Expert insight

Fair Pricing – Striking The Balance

13 May 2019
  • Thomas Cueni Director General

This blog was originally published on Health Policy Watch on 10 May 2019.

“Most of us can probably agree that innovation is meaningless if it does not reach patients. At the same time, a Fair Price must strike a balance between a price that is affordable for health systems and patients, while incentivizing investments into research for future cures,” says Thomas Cueni, director general of the International Federation of Pharmaceuticals Manufacturers and Associations.

In the lead-up to the World Health Assembly, where a proposed WHA resolution “Improving the transparency of markets for medicines, vaccines and other health-related technologies” will be one key focus of deliberations, Cueni sheds historical perspective on the access issue and pitches his vision to Health Policy Watch of a way forward. The op-ed is based on the speech Cueni made at the WHO-led Fair Pricing Forum, (11-12 April) in Johannesburg.

As we look forward to the 72nd World Health Assesmbly, where access to medicines will likely be among the issues on front and center stage, I want to state, on behalf of the life science industry stakeholders that are a critical part of this important discussion and debate one key message:

‘We hear you.’

We hear what countries and patients’ groups are saying, and we are sensitive to the debate about cost and pricing. Yes, we need to do more and we need to do it better. But we can only achieve our goals if we come out of our corners – those in industry, in government and in civil society – and embark on a new kind of journey – actively working together on solutions that make available medicines more affordable and more accessible in many more countries.

In urging us all to adopt this kind of fresh, and proactive approach, I want to recall story of the HIV/AIDS crisis twenty years ago, a drama played out in South Africa, which we should reflect on now, in looking for a constructive way forward.

If there was ever a moment in recent history when many pharma companies were tested, it was then. Tragically, precious time was wasted in making the first breakthrough antiretroviral treatments available to patients in Africa and elsewhere. Nominally, the infamous lawsuit dubbed by the media as ‘Pharma versus Nelson Mandela’ revolved around industry objections to the South African “Medicines and Related Substances Amendment Act” to allow parallel imports and generic substitution of patented drugs. But in reality the dispute was not about patent law (IP), as such, but about “fair access” to medicines and affordability.

Ultimately, the “fair pricing” we all want is in order to achieve “fair access” for all.

I was as part of the industry team that facilitated, with the help of Kofi Annan, a then-revolutionary settlement between the South African government and pharma companies in 2001. This was a settlement only made possible because both sides agreed on the shared objective of patient access to innovative medicines.

Today as I represent the global interests of the innovative biopharmaceutical industry, I can also assure you that there has been a sea change over the past 20 years. Today, our member companies ARE acutely aware of the real concerns around the costs and prices of medicines. Together with millions of colleagues in biopharma companies around the world, I am also convinced that innovation is meaningless if people cannot access it. And unlikely to happen in the future without the continued incentives to invest.

The inescapable truth is that we, all of us, have a shared responsibility to find ways for many more patients to have access to today’s medicines and for future patients to benefit from new, yet to be developed medicines.

“Fair pricing” of medicines is a powerful and important concept. Pricing clearly matters. But stating „that price is the main barrier to accessing many new and effective medicines“, fails to do justice to the multiple barriers that exist in ensuring access to the right medicine for the right person at the right place and time.

Access depends on so much more, not the least on:

  • strengthening local healthcare systems, educating and training health care workers,
  • strengthening supply chains, tackling waste and inefficiencies, corruption and falsified medicines,
  • mobilizing domestic resources, achieving Universal Health Care Coverage.

In short, using pricing concerns as a surrogate for talking about inadequate access falls far short of addressing the complexity of the challenges we have to tackle together. I do not want to fudge the affordability question at all, but we risk failure of achieving equitable access if we lose sight of the fact that pricing is just ONE part in a much larger system.

Striking a balance – incentivize research and make medicines affordable

WHO defines a “fair price” as “one that is affordable for health systems and patients and, at the same time, provides sufficient market incentive for industry to invest in innovation and the production of medicines.” I agree with the WHO here, affordability – for health systems and patients – is inextricably linked to incentives for businesses to invest in innovation and production.

