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Drug Pricing Transparency

When the price…is not right: striving for transparency in drug pricing

For decades, the pharma industry has been at the centre of an incessant debate: transparency in drug pricing. Pharma faces a perpetual paradox of compliance and standardisation on the one hand, and commercial sustainability on the other. Consequently, its drug pricing agenda rides a constant rollercoaster of scrutiny.

The pricing conundrum
As medical innovation becomes increasingly cutting edge, the stakes are higher than ever. Against this backdrop, pricing strategies are being disparaged not only for being too high, but also for their lack of standardisation around the world. For example, in Colombia, the price of Novartis Oncology’s Imatinib (Glivec) for a patient’s annual treatment expenses, was once double that of the country’s per capita income. In 2017, the Colombian Ministry of Health and Social Protection slashed the price of this drug in the public interest.1 The US has the highest drug prices globally,2 so in this context, California State’s signing of the US’ most comprehensive drug price transparency bill is significant. If passed into law, the SB17 Bill will compel drug companies to justify price increases.3

In other countries, health authorities have mechanisms in place to curb drug pricing. In Australia, the Pharmaceutical Benefits Scheme (PBS) purchases an extensive range of the nation’s drug requirements to ensure their availability at fixed prices for those on low incomes. This information is published online in the interests of transparency.4 In Europe, drug pricing varies across countries, with national regulators monitoring prices in their respective countries.5 In May 2017, the European Commission announced its investigation into Aspen Pharma’s pricing of certain cancer medications.6 In Switzerland, only those drugs deemed medically and economically effective are approved. Additionally, the Swiss Government applies a maximum price cap for each drug.7 In the UK, the National Institute for Health and Care Excellence (NICE) approves drugs based on parameters that include cost-effectiveness.8 The Health Service Medical Supplies (Costs) Act 2017 has further strengthened drug price scrutiny in the UK by allowing the government to exert greater control on price regulation.6

The road to patient-centricity 
Drug pricing is a by-product of a complex network of dealings within the larger supply chain, which involves pharma companies, pharmacy benefit managers (PBMs), hospitals, and health insurers. And somewhere in this maze, the needs of the end user can get lost. However, heightened scrutiny and regulation are slowly but steadily compelling governments, pharma players, and PBMs to revisit their strategies to better cater to consumer needs. Examples include the subsidiary (Inside Rx) established by PBM outfit Express Scripts to provide financial assistance to uninsured patients by means of discount cards. Also in the US, Medicare’s prescription drug benefit programme has health plans that provide transparency on prices and savings incentives for consumers.9

Some companies are seeking to reinvent the traditional system overburdened with “middlemen” by collaborating directly with pharmacies. Many PBMs are also adopting transparent approaches by offering flat rates to companies, without hidden markups. Other players are considering different payment structures – such as value-based payment models – which would determine the price of a drug based on its efficacy.10 Advocates of fair pricing believe that greater approval of generics is the answer to long-term price regulation, as it will intensify market competition and lower prices. US-based health advocacy group, CreakyJoints, believes the FDA should fast-track generics approvals to increase patient access and intensify competition.11 Currently, over 4,000 generics applications are pending FDA approval.11

Transparency in collaboration
In April 2017, CreakyJoints called for a unified platform to reign in drug prices. It encouraged relevant stakeholders – the FDA, pharma players, insurance companies, and PBMs – to shift gears towards a more patient-centric healthcare model. To achieve transparency in drug pricing, the healthcare fraternity must join forces to openly communicate their strategies and pass on price reductions to the end consumer.12

Echoing this approach, Alan Rosenbloom, President and CEO of Washington., D.C.-based Senior Care Pharmacy Coalition (SCPC) has stated that:

A comprehensive full-spectrum solution is the only real option. Without a systematic evaluation of the complex strands which inextricably link the drug supply chain and the pricing methodologies of PBMs, policymakers cannot accurately identify the causes of problems and concerns, and will be unable to craft real and lasting solutions. Piecemeal fixes will simply shift the problem from one part of the pricing system to another.13

Unless all concerned stakeholders work together towards resolution, consumers will continue to suffer from the side-effects of unaffordable drug treatments. Ultimately, achieving true transparency will require holistic treatment of a deeply entrenched systemic syndrome.                                

