28 September 2012
One of the real issues facing EU members, particularly those that are having trouble paying their healthcare bills from suppliers, is the way that medicines are priced. The issue of drug pricing is likely to become even more important internationally as the UK pricing system will move to ‘value-based pricing’ in a year when the current arrangement expires. Other EU countries, and elsewhere, all grapple with medicines: whether it is their price, their use, effectiveness, or whether they are not used by the patient. All this adds costs to the system, and particularly in countries where drug prescribing by doctors is not well scrutinised, so that irrational prescribing can occur, influenced more by the reimbursement system, than what is right for the patient. “Big pharma”s’ door-to-door 1950s approach to promoting medicines is well-past its sell-by date.
What is often forgotten in all this is that despite the general view of big pharma, it is not really in their interests (corporate, and profits) for
their drugs to be misused; similarly, it is in their interests, though they seem not to grasp this, and blame sits at in the C-Suite of corporate leadership where they can be disconnected from the real world. Indeed, big pharmaceutical companies are learning, mainly from their own ill-thought out actions, that taking pricing and access to medicines disputes into the courts is, if nothing else, a public relations disaster. [See this item from the LA Times from 2001 on the legal dispute between big pharma and South Africa and this item from the UK’s Independent on protestors outside GSK’s offices]
This week’s British Medical Journal reports on Germany’s Fresenius Kabi’s decision not to supply the drug propofol to the United States if it is to be used for lethal injections for executions within the criminal justice system. The company makes the point that suppling drugs to kill people is inconsistent with their corporate purpose. Similar value language is usually found somewhere in all pharmaceutical companies’ mission statements.
What is interesting here is that the company has indicated what use the drug may be put to and has instructed its wholesalers and distributors to ensure that the product does not end up in the hands of prison officials. This is an important way of thinking and reveals, that when it is necessary, the manufacturer of a drug can stipulate its use and by whom. Granted, the company noted that the use in executions is not part of the product’s licensed use, but doctors can, if they wish, ignore the licensed requirements for medications.
How might this relate to drug pricing? What we start with is the legitimate corporate (and one hopes healthcare system) concern that medicines should not be misused, or abused. In the case of propofol, we see that a manufacturers could stipulate use and user as a requirement of supply.
What we want is a system that would obligate purchasers (such as healthcare systems) as a condition of supply to ensure proper end use of the medicine. Such conditions might include ensuring that the medicine is not used ‘off label’, ensure that patients are enrolled in medicines management programmes to ensure that the medicines are properly taken, that waste is avoided, that prescribing is rational and follows guidelines, medicines-use audits are conducted, the medicine is appropriately part of care protocols, and so on.
What would it take to do this? Something like the arrangement we should all be familar with when we ‘buy’ software, the End-user Licence Agreement, so-called EULA. With a EULA, we don’t actually own the software, but are licensed to use it. Medicines could also be licensed, and the advantage of such a license-based pricing system would its transparency around proper use. There is some irony in the public perception of the pharmaceutical industry as greedy for money, little thought is given the misuse of medicines by doctors and patients, and that are purchased within the healthcare system. For example, perhaps up to 30% of medicines prescribed and paid for are not used properly or thrown away (disposal of prescription medicines down the toilet of course contaminates water supplies). For country like France, UK or Germany, we are talking in the €/£multi-billions of wasted public expenditure
Licensing has the additional benefit of shifting pricing considerations toward the real value of the product-as-used. The UK’s introduction of value-based pricing will need to develop a view on how to quantify the value of the product-as-used. However, drug pricing and reimbursement arrangements in most countries seem to view medicines a bit like FMCG (fast-moving consumer goods) products, such as cosmetics and candy bars. (While a medicine costs upwards of $1 billion dollars to bring to market, composed of research costs and costs associated with clinical trials and testing, I’m not sure how much it costs to invent a new face cream, but the advertising of such a product seems only to require that 15 of 25 women surveyed agreed that it made their skin appear more youthful, hardly the same standards that apply in clinical trials — accepting of course that clinical trials are not all created equal — see Goldacre’s new book.)
An additional benefit is to show how unhelpful comparative drug pricing (call international reference pricing) is. This approach ignores the innovation value of the product-as-used, in favour of what other countries have got the drug price to be — not much different from comparison shopping on the web.
Licensing would also enable the separation of the innovation value of the product-as-used (the research and development costs), from its production and ingredient costs as it would the innovation value that is licensed, and the drug itself as a product sold (licensing the computer software, but paying for the DVD it comes on). This twin pricing makes it possible to recognise the legitimate costs of production.
Wider benefits are realised in two directions:
- the pharmaceutical companies to focus on product development that is truly innovative (and not me-toos or reformulations to extend patent periods);
- the healthcare systems to ensure that the medicines they do buy are properly used.