The World Health Organization has concluded a major one-day forum on fair pricing of medicines, bringing a wide range of stakeholders together in Amsterdam and coming up with several possible actions for the way ahead. Key points of discussion included a definition of fair pricing, moving away from value-based pricing, delinkage of price from research and development costs, and greater transparency, according to participants.
The 11 May Fair Pricing Forum was hosted by the government of the Netherlands, and began with a reception on the night before. The agenda is available here, and a background story by Intellectual Property Watch is available here (IPW, Public Health, 1 March 2017).
The forum was attended by more than 200 invited stakeholders from across the spectrum, according to the WHO. Only journalists were barred from attending.
“This was a first step in reaching agreement on an actionable agenda,” Marie-Paule Kieny, WHO Assistant Director-General for Health Systems and Innovation, said on a telephone press briefing afterward. The audiofile of the press briefing was made available here by the WHO.
The group worked on coming up with a definition of “fair pricing,” she said, and first clarified that it is does not simply mean “low” pricing. “We know what happens when prices are too low and companies leave the market,” she said.
What is needed in terms of fair pricing, she said, is that it brings reasonable return on investment and affordable prices, one that does not bankrupt health systems, ensuring a sustainable growth of the pharmaceutical sector, and universal access to needed medicines and health technologies.
During the forum, some themes and potential actions emerged to move forward, she said, highlighting three.
First, governments need to play a stronger role in setting prices and the R&D agenda. More cooperative approaches were discussed in which governments share information on setting prices, gaining greater leverage when negotiating prices.
Secondly, she detailed, stronger public policies on fair pricing are needed.
And third, governments are beginning to see funding for health as an investment with social-economic benefits. This includes larger investments in R&D so that governments can guide priorities in the early development of pharmaceutical products, in line with their national health priorities, and also influence their future prices.
“Serious Reservations” about Value-Based Pricing
“Tough issues” were also discussed by participants, she said. One of them was the pricing strategy. The WHO has “serious reservations” about the concept of value-based pricing. This refers to prices that are set according to what the market can bear. “What is the value of life?” she asked. This concept is very good for luxury goods, she said, adding, “If I don’t want to buy a diamond because it is too expensive” then she doesn’t have to.
But medicines cannot be considered as luxury goods for which one has a choice whether to buy them or not. But “if I am sick with cancer,” there is no choice, she noted.
“Value-based pricing is not feasible for products which are indispensable,” she said.
Another tough issue was about delinkage, said Kieny, which refers to the delinkage of the price of products from the R&D and production costs. There is agreement that “we need to understand fully what is implied by the concept of delinkage for medicines.”
“At present, we have little transparency” on what inputs enter into the decision to price a medicine, she said, and neither is there evidence of the true cost of R&D, and who actually pays for it. As an example, she said the cost of acquisition of start-up companies by pharmaceutical companies is often considered as R&D cost.
Before the discussion on delinkage is pursued, she said, “we need to understand what is linked to what,” while agreeing that the cost of R&D needs to be shouldered by somebody.
One theme which strongly emerged in the debate is the fact that more transparency is absolutely vital to give evidence for future action, she said. More transparency on pricing from all stakeholders, such as companies’ spending on clinical trials, public research institutions’ spending on discovery research, and countries on how much they pay for their medicines. There is a need of “doing away” with the secrecy around medicines prices, she said.
The final strong message was that there is a need to move away from entrenched positions and towards fair pricing, which is in the interest of the industry, and patients, Kieny said.
“There were a number of discreet but very important actions that were identified,” by participants, as well as defined stakeholders who need to take those actions forward, such as the industry, multilateral organisations, the WHO, and governments, she explained.
Suzanne Hill, director, Essential Medicines and Health Products at WHO, said the international community has been discussing access to medicines for many years. However, the role of prices and price setting in this access problem has not really been fully addressed and those are among the reasons for the fair pricing forum.
Now, it is seen that the problem has become global, with the example of very high prices for hepatitis C and cancer medicines, she said. Many of those medicines are on the WHO Essential Medicines List, but high prices are limiting access to a portion of patients, she said.