If you would like to learn more about how we can assist with innovating pricing models, call us on: +44 (0) 20 3750 9833 or email us at: discover@validinsight.com.

References

  1. GaBI Online – Generics and Biosimilars Initiative (2017). ‘Colombia slashes price of cancer treatment Glivec.’ GaBI Online, 14 September. Available at www.gabionline.net/Policies-Legislation/Colombia-slashes-price-of-cancer-treatment-Glivec [Accessed 15 October 2017]
  2. Bose, S. Dr. (2017). ‘The High Cost of Prescription Drugs in the United States.’ HuffPost News, 29 August. Available at www.huffingtonpost.com/entry/the-high-cost-of-prescription-drugs-in-the-united-states_us_59a606aae4b0d81379a81c1f [Accessed 15 October 2017]
  3. Dembosky, A. (2017). ‘California Bill Would Compel Drugmakers To Justify Price Hikes.’ NPR Shots, 4 October. Available at www.npr.org/sections/health-shots/2017/10/04/551013546/california-bill-would-compel-drugmakers-to-justify-price-hikes [Accessed 16 October 2017]
  4. Kieny, M. (2016). ‘A comprehensive and fair solution to the price of medicines.’ WHO Media Centre, 5 July. Available at: www.who.int/mediacentre/commentaries/fair-price-medicines/en/ [Accessed 16 October 2017]
  5. Young et al. (2017). A comparative study of orphan drug prices in Europe. [pdf] Journal of Market Access & Health Policy. Available at: www.ncbi.nlm.nih.gov/pmc/articles/PMC5405561/pdf/zjma-5-1297886.pdf [Accessed 16 October 2017]
  6. Duhs, G. (2017). ‘Regulators get aggressive on matters excessive.’ Pharmafile, 29 July. Available at: www.pharmafile.com/news/514491/regulators-get-aggressive-matters-excessive [Accessed 17 October 2017]
  7. Emanuel, E. (2015). ‘The Solution to Drug Prices.’ The New York Times, 9 September. Available at www.nytimes.com/2015/09/09/opinion/the-solution-to-drug-prices.html [Accessed 17 October 2017]
  8. NICE (2012). The guidelines manual. [pdf] US: NICE. Available at: www.ncbi.nlm.nih.gov/pmc/articles/PMC5405561/pdf/zjma-5-1297886.pdf [Accessed 18 October 2017]
  9. Turner, G. (2017). ‘Price Transparency Is Critical to Drug Pricing Solutions.’ Forbes, 11 July. Available at: www.forbes.com/sites/gracemarieturner/2017/07/11/price-transparency-is-critical-to-drug-pricing-solutions/3/#4fc5b5ec2efa [Accessed 17 October 2017]
  10. EY (2017). The US drug pricing debate 2017. [pdf] US: EY. Available at: www.ey.com/Publication/vwLUAssets/ey-the-us-drug-pricing-debate-2017/$FILE/ey-the-us-drug-pricing-debate-2017.pdf [Accessed 19 October 2017]
  11. US FDA (2017). The Generic Drug Dashboard 2017. [pdf] US: FDA. Available at: www.fda.gov/downloads/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/AbbreviatedNewDrugApplicationANDAGenerics/UCM572406.pdf [Accessed 19 October 2017].
  12. CreakyJoints Advocates for Transparent Drug Pricing by Insurance Companies (October 2017). Business Wire. Available at www.businesswire.com/news/home/20170417005591/en/CreakyJoints-Advocates-Transparent-Drug-Pricing-Insurance-Companies [Accessed 19 October 2017]
  13. SCPC (2017). ‘Solutions to PBM Pricing Abuses Must Address Entire Drug Supply Chain.’ Senior Care Pharmacy Coalition (SCPC), 17 October.  Available at: http://seniorcarepharmacies.org/solutions-to-pbm-pricing-abuses-must-address-entire-drug-supply-chain [Accessed 17 October 2017]
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James Wright

James Wright is Associate Director at Valid Insight. He has over twenty years' experience in the healthcare industry and consulting, specialising in clinical trial assessment, payer positioning, value and pricing strategy and lifecycle management.

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