Technical Briefing Seminar - Pricing Policies · Pharmaceutical pricing policies • Very few...

HIS/EMP | Communications Planning WHO/HIS/EMP | October 12, 2017

Technical Briefing Seminar -

Pricing Policies

Geneva, Switzerland

10 October 2017

Andrew Rintoul

Scientist

Innovation Access and Use

Essential Medicines and Health Products


Outline

• Access to Medicines and Health Products:

a global priority

• Introduction to Pharmaceutical Pricing

Policies

• WHO Progress in Pricing

• Challenges


Access to Medicines and Health Products:

A Global Priority

• UN Sustainable Development Goals SDG (Goal 3) : Ensure healthy lives and promote well-being for all at all ages


Towards access 2030

• Achieve universal health coverage … access to

safe, effective, quality and affordable essential

medicines and vaccines for all (SDG Target 3.8)


Three Dimensions to Consider When Moving

Towards Universal Coverage

Source: Health systems financing: the path to universal coverage. Executive Summary,

The World Health Report, WHO/IER//WHR/10.1, 2010


Attaining and Maintaining Universal Health Coverage

• Challenges:

– Increasing population or changing in

population age structure

– Changing disease patterns

– New technologies

– Increasing costs


Why a focus on medicines ?

• Between 20 % and 60 % of the health budget in LMIC goes to

medicines expenditures

• In LMIC countries, up to 80 to 90 % of medicines are purchased

out-of-pocket as opposed to being paid for by health insurance

schemes

• In many LMIC out-of-pocket expenditures for health account for

more than 50 per cent of total health spending

• Rich countries are also struggling to maintain & extend their

levels of service coverage, quality and financial risk protection


1. Rational

selection

4. reliable health and

supply systems

2. Affordable

prices

3. Sustainable

financing

ACCESS

Access to essential medicines and UHC


Introduction to Pharmaceutical

Pricing Policies


Trends in Pricing • The issue of rising medication costs is impacting low, middle and high

income countries for example, hep C medications – The median nominal ex-factory price of a 12-wk course of sofosbuvir across 26 OECD

countries was US$42,017, ranging from US$37,729 in Japan to US$64,680 in the US

• There is decreasing market incentive for pharmaceutical companies to produce some of the previously available medications for example, antivenoms

• These recent trends decrease accessibility to medications in two ways:

– New medicines are becoming too expensive for the everyday health

consumer

– Previously available medications are now in shortage even when there is

health demand


Pharmaceutical expenditure as % of

total health expenditures


Private health expenditure as a percentage

of total pharmaceutical expenditure

Source: Regional pharmaceutical situation report (2013)


Pharmaceutical pricing policies

• Very few economic sectors are as intensively

regulated as the pharmaceutical one is.

• Crossroad sector:

– Health issue (access, security, vigilance, etc.)

– Budgetary issue (public expenditure containment)

– Industrial issue (innovation, economic

attractiveness, etc.)


Policy options

• Price controls:

– Value-based pricing’; price/volume agreements; pay for

performance; risk-sharing agreement / patient access schemes;

reference pricing schemes…

• Other Policy Options

– Price negotiations

– Voluntary licensing agreements

– Local production/import

– TRIPS flexibilities, including compulsory licenses


Price Controls • Regulation of mark-ups

• Tax exemptions/reductions for pharmaceutical products

• Cost-plus pricing

• External reference pricing

• Use of health technology assessment

• Internal Reference Pricing

• Promotion of the use of generic medicines Source: WHO Guideline on country pharmaceutical pricing policies (2015)


Regulation of mark ups

• Mark-ups are additional charges and costs

that are applied through the supply chain.

• Why might this be helpful?

• Why might this be difficult?


Tax exemption for medicines

• Simply speaking tax increases prices,

more expensive medicines mean less

people can afford to use them.

• Less expensive the less of a barrier to

access.

• Tax policy is likely beyond your control.


Tax exemption for medicines (cont.)

• Benefits

– Positive equity benefit for the poor

• Downsides

– Loss of revenue


Cost-plus pricing

• Setting prices based on cost of production

plus other expenses (costs).

• These costs need to be defined.(ie include

transportation?, marketing?)

• Validation????


