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Peter O'Donnell is a freelance journalist who specializes in European health affairs and is based in Brussels, Belgium.
Upcoming study reveals challenges faced by Europe over the pricing of pharmaceuticals.
A thoughtful study now nearing publication throws new light onto that perennial issue of how health services can get the best deal when they pay for pharmaceuticals. It offers some interesting analysis of the challenges that arise in Europe over the pricing of products used in combination with other treatments.
The straightforward approach of viewing such products as ‘add-on’ therapy, additional to ‘backbone’ therapy, can run into problems, the study points out. In this approach, payment is based on the value of the combination therapy relative to a comparator, with payers determining the price in line with their willingness to pay. However, if the two products are already marketed for other indications, and with corresponding prices as single treatments, the sum involved in a combination may be well above the payer’s willingness to pay.
This could theoretically be solved by adjusting prices downwards for one or both constituent therapies via, for instance, confidential rebates on list prices. But if the therapies are sold by different companies, competition law may hinder individual product price negotiation. So a possible response to that dilemma is to set the price in a way that reflects the respective contributions of the constituent medicines to the overall clinical benefit of treatment, the study suggests. But this too poses problems, since it requires identification of a framework that makes it possible to determine these shares.
The challenges are all the greater because of the growing number of new therapies entering the market at high prices, comments the study–from an obscure European Union advisory group which calls itself the "expert panel on effective ways of investing in health." The study, which takes the form of an "opinion on public procurement in health systems"—notes that standard policies to contain pharmaceutical costs, including overall budget constraints or spending caps, have had only limited success, with retail pharmaceutical expenditure in Europe remaining stable as a proportion of gross domestic product over the past decade, at 1.5%.
Variations have been tried involving earmarking funds for medicines used in particular settings (such as oncology), with caps beyond which companies selling products financed through these funds are required to pay rebates, or risk sharing agreements, where the effective price or payment is conditional on the performance of the product. But the drawbacks are, the study suggests, that increasingly every actor—the pharmaceutical company, the patient, the clinician and the reimbursement agency—is stimulated to participate in what it calls a 'gambling' process, and "this affects the reputation of the system negatively."
Another difficult issue addressed by the study is the case of a new product with multiple indications, providing varying degrees of benefit for each. "One possible solution is indication-based pricing," it suggests, which may enhance innovation "because companies capture a larger share of surplus generated." But it is "difficult to verify use by indication, is not acceptable to all countries, and each additional indication often leads to a price reduction, which disincentivizes new uses of existing medicines."
The study runs through many of the other more familiar challenges–including how to proceed when clinical benefits in the population in question are uncertain. Managed entry agreements can theoretically provide a solution to the obvious limitation that clinical trials are rarely undertaken in patients that are fully representative of the population that will ultimately receive it, by introducing a performance-based payment system. "These have the advantage of addressing financial risks, but not clinical uncertainty," the study observes. In addition, "there are concerns that they are opaque, even to the extent that they are not open to inspection by the Court of Auditors (the EU's financial watchdog), and the expiry date of the patent is concealed, hampering the entry into the market of generic or biosimilar medicines."
The only way suggested to improve the design of such agreements and harmonize them across countries is to lift "confidentiality provisions in some countries, sometimes enshrined in legislation." To anyone following European health policy, that is quite a big ask, as the often-tempestuous debates in the EU over recent years have demonstrated
As the study itself acknowledges, many of the issues it raises go deep into sensitive areas of policy that beyond the scope of its mandate, ranging from high prices to patent law and competition policy, and into territory that EU member states still jealously guard as their own preserve–particularly drug reimbursement. It timorously suggests greater transparency all round, and delinking research and development costs from production and sales. It modestly admits that it "would be naive to believe that the complex issues involved in procurement and pricing of pharmaceuticals could be resolved in this opinion." The expert panel recognizes that "there are many interests involved, in some cases with member states taking quite different approaches depending on whether they are predominantly producers or consumers of pharmaceuticals," and "we do not make any specific recommendations for a way forward, not least because many of the issues are a matter of national competence and are dealt with in different ways." It concludes by simply noting "the political challenges" in moving to very different policies.
That, perhaps, is the most interesting aspect of the study. After a careful assessment of the challenges and the possible solutions, it is forced ultimately to accept that there isn't much to be done in the current political configuration of the European Union other than tinkering at the edges–thus confirming a broad consensus among all players. Right now, and incentivized by the strains of tackling Covid with manifestly insufficient political or technical capacity, the EU is contemplating new powers for itself in health matters–and this is already one of the items on the agenda of the Conference on the Future of Europe, an official review of the EU constitutional arrangements that has just been agreed and on which work will start this spring. But although the consensus on the need for change is broad, so too is the diversity of opinions on just what that change should be. An early resolution of these issues is not, unfortunately, yet in prospect.