netherlands; also the arrangement differs between the two countries in respect of the patient population covered. While the countries involved will share the information with each other, it is worth noting that the pricing agreements with the manufacturer have not been made public (reportedly, the result was a reduction of up to 85% on the list price for Spinraza).
BeNeLuxA was followed in 2017 by the Valetta Declaration, an agreement between Malta, Cyprus, Greece, Italy, Spain, Portugal, Ireland, Romania, and Slovenia to enhance cooperation in a range of areas, including joint price negotiations for selected medicines (e.g. innovative, high-cost drugs in areas of high unmet need).
There were already two collaborations in the Nordic area. The Nordic Pharmaceuticals Forum, established in 2015, which comprises Denmark, Iceland, Norway and Sweden. It focuses on: horizon scanning; ensuring the security of drug supply; joint procurement of older drugs; and joint price negotiations for new, expensive drugs. FINOSE involving Sweden’s Dental and Pharmaceutical Benefits Agency (TLV), Norway’s Medicines Agency (NoMA) and the Finnish Medicines Agency (Fimea), aims to improve the efficiency of the HTA process in these three countries by producing joint assessment reports. However, for outpatient drugs in Finland a FINOSE assessment does not replace the normal pricing and market access process and an application to the Pharmaceutical Pricing Board must also be submitted. FINOSE’s first joint assessment was completed in 2018 for Astellas’ Xtandi for non-metastatic castration-resistant prostate cancer; it concluded that the long-term survival gain and modelled QALY gain for Xtandi were not justified.
In addition, in September 2018 Denmark and Norway entered into a political agreement to develop the conditions for joint price negotiations, and discussions have begun on a future joint Nordic tender for selected drugs. Other Nordic countries are expected to join when the framework has been established. The decision on which drugs to use in each country would remain at national level.
United States
Action is also being taken in the US where new rules state that direct-to-consumer television advertisements for prescription drugs and biologicals covered by Medicare or Medicaid must include the list price (wholesale acquisition cost) if that price is equal to or greater than $35 for a month’s supply or the usual course of therapy.
Risks
A more transparent pricing regime, which could conceivably lead to a lowest common denominator approach to pricing at a global level, runs considerable risks – most notably reducing incentives for investing in new breakthrough medicines, particularly those for smaller patient populations and the emerging personalised therapies. Also, if transparency reduces prices in higher income countries, which essentially help subsidise those in lower income countries, clearly the latter would suffer. At the WHA, the UK delegate urged that price transparency should not threaten “differential pricing arrangements, whereby low- and middle-income countries can purchase certain medicines and health products at lower prices than those paid in developed nations”.
Competition
In the context of drug prices, it is often forgotten that the pharmaceutical market can be an extremely competitive one – even for new breakthrough medicines. And this competition inevitably acts as a brake on pricing. HCV drugs are a good example. As the market has become more crowded, prices have dropped and Gilead has recently decided to launch generic versions of Harvoni and Epclusa at significantly reduced prices in the US more than 10 years before the patents expire.
Looking to the future
At present, the various country collaborations described above are still in their infancy and they remain confined to distinct country groupings. Also, their aims are wider ranging than price transparency alone. However, looking to the future, it is not inconceivable that, galvanised by those who promoted the WHA resolution and by the launch of increasing numbers of very expensive personalised gene and cell therapies, a more coherent and coordinated approach will emerge. Industry will have to stay ahead of the game and perhaps come up with some novel ideas on how new drugs should be paid for. At the very least, companies will have to supply detailed and convincing data in support of their list prices – beyond simply stating that these prices are necessary to recoup the costs of R&D.