External Reference Pricing

• ‘the practice of using the price(s) of a pharmaceutical product in one or several countries in order to derive a benchmark or reference price for the purposes of setting or negotiating the price of the product in a given country’

• 25 of 28 EU Member States (2016); different methodological approaches


External Reference Pricing (cont.)

• Setting price

• Validating price

• Negotiating price

• Special Pricing Arrangements

– Price Volume Agreements

– Published and real prices


• It is the most widely used tool for setting

prices.

• Need access to price lists.

• And some rules for dealing with prices.


Medicine price information sources http://www.who.int/medicines/areas/access/med_price_info_sources/en/


ERP in European Countries


Differences • Differences between countries with respect to

– scope of medicines e.g. originators, prescription-only medicines, new innovative medicines

– price type considered e.g. ex-factory price, wholesale price –list prices (as 21 countries compare medicine prices at the level of ex-factory prices, while eight countries at the pharmacy purchasing price (wholesale price) level)

– price revisions (regular and irregular intervals)

– price sources (mainly marketing authorization holders or MAH)

– dealing with missing information

– exchange rates

• In practical terms, EPR is a cost- and time-intensive exercise and would benefit from tools and mechanisms to ease the work load


Implementation Issues • European countries tend to select as reference countries those that share

economic similarities or geographic proximity, however many differences were found between countries regarding the methodology used.

• Japan uses a formula to adjust prices upwards or downwards and as a consequence prices can vary between 150% or 75% below the reference countries’ prices. Mexico uses a weighted average of ex-factory prices with respect to the previous quarter in six countries with bigger sales. A formula is used to determine the price for sales to the public (ERP ×1.72).

• In Slovakia pharmaceutical companies must provide information about the price of a medicine in the country of origin plus eight European countries before it is introduced to market.

• In Estonia, ERP is used for reimbursed originator and generic medicines using the manufacturer price level. The ERP explicitly examines the prices of Latvia, Lithuania and Hungary and may include all EU member states.


Experience – from literature • Savings:

– EPR can lead to substantial savings for public payers, but the effect seems to ‘fade-out’ in the course of time

– The authorities who recently introduced EPR considered the policy as effective, whereas authorities with longer-term experiences with EPR said that the benefits of the beginning have increasingly been foiled by limitations arising after some time

• Limitations: – Incentivises manufacturers to first launch in high-priced countries and delay (or not launch) in

lower-price countries - - availability issue

– Non-consideration of (even statutory) discounts lead to a distortion of prices, and public payers risk overpaying -transparency concerns

– EPR is not a simple exercise but requires expertise and administrative efforts to establish and run an appropriate system

– Prices obtained by EPR do not reflect the value of a medicine in the given country and are influenced by the design of the system

– EPR is exposed to exchange rate-volatility when referenced prices are denominated in local currencies

– Tendency of convergence to the top rather than a race to the bottom


WHO Guidelines • Countries should consider using external reference pricing as a

method for negotiating or benchmarking the price of a medicine.

• Countries should consider using external reference pricing as part of an overall strategy, in combination with other methods, for setting the price of a medicine.

• In developing an external reference pricing system, countries should define transparent methods and processes to be used.

• Countries /payers should select comparator countries to use for ERP based on economic status, pharmaceutical pricing systems in place, the publication of actual versus negotiated or concealed prices, exact comparator products supplied, and similar burden of disease.


Use of Health Technology Assessment

• Used to assess value for money when

making decisions on pharmaceutical

prices.

• Requires a high level of technical capacity.

• Resource intensive.


Internal Reference Pricing

• A method of ensuring that products that produce the same benefit for patients do not have different prices.

• If one product has a higher price there is a mechanism to lower the price.

• Requires some Health Technology Assessment.


Internal Reference Pricing (cont.)

• Need a list of therapeutic relativities.

• For example 20mg of Drug x per day =

10mg of Drug y per day

• If they don’t have the same price why not.


Internal reference pricing

• Simply, you should not pay more for a

medicine that achieves the same health

outcome.

• It is a way to lever competition between

medicines.


Generics

• Same active ingredient same health

benefit.

• Therefore the same price.

• ‘But I’m the original ‘product’’ I’m better.


Therapeutic Group

• Some different medicines produce the same health outcome.