Our judgments may differ on what is the right balance. Where we can agree is that the solution lies in balancing the needs to incentivize research into future breakthrough therapies while ensuring that medicines are affordable for health systems, to patients and no one is left behind or suffers financial hardship due to out of pocket payments. More dialogue is certainly required on how to find a) the right balance between access to medical progress, b) the proper incentives for future breakthrough innovations, and c) the need for sustainable budgets.

I want to emphasize industry’s willingness to explore new avenues of innovative reimbursement models such as paying for performance (outcomes), risk sharing, as well as engaging in dialogue on how to make these medicines more affordable and accessible in lower and middle income countries (LMICs).

I see achieving “fair pricing and fair access” as a constant process of adjustment that takes into account:

  • Fostering innovation, i.e. rewarding medicines with an added therapeutic benefit, to stimulate research & development which will benefit future generations and address unmet health needs;
  • Affordability and access to care and innovation for today’s patients, which includes building payment models that protect patients from financial risks related to out of pocket payments;

Building sustainability in health systems, of which pricing is one element.

Recognizing Innovation’s Rewards – Healthy Life Expectancy

We are also seeing great, transformative leaps in new treatments and innovations for many of the world’s most deadly diseases. We have seen deaths from cancer fell by 20%. Two thirds of those diagnosed with cancer remain alive for at least five years after diagnosis/treatment. In just the last few years, people living with Hepatitis C can now be cured through a 12-week course of medicines. Moreover, millions of children in LMICs are living beyond their 5th birthday, thanks to immunization. According to WHO healthy life expectancy at birth has increased by nearly 5 years since the turn of the millennium[1]. And the fact that we are making significant progress in reaching many more patients in low and middle income countries with life-saving treatments, through a range of innovative new public-private (insert AA weblink here) partnerships.

Fostering innovation by acknowledging added therapeutic value, through a value-based pricing approach to incentivize industry to continue investing in high risk of pharmaceutical R&D is fundamental to sustainable innovation. Global health statistics reflect progress across the board. Healthy life expectancy

More than half of the new medicines approved by the US Food and Drug Administration (FDA) benefitted from accelerated review because of the “breakthrough” therapeutic value they bring for patients. And let me reassure you, there is a rich diverse medicine pipeline of over 7,000 medicines in development.

Today’s innovative medicines are tomorrow’s generics and biosimilars. Without one, you will no longer benefit from the other. We have lower cost options for treating conditions like heart disease and depression thanks to past innovation. The generics and biosimilars we use today create “head-room” in budgets for innovative treatments. Furthermore, the continuous upgrading of treatment regiments via new additional medicines create fierce innovator-to-innovator competition within therapeutic classes. To ignore this dynamic, is to turn our backs on the hope to find solutions for still fatal cancers or Alzheimer’s. Despite failure rates of clinical trials of 99.7% over the last 15 years, we have nevertheless more than 100 compounds in clinical trials for Alzheimers. This is the long-term, true value of innovation.

Building Affordability by Building Health Systems

On affordability: the biggest challenge we face is where people have to pay for their health-care “out of pocket”. According to a 2017 report by the World Bank and the World Health Organization, at least half of the world’s population cannot obtain essential health services.

However, the challenge of access goes beyond affordability. For most major diseases, there are generic treatments available. Yet, a report, launched recently by the Center for Disease Dynamics, Economics & Policy (CDDEP), found that more people lack access to antibiotics than die from antimicrobial resistance. One of the reasons for this is that far too often the existing health system cannot provide quality medicines for those who need them, even if they are cheap.

We have found that even when $1 per month treatments for chronic diseases are available far too many people cannot access them. The World Health Statistics 2019 report also underscores the need to prioritize primary health care and highlights the issue of cardiovascular diseases, which are the No. 1 cause of death globally: The report also asks, “why is something as simple as controlling blood pressure just not happening on the scale needed to prevent premature death?”

The WHO General Program of Work for the period 2019-2023 (GPW 13) clearly shows the way ahead. It also provides a blueprint for building collaboration and partnership with the private sector. Creating UHC and mobilizing domestic resources is an important component of improving affordability and access. We all, public, private, and civil society, have key roles to play here.

