Swiss Panel Looks At Value-Based Drug Pricing, Link Between R&D And Prices 26/02/2018 by Catherine Saez and William New, Intellectual Property Watch Leave a Comment Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window)Some products are too cheap, generic drug companies do not invest in them because they do not make enough money out of them. Others seem astronomically expensive, and are said to include the costs of all research, successes and failures alike. Panellists at a recent Swiss-organised expert event in Bern concurred that something must done about pricing, and explored some surprising ways to do it. Panellists at the Swiss IPI event earlier this month The event, entitled, “Stakeholder Discussions on Innovation: availability and affordability of medical products. Can we achieve it all?” took place on 1 February at the Swiss Intellectual Property Institute. It included representatives from across Swiss government, as well as leading thinkers from different sides of the issues – industry, advocates, international organisations and academia, all speaking in their own capacities. Rethinking Value-Based Pricing There is a need to rethink value-based pricing, and some investment should be made for very low-priced products, and also to direct money towards priority health needs, said Peter Beyer, senior advisor, Department of Essential Medicines and Health Products at the World Health Organization. Some products are too cheap and some generic companies do not invest in those products because they cannot make enough money from them, he said. Ministries of health have no money to give to R&D and ministries of economy have national plans but have no free money to give to entities conducting R&D, he said. No Link between R&D and Prices Access to medicines has to be addressed at the country level, said Peter Braun, head of Global Access Strategy and Health Policy at Roche. He added that Roche and other companies engage at the local level to find out what is happening in health care systems, why patients are not being diagnosed, why they are not being treated, and who are the actors in that space that Roche can work with to address those issues. “Then we can apply the pricing flexibility that is needed, but we need to see commitments in fact that those healthcare systems will be fortified,” he said. He said the patent system has allowed companies like Roche to “make massive investments over long periods of time,” adding that Roche alone invested CHF10 billion last year and in the last decade the industry has invested US$1.3 trillion in research “despite a very high risk of failure.” “There is no link between R&D and prices,” he said, as companies work on programmes to develop novel medicines, “and if they don’t work” – as most of them fail – the companies absorb that. Prices are value-driven, according to Braun, describing what he said is a “very strange situation,” with Herceptin as an example. Herceptin is a breakthrough medicines for breast cancer, and also works on gastric cancer. However, the value is not the same, he said. In early stages of breast cancer Herceptin is a cure, but for gastric cancer it prolongs the life of the patients by a couple of months. Therefore, the two applications do not have the same value, yet in most countries, Roche is legally required to sell the same vial for the same price, “which does not make sense,” he said. Pricing mechanisms should allow for more differentiated nuanced pricing to better reflect the value that the medicines provide, he said. Beyer noted a number of drugs coming to the market have no proven benefits or no quantifiable benefits compared to existing treatments. Transparency of R&D Costs; Alternative Models The Drugs for Neglected Diseases initiative (DNDi) was created to develop new treatments for neglected diseases, and steers research towards specialised targeted product development, leveraging knowledge and knowhow of academia and industry, said Pascale Boulet, intellectual property & access leader at DNDi. DNDi finances R&D activities, and ensures access to the final product, and also that knowledge generated and research outputs are made available to the wider research community, she said. Prices are calculated not based on the cost of R&D but on what price patients or ministers of health can pay to ensure access, she explained. DNDi is essentially financing R&D so there is no need to recoup the cost of R&D through pricing. The price is the lowest possible, enough to ensure sustainable production. According to Boulet, the costs of R&D at DNDi are publicly available. In 2014, DNDi published a report [pdf] on ten years of experience & lessons learned, including R&D costs. Those figures showed that DNDi needed between €10 million and €40 million euros (US$12-50 million) to develop and improve formulation of an existing treatment, and between €100-150 million euros (US$ 120-185 million) to develop a new chemical entity, which also includes failures. DNDi does not depend on IP and has not used IP. Rather, Boulet said, it works within the IP system. It has filed patents on occasion, but the usual trigger of the patent system does not work in its case. She agreed when asked later that DNDi’s practice could serve as a model for transparency of R&D costs. One of the speakers during the day noted an analysis done of new drugs that found over 70 percent of recently developed drugs by pharmaceutical companies do not add significant value. “Companies are involved in developing drugs that have little value,” the speaker