• Can be used to introduce competition where patents exist.

• Examples

• Drug x® 10mg od is equivalent to drug y® 30mg od.


Therapeutic relativities • Requires a list of which drugs are equivalent to

other drugs.

• Australian example. – Relativity sheets

http://www.pbs.gov.au/info/industry/pricing/pbs-items/therapeutic-relativity-sheets

• Who makes this judgement

• Gives transparency to businesses they will be able to predict the impact of competition











Some examples Unit price

Atorvastatin 10 1.40

Atorvastatin 20 3.17

Paclitaxel 100mg 285.57

Paclitaxel 6mg/ml solution, 50 mL (300mg) 19,766.09

Water for injection, 5mL 0.86

Water for injection, 10mL 0.49


Promotion of the use of generic medicines

• Just as effective

• Generics are ‘generally’ cheaper.

• Promotes competition.


Reimbursement policies

• Reimbursement

– Reimbursement lists and rates

– Reference price systems

– Co-payments

– Patient access schemes


Policy options

• Price controls

– Value-based pricing’; price/volume agreements; pay for

performance; risk-sharing agreement / patient access schemes;

reference pricing schemes…

• Other Policy Options:

– Differential pricing/price negotiations

– Voluntary licensing agreements

– Local production/import

– TRIPS flexibilities, including compulsory licenses


Differential pricing/price negotiation

Sofosbuvir 12 weeks treatment course: – US: US$84,000 (reductions since Abbvie

came to market) – UK: US$57,000 – Egypt: US$900 (same price offered to public

programme in Lao PDR; Mongolia) – Pakistan: US$1,620 (private sector)


License Agreements

Sofosbuvir, ledipasvir, velpitasvir: – 101 countries = around half of all middle-income

countries

– 11 Indian licensees; collaboration with companies in Egypt and Pakistan

– Allows shipment under compulsory licenses

– Allows combinations with "foreign" products (e.g. daclatasvir)


WHO Patent Landscapes

sofosbuvir

Harvoni

Gilead Sciences

ledipasvir Gilead Sciences

Daclatasvir BMS

dasabuvir Viekira Pak with

ritonavir

AbbVie

ombitasvir AbbVie

paritaprevir AbbVie

simeprevir Janssen

www.who.int/phi/implementation/ip_trade/ip_patent_landscapes/en/


Cost of hepatitis C treatments?

Source: Hill A, Cooke G. Science 2014: Vol. 345 no. 6193 pp. 141-142


WHO Progress on Pricing


Fair Pricing Forum • A global dialogue among relevant stakeholders to explore strategies for

establishing fair prices that is sustainable for health systems and for innovation

• Participants: 250 participants from Member states, IGOs, NGOs, academia and Industry

• WHO and the Ministry of Health, Welfare and Sport of The Netherlands are jointly organizing a Fair Pricing Forum

• The Forum took place in Amsterdam, from 10-11 May 2017, Amsterdam, The Netherlands

• For more information, please see

http://www.fairpricingforum2017.nl/home

http://www.fairpricingforum2017.nl/home


Issues

• Transparency of R&D and Pricing

• Alternative Business Models

• Shortages of Generic Medicines

• Collaboration between Payers

• Value Based Pricing


What does it cost to develop a new medicine?


What does it cost to develop a new medicine?

• R&D costs what?

• $2.6 billion?

• $180 million?

• Likely some where in between.


Price Transparency

• For some high cost drugs the visible price

is not the price paid.

• Acknowledge when hidden prices exist.

• Publishing total rebates.

• No market mechanism in the current

setting of the published prices.


Alternative Business Models

• Removing the link between R&D and

price.

• Buying out patents.

• Funding the R&D and then paying cost of

production plus %.


What does it cost to produce a generic medicine?

• Cost of Production Report

• What can we use this information for?


Is there a link between shortages and low prices?

• More research is required.

• The answer may lie with use of capital.

• Quality has a price.


• Collaboration between Payers

• Value Based Pricing


Challenges

• National Medicines Policies and Development Plans exist more often but lack of implementation

• Leadership and coordination of different actors by National authorities are weak or insufficient

• Lack of human resources and important turn over of staff

• Prescribing and dispensing practices of pharmaceutical products must be improved


Thank you

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