In our experience, the most helpful way to assess the affordability of medicines to health systems is to take into account both the spending involved and the cost to society represented by disease. This means accepting that medicines can and do make a real contribution to reducing other healthcare costs as well as lost productivity. Think of a vaccine that prevents cancer (e.g., human papillomavirus/HPV) or a drug that eliminates the need for a liver transplant (e.g., the new hepatitis treatments) – both reduce pressure on health systems. They reduce the need for hospitalisation, cure previously chronic conditions, and avoid losing productive life years. They are cost-effective and cost-saving in addition to saving lives.

Although I am deeply aware that the debate on the price and cost of innovative medicines is truly global, I want to highlight affordability and access in LMICs, where national governments invest a lower percentage of their annual budget on healthcare, as compared to governments in more affluent countries. In these settings, assessing affordability has clearly very different implications to more mature markets.

For many LMICs, strengthening healthcare systems still requires considerable investment in reliable healthcare infrastructures and supply chains and training skilled healthcare staff to effectively diagnose and treat.

In addition, governments and pharmaceutical companies must continue to partner to find solutions for access and affordability appropriate to each national context. These initiatives must focus on health and economic outcomes where the unique set of national circumstances can be fully taken into account, rather than a myopic focus on cost containment. The goal should be to improve the quality of care, reduce overall expenditures, increase productivity and fiscal capacity. Accordingly, any review process regarding costs and benefits of individual medicines should adopt a societal perspective. The incentive-based model underlying the pharmaceutical lifecycle is essential in enabling innovators to pave the way for generics.

Fair Pricing in Sustainable Health Systems – What else can industry do?

Now, in that broader context, what can we as industry do to achieve “fair pricing”. And where we see opportunities for better engagement with governments, patients and civil society?

As somebody who strongly believes in paying for the added therapeutic value of an innovative medicine, I’d like to state something, which is often forgotten in the global pricing discussion: advocating for value-based pricing by definition means advocating for some form of differential or tiered pricing – since the “value” of avoided disease, death and health-care savings inevitably differs by region and country.

For several years now, many companies have been applying differentiated pricing solutions across LMIC to take into account the specific country contexts. We are keen to hear from participants about how this could be done more effectively. Furthermore, many pharma companies have patient assistance and other programs to ensure patients have access to medicines independent of their economic status. Our industry is involved with over 250 health partnerships, many of which focus on access and health systems strengthening.

The lesson learnt from that South African turning point two decades ago was for governments, the research-based and generic industries to work together.

The experience showed that differential pricing could work when done in partnership with governments, donors and industry. As a result of the settlement reached, we now have “4th generation” treatments for HIV because a model was found that enabled industry-led innovation to continue. It mobilized stakeholders in support of partnerships that increased access to diagnosis and treatment in the LMICs – for AIDS, of course, but also for diseases such as malaria and TB with the Global Fund and for vaccines with GAVI. Nobody can deny that partnerships have had a huge impact on improving lives and preventing disease of many million people in LMICs.

Similarly, the London Declaration on Neglected Tropical Diseases of 2012, a partnership between industry, the Gates Foundation and WHO, has made a decade-long commitment to donating drugs, 14 billion dosages altogether, until diseases such as Chagas or River Blindness are entirely eliminated. As a result, the mass drug administration programs not only ensure people get access to treatment but also build capacity, training millions of health workers and community volunteers.

Today, the biopharma industry as a whole is spearheading new types of collaboration with initiatives such as Access Accelerated. Two dozen global biopharmaceutical companies are working together to set up partnerships with the World Bank for health systems strengthening or individual programs involving civil society, multilaterals and NGOs. The goal is very tangible. It is to drive on-the-ground implementation and action plans to address non-communicable diseases in low- and middle-income countries. The City Cancer Challenge is exemplary in aiming at improved cancer care in cities such as Asuncion, Cali, Kumasi, Kigali, Porto Alegre, Tbilisi, and Yangon. This novel approach means that governments or city mayors do not waste scarce resources dealing with multiple companies towards achieving their health SDGs. We are also working to explore what other approaches industry could usefully take forward to enhance access.

