Finance could provide answer to pharma pricing conflicts
The financial sector could provide an answer to the increasingly vexed issues of very high costs for innovative new drugs.
Growing opposition to the ever-increasing costs of new medicines, particularly in the US, suggests that health systems can’t and won’t pay for drugs in the conventional way.
Gilead’s ground-breaking hepatitis C treatments Sovaldi and Harvoni have been at the centre of this debate, offering a cure for many patients, but also threatening to overwhelm drug budgets.
The issue was top of the agenda at the Economist Pharma Summit in London yesterday. The Keynote speaker was Stefan Kapferer, Deputy Secretary-General of the OECD, and a former minister in the German government, who played a lead role in setting up AMNOG and IQWiG, the country’s cost- and clinical-effectiveness organisations.
Kapferer said OECD research suggested new medicines and other innovations were the biggest pressure on healthcare budgets.
“It is very clear the reason [for escalating healthcare spending] is not increasing costs from ageing or salaries of those working in healthcare, it is innovation and technology.”
This viewpoint was hotly contested by Alison Clough of the UK pharma industry association the ABPI, however, who said UK spending on patented medicines represented just 7 per cent of its health budget.
Kapferer made it clear that Sovaldi was a ‘real breakthrough’ drug, but said it had presented healthcare systems in the US and Europe with huge problems. He pointed to calculations that if all the US patients with hepatitis C were treated with Sovaldi in one year, the cost would come to $300 billion – a massive figure, and same size as the total US healthcare annual expenditure.
Responding to the comments, Patrick Flochel, partner at EY’s pharmaceutical sector division said payers across all healthcare systems in developed countries were making it clear that prices were the number one issue.
He said last year’s stand-off over Sovaldi, between manufacturer Gilead and health insurance manager Express Scripts, looked to be a watershed moment for pharma pricing.
In December last year, Express Scripts signed a deal with AbbVie for its rival hepatitis C regimen, a move which has now led Gilead to offer big discounts on Sovaldi and Harvoni – a development which also wiped millions of the company’s share price.
“It’s only the beginning,” said Flochel, and predicted that the new PCSK9 inhibitor drugs from Amgen and Regeneron/Sanofi would be next in the firing line.
Patrick Flochel said there was growing talk of creative solutions to paying for drugs – including systems which reserve payment until patients are shown to have benefited, or an annuity system, in which the cost of a drug is paid off in instalments over a number of years, rather than in one lump sum upfront.
“We need a much more sophisticated long term engagement,” he said, adding that the financial sector could step in with a solution.
“We are starting to get the interest of finance companies who could help offset those costs – this solution exists for lots of other industries, so why not for healthcare?”
Also present on the panel was Sir Andrew Dillon, head of England’s market gatekeeper NICE. He repeated his earlier pledge to investigate ‘creative solutions’ to manage the risk for pharma companies and healthcare systems.
He agreed new approaches were urgently needed.
“I am told practically every week by pharma companies that there is a tidal wave [of new treatments] that will change the whole paradigm,” said Dillon.
In the UK, the Life Sciences minister recently announced a new comprehensive Innovative Medicines and MedTech Review, which aims to address the many problems related to prices, market access and affordability and cost effectiveness assessment in the UK.
One innovative approach already agreed is in Scotland, where the country’s NICE equivalent the SMC has agreed a ‘pay if you clear’ deal with Janssen for its hepatitis C drug Olysio.
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