Technical Briefing Seminar - Pricing Policies

Transcription

1 Technical Briefing Seminar - Pricing Policies Geneva, Switzerland 10 October 2017 Andrew Rintoul Scientist Innovation Access and Use Essential Medicines and Health Products

2 Outline Access to Medicines and Health Products: a global priority Introduction to Pharmaceutical Pricing Policies WHO Progress in Pricing Challenges

3 Access to Medicines and Health Products: A Global Priority UN Sustainable Development Goals SDG (Goal 3) : Ensure healthy lives and promote wellbeing for all at all ages

4 Towards access 2030 Achieve universal health coverage access to safe, effective, quality and affordable essential medicines and vaccines for all (SDG Target 3.8)

5 Three Dimensions to Consider When Moving Towards Universal Coverage Source: Health systems financing: the path to universal coverage. Executive Summary, WHO/HIS/EMP The HIS/EMP World Health October Communications Report, WHO/IER//WHR/10.1, 12, 2017 Planning 2010

6 Attaining and Maintaining Universal Health Coverage Challenges: Increasing population or changing in population age structure Changing disease patterns New technologies Increasing costs

7 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

8 Access to essential medicines and UHC 1. Rational selection 2. Affordable prices ACCESS 3. Sustainable financing 4. reliable health and supply systems

9 Introduction to Pharmaceutical Pricing Policies

10 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

11 Pharmaceutical expenditure as % of total health expenditures

12 Private health expenditure as a percentage of total pharmaceutical expenditure Source: Regional pharmaceutical situation report (2013) WHO/HIS/EMP HIS/EMP October Communications 12, 2017 Planning

13 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.)

14 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

15 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)

16 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?

17 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.

18 Tax exemption for medicines (cont.) Benefits Positive equity benefit for the poor Downsides Loss of revenue

19 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????

20 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

21 External Reference Pricing (cont.) Setting price Validating price Negotiating price Special Pricing Arrangements Price Volume Agreements Published and real prices

22 It is the most widely used tool for setting prices. Need access to price lists. And some rules for dealing with prices.

23 Medicine price information sources

24 ERP in European Countries

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28 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

29 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.

30 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

31 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.

32 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.

33 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.

34 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.

35 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.

36 Generics Same active ingredient same health benefit. Therefore the same price. But I m the original product I m better.

37 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.

38 Therapeutic relativities Requires a list of which drugs are equivalent to other drugs. Australian example. Relativity sheets Who makes this judgement Gives transparency to businesses they will be able to predict the impact of competition

39 Some examples Unit price Atorvastatin Atorvastatin Paclitaxel 100mg Paclitaxel 6mg/ml solution, 50 ml (300mg) 19, Water for injection, 5mL 0.86 Water for injection, 10mL 0.49

40 Promotion of the use of generic medicines Just as effective Generics are generally cheaper. Promotes competition.

41 Reimbursement policies Reimbursement Reimbursement lists and rates Reference price systems Co-payments Patient access schemes

42 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

43 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)

44 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)

45 WHO Patent Landscapes sofosbuvir ledipasvir Daclatasvir dasabuvir ombitasvir paritaprevir simeprevir Harvoni Viekira Pak with ritonavir Gilead Sciences Gilead Sciences BMS AbbVie AbbVie AbbVie Janssen

46 Cost of hepatitis C treatments? Source: Hill A, Cooke G. Science 2014: Vol. 345 no pp

47 WHO Progress on Pricing

48 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 May 2017, Amsterdam, The Netherlands For more information, please see

49 Issues Transparency of R&D and Pricing Alternative Business Models Shortages of Generic Medicines Collaboration between Payers Value Based Pricing

50 What does it cost to develop a new medicine?

51 What does it cost to develop a new medicine? R&D costs what? $2.6 billion? $180 million? Likely some where in between.

52 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.

53 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 %.

54 What does it cost to produce a generic medicine? Cost of Production Report What can we use this information for?

55 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.

56 Collaboration between Payers Value Based Pricing

57 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

58 Thank you