Let’s face it; all the individual and collective industry efforts to improve access to medicines will not be truly game-changing on their own. What we need is the right conditions, which allow scaling up of such initiatives, and ensuring that the medicines reach the patients for whom they were destined. We need to do more and do better to tackle access hurdles and make innovative medicines more affordable in LMICs. From multiple discussions with industry colleagues, I know that there is a willingness to leave our comfort zones and engage in dialogue to find new solutions.

Take a One Health Approach to Access

At the same time, we also need to be aware there is no one-size fits all solution. We need to take a One Health approach, whereby investment in health infrastructure, service delivery and prevention are also part of the dialogue. Our single most important ask to governments is for a clear process to meet the goals of Universal Health Coverage. Organize and fund systems where patients no longer risk to be impoverished because of out-of-pocket payments. Explore where efficiencies can be achieved in regulatory processes, improving disease awareness, education, diagnosis and treatment, as well as in building necessary infrastructure. Look at how supply chain systems can be strengthened to ensure timely and effective delivery of care to patients. All of these are critical components of achieving UHC.

Governments could also consider more general budgeting approaches that include the cost of disease and the benefit a medicine confers. WHO Afro has recently made a powerful investment case for investing in immunization. The World Bank Human Capital Development Index shows that investing in health is about investing in creating wealth.

In whatever steps we take forward, we also need to build a social contract that also defines a “fair price” in the broader social and economic context of each country’s overall stage of economic development, whether it is a low-income country, middle-income or high income.

Rich countries should not “price refer” and engage in parallel import from poor countries, in instances where prices in other, less affluent, countries declined substantially as a result of concessionary arrangements, such as voluntary licensing arrangements that afford treatment to populations who could not otherwise access certain drugs at all. Drugs, like other essential items, such as housing and foodstuffs, are naturally going to cost more in countries where GDP and average incomes are higher – otherwise local pharmaceutical manufacturing would cease to be a viable activity, with all that implies for national health systems and economies.

In this process of building a new, more robust social contract on access issues, the WHO has a privileged role as a convener for collaboration and information-sharing between stakeholders in health systems. The WHO plays a key role in fostering engagement and collaboration between governments, industry and civil society in contributing to better health systems.

Raising the Stakes

Let me conclude with something that I said at the beginning. We have a commitment, and a responsibility to get medicines and vaccines to the people who need them. That is why biopharma companies are actively exploring better ways to price our medicines based more on patient outcomes and societal value.

Industry leaders are aware that much more needs to be done to reach all patients, regardless of economic circumstances. A debate on transparency of prices and R&D costs – in the terms promoted by some advocates –however well-meaning – will not achieve this objective. Rather, we each have to come out of our corners and join forces to work on access and affordability.

We also need to explain better how our industry operates. We are willing to engage in constructive dialogue on our research model and on policies that will ultimately lead to continuous innovation and sustainable access to patients.We are happy to further explore new business models where the normal market incentives are insufficient, such as Neglected Tropical Diseases and AMR. We are already engaging in multiple Public Private Partnerships with organizations such as MMV, Gard-P, DNDi, and the Medicines Patent Pool.

Biopharma company representatives are engaging more deeply in a dialogue with governments and civil society about the different approaches we can take together. These include: working with governments, insurers, and doctors to create sustainable solutions with the aim that no patient will ever go without our medicines because they cannot afford it. I invite governments, key policy influencers and civil society to engage with these forces constructively and positively.

The industry is rightfully being challenged. Do I think we always get it right? No. However, I believe we are raising our stakes in the game. We are finding new and better ways of showing the therapeutic value of medicines to society; we are making progress in reaching more patients, including in LMICs. Last, but not least, let us not lose sight of the toll and debilitating costs of non-treatment. Let us work together here to listen and learn about the good that is already happening and discover even more new ways to meet the challenges we all share for the benefit of patients today and tomorrow.

[1] Healthy life expectancy at birth – the number of years one can expect to live in full health- increased from 58.5 years in 2000 to 63.3 years in 2016.