The global community cannot reach full and affordable access to medicines for all “if we continue to work with the current pricing model,” said Hill.
The fair pricing forum is an initial attempt to start an actionable agenda for solving this problem “to ensure that we all understand first of all what current drivers of different pricing structures are,” she said.
“We think this is very much the beginning of the process. In the next day or two we will be discussing with our expert advisory group the concrete next steps, including how we action some of the items … as well as a potential for a future forum,” she said. The advisory group will also meet in the Netherlands, the WHO said.
The challenge with value-based pricing is that it does not take into account different populations, whether some can afford it.
Fatima Suleman, associate professor in the Discipline of Pharmaceutical Sciences, School of Health Sciences, University of KwaZulu-Natal, South Africa.
She underlined the high price of new innovative medicines in South Africa. She also mentioned shortages of medicines at the global level. The supply issues are not in relation with the national supply chain factor but more in relation to the fact that medicines are being withdrawn from the market.
The forum provided a platform for all stakeholders to come together and talk in a more collegial way without being confrontational and defensive, she said.
Examples of discrete actions that might be taken forward are “horizon scanning,” that is, looking at the pipeline for medicines, and identifying a list of vulnerable products that have been on the market for some time and might face high pricing, said Hill.
A final report from the forum is expected in four to six weeks, Hill said. The forum and topic are not specifically on the agenda for this month’s annual World Health Assembly, but member states could raise the issue if they see fit.
“We do see a consensus developing around the need for action and change,” Hill concluded.
Initial Industry Reaction
Initial reactions did not appear to be issued by the many stakeholders in the room at the forum, except one by the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA). The IFPMA statement is available here.
A key message from industry was to focus the discussion on one or two areas of consensus.
Thomas Cueni, IFPMA director general, said in the release, “We witnessed today at the Forum that with goodwill on all sides, it is possible to have a largely constructive debate. We must focus on one or two areas where we saw today there is broad consensus, such as anti-microbial resistance (AMR) and shortages. We learn to work together better, get to understand better each other’s challenges and strengths, and importantly built trust and create open lines for communication.”
He said he made the point in the meeting that “by and large the current research-based biopharmaceutical business model works well and has produced new medicines that have transformed the treatment of many diseases, including HIV, cancer and many rare diseases, and more generally have largely contributed to major improvements in global health and radical increases in life expectancy.”
The statement continues, and appears to somewhat contradict the WHO statement about value-based pricing.
“IFPMA was pleased to see the broad agreement among participants that prices should reflect the therapeutic value of medicines,” it says. “However, the IFPMA warned against a narrow focus on just one component of national healthcare spending. The fact that more than 90% of the medicines currently included in the WHO List of Essential Medicines are generic, many people in low- and middle-income countries still do not have access even to these medicines. It should also be acknowledged that spending on prescription medicines in the vast majority of OECD countries has been stable at around 10-15% of total health care spend for a number of years. This is quite remarkable, given the biopharmaceutical industry in the last 10-15 years has developed a number of breakthrough treatments.
“Any debate about sustainable access to medicines and efficiency of healthcare spending needs to be holistic, looking at both health and social care systems, identifying waste or weakness in the health system and inefficiencies in the supply chain, and taking a long-term and comprehensive view when measuring the value of new medicines,” he concluded.
“We must be willing to engage in this debate,” he told Intellectual Property Watch afterward.
Rather than shooting for the stars, the focus should be on practical areas where there is consensus. Working together and making progress on these areas can create trust, he said.
During the forum, which was conducted under Chatham House rules, one of the questions put to a vote was meaningful definition of fair pricing, and the breakout was as follows:
All payers can afford (33.5%)
Attractive return on investment for manufacturer (4.5%)
Represents therapeutic value (41.5%)
Covers the cost of bringing the medicine to market (28.5%)
This is despite the fact that by his estimate, only 15 out of 250 participants were from industry, said Cueni. “I think we were outnumbered by NGOs,” he said. Cueni agreed with the WHO estimate that perhaps 50 of the participants represented governments, and said they were generally “very balanced.”
By Catherine Saez and William New