Over the past three years I have had the good fortune of working closely with Adam Barak who is the Head of International Pricing and Reimbursement at United BioSource Corporation. UBC is a leader in peri- and post-approval product development; safety and risk management; health economics and outcomes research; pricing, coverage, reimbursement, and access strategies; and medical publications and communications. This year they were purchased by Medco; one of the largest Prescription Benefit Management companies in the world. Adam has been kind enough to “test the waters” with us as a guest contributor with his offering below, but hopefully we can twist his arm and have him bring us insights on a regular basis. Thanks Adam for this and we look forward to continuing our partnership.
2010 has seen a lot of change in Europe with regards to healthcare funding and pharmaceutical pricing and reimbursement in particular. The 2 largest drug markets in Europe, Germany and the UK, have finally called time on their liberal policy of allowing free prices for pharmaceuticals, allowing as they have done manufactures to set prices and managing costs through other means (profit controls, prescribing budgets, internal price referencing and positive lists). For the UK new policies will see value based pricing imposed from 2014 (though discussions of how the mechanisms will work have barely even started), NICE’s role changed significantly (QALY thresholds as a means of determining a national positive list are likely to go in 2013) and restructuring of local and regional payers. In Germany under the new ‘AMNOG’ initiative, new drugs will face pricing review from 2011 with the National Association of Statutory Health Insurance Funds negotiating drug prices with manufacturers; the German government hops the new rules will reduce annual drug budgets by 2 billion Euro.
Add to these new regulations some of the other initiatives seen in Europe in 2010 (France announced a €100m saving programme on healthcare spend, Spain authorised price cuts of 25% on generics, Italy will reduce prices of out of patent brands by 20% and Greece is working through its plans to cut drug prices by as much as 27%), and it is no wonder that manufactures are worried that they may be taking a disproportionate hit in response to the global recession, through the monopsony power of governments to impose such programmes as a relatively easy way of managing health care budgets in the current economic climate.
Asia of course has similar challenges and its solutions do include such as price cuts (6% in Japan in April, in South Korea July saw price cuts to be imposed leading to savings of WON 3.8b [US$3.4m], price caps in Guangdong province China announced in August) as well as other initiatives not seen in Europe such as compulsory licensing of domestic manufacture, low priced generic versions in Thailand.
The key challenge of course in all of this is one of access, to get the drugs to the patients who need them. However affordability is what the real issue is, and the mechanisms in place across the world to approach the affordability question are piecemeal and archaic. Equity, that peculiar concept that seems absent from pricing and reimbursement policy from one country to the next, rather than being at the heart of affordability and access policies is peripheral. If we extend a definition of equity to “the quality of fairness to all” then by implication that means patients, payers and providers, and how can one do this if different groups (let’s call them countries) have different needs, different willingness to pay and different abilities to pay. The obvious solution is to ensure that goods, in this case medicines, are priced by need and value to their appropriate customer, but through parallel trade, international price referencing and restrictions to patent life for innovations, any such mechanisms for fairness are not only impossible, but actually illegal! If a manufacturer wanted to supply its drugs to a low GDP market at a low (fair/appropriate ) price, government and European Commission policy effectively export that price to higher-GDP countries so the manufacturer is discouraged from making the concession in the first place, leaving to market distortions where government and EC policy actually acts to restrict patient access to medicine, a quite ridiculous situation.
But we are where we are, governments and payers have their own interests at heart and, with the moves of such as Germany, the UK and Thailand, we are possibly seeing movement even further away from an equitable environment where payers contribute to global R&D based on their willingness and ability to pay and their GDP, rather than through what bargains they can force through their monopsony power.
Adam Barak is Head of International Pricing and Reimbursement at United BioSource Corporation, London