Elephants, fairness, and magic formulas in drug pricing (Guest blog)

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Elephants, fairness, and magic formulas in drug pricing (Guest blog)

23.07.20

It was 30 minutes in to a recent panel discussion on the challenges of cancer before the moderator, pointed to the elephant in the room. Noting a lack of enthusiasm from my fellow panelists to dance with this particular elephant I stepped in. My response wasn’t particularly smart nor innovative but the elephantine experience underlined for me the importance of dialogue on the issue and triggered my thinking.

The discussion about price, access and affordability is not clear at all. Some think that price is the main hurdle for access and reducing the price would be a simple and effective solution improve access and affordability. (Prokupkova, et al., 2018) Others think, access is a question of the right access agreement which will also solve the affordability problem. (Bouvy, Sapede, & Garner, 2019) Then there is a third group who says that the price must be fair. (Prokupkova, et al., 2018), (World Health Organization (WHO), 2019) The third group gets all my points. Like with the call of some stakeholder groups for transparency: Who could be against fairness?

But, how do we define “fair price”? A philosopher once said that a fair price is one which benefits both the seller and the buyer. (Aquinas, 1947).[1] I couldn’t agree more. This perspective, however, could lead to less than satisfactory results. How should one determine any price point with this definition?

Recently, various authors have proposed frameworks or even formulas for pricing medicines. (Uyl-de Groot & Löwenberg, 2018), (Moon, Mariat, Kamae, & Bak Pedersen, 2020) (Annemans, 2019), (Prokupkova, et al., 2018). Some of them propose to factor in R&D costs, others are against; some consider a margin, others propose also to reflect the patent life; some would like to reflect the budget impact, while still others are more flexible and propose ceilings. At first glance, all these inputs sound relevant to determining whether a price is fair. A reality check would show, however, that all European countries have already pricing regulations in place and prices are a result of negotiations, and neither price nor reimbursement is granted. In addition, many other factors also come into play when looking at individual country policies which try to manage budget, uncertainty and access: External Reference Pricing which by its nature imports foreign drug prices; local standard of care; claw backs in case of overspend, mandatory rebates, tenders (Vogler, et al., 2017), and sometimes even industrial policy, such as the request to have local clinical trials programs. (AT Kearney)

The formula approach has always a bit the touch of magic about it. Access in the real world is much more complex than the current public debate as the Time to Access Project of the EFPIA Oncology Platform has shown. The current approaches, such as comparing medicine A with medicine B or assessing budget impact, address access and affordability but do not necessarily consider other factors such as how research works, current scientific developments, payers’ behaviors, or society’s preferences (OECD, 2010). Enabling and steering innovation in areas of unmet need goes beyond the innovation’s added value (or cost) and must also consider the longer-term drivers of innovation (Cutler, 2020).

It is not by chance that the philosophical definition does not establish a price point but points to how fairness is grounded in relationships. First, determining value is a societal question. Although the current policy environment is rather polarized, value must be negotiated between the different stakeholders based on their own legitimate interests. Second, determining the value of an innovation is only the last step of the R&D process which requires first and foremost an environment where innovation can happen, scientifically and economically. Resources for the so-called “eco-system”, be it for public, be it for private R&D are needed. Third, there is a shared raison d’être: the value of innovation is patient benefit. A societal dialogue should lead back to the core question: How can we create patient benefit in a framework of fairness which ensures access and future innovation.

In addition to the in-room elephant there is another elephant in front of our window. Scientific development in cancer has progressed beyond recognition, which creates benefits as well as challenges in terms of access. Between 1995 and 2020 the European Medicines Agency (EMA) approved more than 120 cancer medicines and more than 164 indications. (Hofmarcher, et al., 2019)

Immuno-oncology alone has created much more complexity. Recent innovations in cancer are not only targeting one but more than 20 types of cancer (IQVIA Institute, 2018). If there were three companies conducting immuno-oncology research, this would result in 60 filings. In addition, many new therapies will be used in various combinations with other cancer treatments, and at various stages in the disease path, from the neo-adjuvant to the metastatic setting. In order to ensure timely and affordable access, pricing and reimbursement processes must reflect these developments.

There are other treatments on the horizon such as CAR-T or CRISPR, which are one-off treatments that can present additional budgetary challenges. And also opportunities: As they could really transform healthcare from paying per item to paying for outcome. The only way to manage scientific development is horizon scanning, an exercise which assesses future medicines, how they might be integrated in the current health system, and the potential benefit they may bring.

The two issues – fair price and scientific development – are interlinked. While the share of cancer medicines in total cancer expenditure has grown rapidly in the past few years and now reaches up to 32% one cannot, in all fairness, conclude that this is only the result of price. In 1996, a lung cancer physician had only four treatments available, in 2016 there were 19 (IQVIA, 2017). One of the driving factors in increasing healthcare expenditure is indeed technological progress: We have new treatment options. We can treat patients that were lost 10 years ago. HIV patients can live a nearly normal live. Skin cancer patients can expect to be alive after five years. Some 10 years ago the 5-year-survival rate for skin cancer was 5%. (ESMO)

Will technological progress in cancer make healthcare unsustainable? Healthcare spending showed positive growth again after the financial crisis. It is legitimate to ask how much we should spend on healthcare. With that said, the share of spending on cancer has remained nearly constant: European countries spent between 4% and 7% percent of their healthcare budgets on cancer in 1995. (Hofmarcher, et al., 2019) And they did so still in 2018. Considering the 50% increase in incidence of cancer and the successes in cancer care, such as tobacco prevention, screening, and treatments, shouldn’t we invest more in cancer care?