said. “Nobody would buy a car that doesn’t work,” they said. But in medical products, the consumer does not know if it is better or not. The speaker posited whether the patent system could be moved toward products that have more result or impact. Another speaker, Prof. Margaret Kyle of Ecole des Mines in Paris, suggested that the problem might not be with the patent system but with the reimbursement system. The patent application comes so early in the development of a product, the product may not be well-suited to assess its value. Roche’s Braun countered that the company already does that analysis so it can ensure significant value in products. Esteban Burrone, head of policy at the Medicines Patent Pool, said there does appear to be money in the system, but “maybe not always in the right pocket” or ministry to be able to have drugs you need and prices you need. He asked if there are case studies of governments addressing that, taking funds from one and putting it toward another. To that, Braun remarked that countries already do that in the reimbursement negotiations they conduct with companies. “Those are the signals we receive,” he said, and they redirect toward other areas depending on that. Ellen ‘t Hoen, lawyer and public health advocate at Medicines Law & Policy, added that there is “clearly a call for greater transparency” in R&D figures. Swiss Intellectual Property Institute Deputy Director Felix Addor opens the meeting What Has Worked, What Next For Novartis Head of Market Pricing Christophe Carbonel, the availability and affordability question is radically different between the “mature markets,” and low-income markets. In mature markets, he said, the development of health technology assessment has provided guidance for industry when planning for projects and shaping those projects as to what is valuable to payers. Managed entry agreements have helped to ease tensions between R&D investments in global development programmes to address multiple payers with different perspectives. Those agreements have allowed flexibility in the negotiations, addressed uncertainty, and allowed adjustments to prices, Carbonel explained. “That has worked,” he said. The way forward, he added, is further harmonisation of the value requirement, citing a new proposal for a European Commission health technology assessment (Proposal for a Regulation of the European Parliament and of the Council on health technology assessment and amending Directive 2011/24/EU – 31 January). In lower income markets, affordability is the main issue, he said, and the industry is working its way around some constraints and risks, in particular that wealthier markets would want the same pricing that is offered to low-income markets. For Burrone of the MPP, the biggest success story in global public health today is HIV. “We have done certain things right in HIV and maybe that is what we should be looking at,” he said There are over 20 million people on HIV treatment every day, the vast majority of which are in low and middle-income countries, he said. “How did we get there, how did we do that?” he asked. Several factors contributed to this success, Burrone explained, including significant innovation, and a significant investment from industry. A mobilised public opinion was largely driven by a very active civil society, which created political will. There was also significant domestic spending, and access to affordable treatments through competition. The success story of HIV was done in partnership in many cases with the pharmaceutical industry, he said. HIV treatment currently costs between US$75 and US$80 per patient, per year, he said. Some US$ 1.5 billion is spent to treat people in developing countries, he said, adding that if treatment was still priced at a thousand dollars, which was the price in the early 2000s, only 150,000 could be treated with that amount. Affordable treatments are a key element in the process, he said. ‘t Hoen said the hepatitis C “conundrum” could have been avoided if lessons learned from HIV had been applied. Part of the HIV access to medicines success story came from the 2001 World Trade Organization Doha Declaration on TRIPS [Agreement on Trade-Related Aspects of Intellectual Property Rights] and Public Health, which created a political atmosphere allowing countries to use the TRIPS flexibilities, she said. The Medicines Patent Pool is mimicking the situation that existed in generic manufacturing capacity in India before the TRIPS, she explained. Among the lessons for the immediate future, she suggested to expand the mandate of the MPP to include all new essential medicines. Additionally, there must be a stop to the dismantling of TRIPS flexibilities that countries have, she said, denouncing attempts in bilateral and regional trade agreements to remove or put limits on those flexibilities. ‘t Hoen also suggested that the current incentive system based on market exclusivity and monopolies should be changed. There is enough money in the system to finance R&D, which should be rewarded but not through high drug prices, she said. This shift from the current system needs international collaboration, she added. Image Credits: Catherine Saez, Swiss IPI Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) Related Catherine Saez may be reached at firstname.lastname@example.org.William New may be reached at email@example.com."Swiss Panel Looks At Value-Based Drug Pricing, Link Between R&D And Prices" by Intellectual Property Watch is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.