Search for single drug-pricing model in Europe will fail - EC experts

by Peter O'Donnell
BRUSSELS, Feb 9 (APM) - The search for a single drug-pricing model in Europe is doomed to failure, predicts an influential study published by the European Commission late on Friday.
No single model for paying for medicines will be capable of addressing all the multiple objectives that have been set, say the group of experts created by the Commission on "Innovative payment models for high-cost innovative medicines".
There are just too many conflicting elements and objectives, say the experts: "uncertainty about the true benefits of the new product, the desire to promote quick access of beneficial products to patients, reward innovation, promote innovation in neglected therapeutic areas, and maintain sustainability of health systems".
"Several instruments including payment models" will be needed, and trade-offs will have to be made between distinct objectives, they conclude.

No easy answers

Managed entry agreements can be useful to cope with uncertainty over product benefits, by embedding a performance component in the payment model and using real world evidence. But this also carries a risk of "abuse of market power", says the study.
It says companies adapt their pricing strategies so as to "keep effective prices secret".
At the same time, "the intuitively attractive idea of pricing according to costs has the drawback of undermining the incentives to obtain innovations with high value in an efficient way". Instead, it says, it could result in promoting "high-cost incremental innovations to justify prices".
"Pricing of new, innovative, medicines is best seen as a dynamic process starting from early phases of development (R&D costs) and adjusted where relevant and towards the end-life of the product", says the study.
But, it goes on, this approach "needs clear criteria, good use of different tools and continuous cooperation of relevant economic agents."

Ad hoc approach

The study falls back on recommending authorities to "define a set of principles that payment models should follow, and allow flexibility in the design in each case."
It sees health technology assessment as a mechanism to overcome "the asymmetric information between companies and health care payers about the true value of new products."
And "whenever high margins over costs are likely to be present, strengthening the bargaining power of health systems and using payment models that reduce exercise of market power is desirable."
It suggests "payment models based on new ways of procuring innovation" - it offers the example of prize-awarding mechanisms - to cope with neglected therapeutic areas.
This recommendation sits alongside a recommendation to "revisit the promotion of innovation through patent law and market exclusivity".

Collaboration to confront companies

The study also recommends more joint work between health authorities. It predicts that "clusters of models according to basic features will develop over time, with countries learning from each other’s experience".
Using joint negotiation procedures will "strengthen the bargaining power of health systems as buyers". Authorities should also "consider the use of mandatory licensing in extreme cases of public health risks."
In the short term, it urges health technology assessment bodies and reimbursement agencies to ask companies to disclose "R&D costs, marketing costs and production costs".
And it favours invoking competition law and conducting "a competition policy review of high prices asked by companies".
Over time, it sees payment systems evolve in the direction of paying for acquisition of a service rather than of a product.
Optimistically, the study concludes: "Companies that produce truly innovative medicines (of high value and benefit to patients) and are rewarded in a way compatible with financial sustainability of health systems will thrive and grow on the basis of the merits of their innovation."



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