Drug pricing scandal rocks the USA but does not shake European systems

November 9, 2016 ctheodoropulos

There was one issue where Hillary Clinton and Donald Trump came together in the otherwise divisive and bitter American presidential campaign: Drug pricing.

Suddenly this year shocking missteps by pharma companies threw the spotlight on the usually invisible process of setting reimbursement for medications. Both presidential candidates seized on the topic making it a hot topic from the early primary campaign to the final stumping.

“Ironically these were generic products, but the public does not care if a product is generic. They only notice the prices of these products were suddenly going up a lot,” said Joseph Damond, Senior VP, International Affairs, Biotechnology Innovation Organization (BIO).

The moderator for the opening plenary session at BIO-Europe® 2016, Damond highlighted the US drug pricing controversies to set a context for the panel discussion that focused on “Value and the pricing of innovation.”

Joseph Damond, Senior VP, International Affairs, Biotechnology Innovation Organization (BIO)

Joseph Damond, Senior VP, International Affairs, Biotechnology Innovation Organization (BIO)











The pressure to demonstrate value for pharma products has intensified worldwide, he noted, but nowhere as spectacularly as in the US where Mylan N.V. raised the price of its EpiPen 500% to more than USD 600 and Turing Pharmaceuticals jacked up the price of Daraprim by over 5,000%.

“Many insurers were caught unawares of the pricing of these specialty drugs and it set off a chain reaction,” said Damond.

Less visible to the public was what he called an active political campaign in Washington DC by the insurance industry to call attention to these price increases to pivot public outrage to anger over drug costs generally. This lobbying gained traction with support from Health Technology Assessment (HTA) agencies and won greater prominence as the influential Institute for Clinical and Economic Review (ICER) weighed in on the issue.

What is clear, Damond said, is there will be significant political fall out in the US that will have a real impact on the market and in valuations of biopharma companies large and small, and create more pressure than ever for drug developers to demonstrate value with great rigor as a precondition to receiving reasonable access and pricing.

Yet after the table was set for a discussion, the three Europe-based panelists proved to be underwhelmed these shockingly sudden developments in the US.

Juergen Windeler, MD, the Director of Germany’s HTA, the Institute for Quality and Efficiency in Health Care (IQWiG), explained that for most of Europe, and especially in Germany, “we have had a traditional tendency to increase the pressure on pricing and value. Compared to the US, fortunately, we do not have the same problems in our healthcare system.”

There are three reasons for this, he said. First the ongoing financial strains on the European economy has maintained a cost pressure on healthcare systems.

Next, over past five years there has been a growing trend toward what he said would fall under the title of too-many-medications, and belief that countries do not need everything that is emerging from pharma innovation and trying to enter the healthcare systems.

“This is not a financial issue so much as it is a matter of asking, what is the role of these innovations in the healthcare system,” said Dr. Windeler.

“And finally, this is quite simple,” he said. “There are a couple outstanding examples where companies have tried to get an extraordinary price for their products from the healthcare system. It is not a general development, but these singular examples have led to scandalizing the process.”

Kate Bingham, SV Life Sciences Adviser

Kate Bingham, SV Life Sciences

Kate Bingham, the Managing Partner at the life sciences venture capital firm SV Life Sciences based in London agreed with Dr. Windeler, except to say the example of attempts to raise prices scandalously was not confined to a few companies, citing a study that found over 400 generic drugs increased their prices by over 1,000% over the past five years.

“These are the ones that get the headlines, and it is massively contrary to what we do,” said Bingham. “The basis for everyone being in this audience, or in this industry, is all about developing new, innovative drugs that have a significant clinical impact.”

Price hikes for generic drugs, she said, “is clearly not helpful. I think putting a spotlight on that and the political repercussions to put a lid on these price increases is a good thing.”

The focus that should come out of this controversy, she said, is asking what is the actual value that an innovative drug creates for a healthcare system.

Unlike the US, Europe tends to have single payer systems, such as the NHS [the United Kingdom’s National Health system] which is one of the continent’s biggest insurers with a spend of EUR 120 billion annually.

“These single payer systems are in a much better position, and unusually, Europe finds itself in a much stronger position to assess the cost-benefit of new medicines,” she said. “The challenge in the United States is negotiating separately with so many payers, which diminishes an enthusiasm for dealing with a whole system solution that one sees in Europe.”

“Until the US becomes a bit more joined up and figures out how to stop patients from jumping between healthcare insurers it is going to be difficult, and especially difficult for highly priced orphan diseases.”

The Head of Pharmaceutical Development at Bayer, Jörg Möller, agreed that the pressure to demonstrate value has increased, “but in my view, this is not a problem in itself. Where we are able to demonstrate value, then we are in a good position.”

Jörg Möller, Bayer

Jörg Möller, Bayer

A Member of the Executive Committee for Bayer’s Pharmaceuticals Division, Möller said, “The problem is that the public discussion is less centered on value than it is on cost. If we talk about value, then we can talk about the benefits that can come with innovative medicines, such as an increase in life expectancy. But in a discussion focused on costs, you will not hear a discussion of benefits. We need to get away from a pure cost discussion.

The biggest costs in healthcare are hospital costs, he said, not medications, which account for less than 15% of healthcare costs.


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