It becomes clear that there are several elephants. Calling for fair prices is the right thing. Access and affordability are serious issues and the EFPIA Oncology Platform has established an honest dialogue in this field. At the same time, we must consider scientific development which has created unprecedented progress for cancer patients’ lives and respective healthcare payment models. The moderator was right in pointing to the elephant. But there is more than one elephant. However, we should not only talk about them, we must embrace them. Then they will disappear. No worries, this won’t be a big bang, but when walking the talk we may experience somewhat fairly magic.

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Annemans, L. (2019). A proposal for value informed, affordable ("via") prices for innovative medicines. Journal of Medical Economics.

Aquinas, T. (1947). Summa Theologiae. Part I & II. New York: http://dhspriory.org/thomas/summa/SS/SS077.html#SSQ77OUTP1.

AT Kearney. (n.d.). Localization: an emerging requirement of a global pharma strategy. Retrieved March 11, 2020, from Kearney: https://www.kearney.com/health/article?/a/localization-an-emerging-requirement-of-a-global-pharma-strategy

Bouvy, J. C., Sapede, C., & Garner, S. (2019). Managed Entry Agreements for Pharmaceuticals in the Context of Adaptive Pathways in Europe. frontiers in Pharmacology.

Cutler, D. M. (2020). Are Pharmaceutical Companies Earning Too Much? JAMA, 323(9).

ECL. (2018). Let's Talk Access! White Paper on Tackling Challenges in Access to Medicines for All Cancer Patients in Europe. Brussels: Association of European Cancer Leagues (ECL).

ESMO. (n.d.). ONE IN TWO PATIENTS WITH METASTATIC MELANOMA ALIVE AFTER FIVE YEARS WITH COMBINATION IMMUNOTHERAPY [ESMO 2019 PRESS RELEASE]. Retrieved March 11, 2020, from European Society For Medical Oncology: https://www.esmo.org/newsroom/press-office/esmo-congress-melanoma-immunotherapy-checkmate067-larkin

Hofmarcher, T., Bradvik, G., Svedman, C., Lindgren, P., Jönsson, B., & Wilking, N. (2019). Comparator Report On Canceer In Europe 2019. Disease Burden, Costs And Access To Medicines. Stockholm: Institute of Health Economics (IHE).

IQVIA. (2017). Global Oncology Trends 2017. Advances, Complexity and Cost. IQVIA.

IQVIA Institute. (2018). Global Oncology Trends 2018. Innovation, Expansion and Disruption. Parsippany: IQVIA Institute.

Moon, S., Mariat, S., Kamae, I., & Bak Pedersen, H. (2020). Defining the concept of fair pricing for medicines. BMJ.

OECD. (2010). Value for Money in Health Spending. Paris: OECD.

OECD. (2017). New Health Technologies: Managing Access, Value and Sustainability. Paris: OECD Publishing. doi:https://doi.org/10.1787/9789264266438-en

Prokupkova, A., van den Ende, M., Muller, G., Aagaard Thomsen, L., Sogaard, J., Kohler, D., . . . Brigand, T. (2018). Let's Talk Access! White Paper On Tackling Challenges In Access To Medicines For All Cancer Patients In Europe. Brussels: Association of European Cancer Leagues (ECL). Retrieved from https://www.europeancancerleagues.org/abouta2mtf/

Uyl-de Groot, C. A., de Vries, E. G., Verweij, J., & Sullivan, R. (2014, March). Dispelling the myths around cancer care delivery: It's not all about costs. Journal of Cancer Policy, 2(1), 22-29. doi:https://doi.org/10.1016/j.jcpo.2014.01.001

Uyl-de Groot, C., & Löwenberg, B. (2018, July). Sustainability and affordability of cancer drugs: a novel pricing model. Nature Reviews, Clinical Oncology, 15, 495-496.

Vogler, S., Paris, V., Ferrario, A., Wirtz, V. J., Jonchere, K., Schneider, P., . . . Baber, Z.-U.-D. (2017). How Can Pricing and Reimbursement Policies Improve Affodable Access to Medicines? Lessons Learned from European Countries. Appl. Health Econ Health Policy.

World Health Organization (WHO). (2019). Fair Pricing of Medicines. Retrieved from World Health Organization: https://www.who.int/medicines/access/fair_pricing/en/

Annemans L. J Med Econ. 2019;22(11):1235-1239.

Aquinas T. (1947). Summa Theologiae. Part I & II. https://www.sacred-texts.com/chr/aquinas/summa/http://dhspriory.org/thomas/summa/SS/SS077.html#SSQ77OUTP1.