Affordability Must Be EU’s New Drug Pricing Mantra
Executive Summary
A balance must be struck between rewarding innovation and ensuring medicines are affordable for patients, a public-interest group told the European Council in a report which said the drug industry benefits from a “web” of EU protection allowing firms to set profit-maximizing prices.
Europe’s drug-pricing system is “tipped hugely in favour of private firms” and must be changed to make sure the public has easier access to life-saving medicines, health and legal experts have said in a report to European Union policy makers tackling high pharmaceutical costs.
The report, titled “The European Union Review of Pharmaceutical Incentives: Suggestions for Change,” calls for the “right balance to be struck between rewarding innovation and ensuring medicines are affordable,” terming it “a matter of life and death, wellbeing and illness.”
The European Council is reviewing incentives given to companies to develop new medicines and has also noted “with concern” significant price increases of older medicines after the EU has given them orphan status.
In announcing the review in 2016, the Council cited an “increasing number of examples of market failure” where patient access to “affordable essential medicines was endangered by very high and unsustainable” prices.
The group behind the report is called Medicines Law & Policy. It assembles legal and health policy experts who supply “best practice” models for governments, UN agencies and others to ensure affordable medicines.
“The pharmaceutical industry now benefits from a web of protections in the EU that together delay market competition for long periods and allow companies to set profit-maximizing prices… unaffordable for many,” said Ellen ‘t Hoen, one of the report’s authors and an intellectual property rights expert. “Companies obtain those rights without needing to demonstrate their turnover is insufficient to recoup investments and make new ones,” she said.
The drug pricing issue has taken on fresh urgency as innovative medicines like gene therapy push treatment costs to stratospheric highs. Just recently, Novartis announced Zolgensma, a gene therapy for spinal muscular atrophy in children, which will be priced at $2.1m per treatment. And Zynteglo gene therapy from Bluebird, to treat beta thalassemia, a rare blood disorder, will sell for $1.8m in Europe. Some drug firms are using what they call “quality of life improvement” to set medicine prices.
“The EU’s rules were written at a time when the world was different These issues aren’t going to go away. The rules need deep-rooted revision,” Kaitlin Mara, a spokesperson for Medicines Law & Policy told Generics Bulletin. The European Council will wait until installation of the next European Commission to decide on proposed changes.
Concept Of ‘Sufficient Profit’ Should Guide Policy Makers
Most importantly, the report suggests the notion of “sufficient profit” should guide policymakers, with “sufficiency estimates driven by transparency of cost and pricing.” Adequate incentives for research and development are important, but there needs to be a clearer link between risk and reward, the report said.
In defining the line between “sufficient” and “excessive” profitability, the report suggests a “return on investment” approach that aims for the “minimum return” required to spur orphan drug development.
Also, the report says, flexibilities in patent law “should not be rendered ineffective by exclusive rights granted through the medicines regulatory system.” And finally, the report says the EU should not use trade agreements to demand that third countries implement more stringent IP protection than they themselves are required under World Trade Organization rules.
The experts also said the EU orphan-disease prevalence threshold of not more than five per 10,000 people should be re-examined. The unprecedentedly high prices for orphan drugs have meant orphan disease markets with less than 10,000 patients can produce “blockbuster profits,” they note. As a result, it makes no sense to set a prevalence threshold based on an assumption about profitability without considering pricing behaviour, they said.
One case in point, the report noted, was treatment for cerebrotendinous xanthomatosis (CTX), a rare genetic disease which involves an inability to produce enough of the primary bile acid chenodeoxycholic acid (CDCA). In the Netherlands, CDCA was marketed until 2008 for gallstones at €0.28 ($0.32) a capsule. It was also prescribed off-label to treat CTX. Leadiant Biosciences acquired the marketing rights to Chenofalk, the product containing CDCA for gallstones, and withdrew it from the market. It then acquired marketing rights in 2017 for CDCA Leadiant as an orphan product for CTX. Once it was the sole supplier of CDCA to treat CTX, it set a price of €140 per capsule, representing “a 500-fold rise over the previously available CDCA product, and raising the treatment price from €300 to €150,000 a year,” the report said.
Consideration also should be given to instituting a ‘claw-back’ mechanism so that, if an orphan drug turns out to be profitable above a certain threshold, financial incentives provided by the EU during development could be repaid, the experts suggested.
The report’s briefing documents noted a big change in drug firms’ orphan-disease R&D “in response to generous (EU) incentives.” There were eight orphan drug products on the market in 2000 when new rules were introduced. By 2018, applications for orphan drug designation had risen to 3,210, of which 2,121 had been approved.
A recent World Health Organization report showed production costs of most medicines on its Essential Medicines List were a small fraction of final prices paid by governments, patients or insurance. Countries can take a step towards fostering greater price transparency by sharing price information which could serve as a powerful negotiating tool, the experts said. Pooled procurement and voluntary sharing of policies could also help cut prices, they added.