[Ip-health] IP-Watch: WHO Advisory Group Report On Fair Pricing Forum Released: A ‘Matter Of Global Concern’

Thiru Balasubramaniam thiru at keionline.org
Wed Mar 22 02:59:08 PDT 2017


WHO Advisory Group Report On Fair Pricing Forum Released: A ‘Matter Of
Global Concern’


The report from a meeting of a World Health Organization informal advisory
group on challenges of medicines pricing and organising a Fair Pricing
Forum this spring has been made public. The report shows the analysis and
assertions of the diverse group, as well as questions and plans to take

The informal advisory group met in a closed-door session at WHO from 22-24
November. A Fair Pricing Forum, co-organised by the WHO and the Netherlands
government has been planned for 10-11 May (second day is the main day) in
Amsterdam (IPW, Public Health, 1 March 2017). The WHO has published a Q&A
page on the May forum. It notes among other things that the forum
initiative :does not replace WHO’s ongoing work on intellectual property
and TRIPS flexibilities.”

The advisory group report [pdf] focuses on the problems with medicines
pricing, including high prices and shortages.

“[N]ational health budgets are buckling under the strain of paying for new
treatments,” the report states, referencing US$ 50,000 for a course of
hepatitis C treatment sofosbuvir. Breakthrough therapies are so expensive
“they have created serious budget problems, even in the wealthiest
countries in the world, leading to situations where access is restricted on
account of cost.”

“The time is ripe,” it says, “to rethink how medicines are priced and what
tools governments have to make sure that essential medicines are affordable
to patients and the health system.” At the same time, it adds, shortages of
“in-principle” cheap generic essential medicines are increasing, but it
raises concern about “unsustainably low prices [which] can drive
high-quality manufacturers out of the market in the long run, jeopardizing
the continuity of supply.”

The report includes the list of participants in the advisory group meeting,
about 20 people from governments, international organisations, research
institutes, and academia. The group discussed studies and data and came up
with suggestions.

With an eye on a “fair pricing model,” the report stated the objectives of
the 2017 Fair Pricing Forum as:

• To start a process with all relevant stakeholders (including patients and
third party payers) to exchange experience with the current price setting
and pricing systems and discuss options that could lead to a fairer price
setting and pricing system that is sustainable for health systems and for

• To have a preliminary discussion about the wanted but also unwanted
consequences of the current business model including ideas about possible
alternative business models;

• To identify the price related factors that contribute to shortages of
essential medicines

• To identify suitable measures and approaches for countries to remedy
shortages of essential medicines that may be due to low profit margins;

• To provide a platform for these discussions and provide relevant
background research;

• To expand current networks of payers to include other relevant players
and countries to facilitate better exchange of experience;

• To identify for action with the current innovation and pricing system,
including the need for transparency of prices paid, research and
development (R&D) costs, production costs, and profit margins.

The report discusses what is a fair price and how can it be achieved. “The
ultimate aim,” it said, “should be a price that assures new medicines are
affordable to all patients and health systems, allows for a reasonable
profit margin (also allowing for investment in innovation), and assures a
stable supply of generic medicines.”

It uses economic surplus as a way to approach the issue, splitting it
between consumer surplus (e.g., when product is priced lower than they
would be willing to pay), and producer surplus (price is higher than
producer would be willing to make and sell a medicine for). The group took
the view that more work is needed to understand fair price, it says.

Generics, Shortages, Low Prices

The report noted that shortages can occur for some essential medicines, and
that prices vary “enormously” between countries for some products. “Price
disparities and medicine shortages raise questions about the health of the
generic market,” the report states.

It discussed costs of producing generic medicines, where the major cost is
manufacturing, primarily synthesizing the active pharmaceutical ingredient
(the API), as well as registration and distribution. The group discussed
preliminary results of a study on generic manufacturing costs on the WHO
Essential Medicines List, most of which are not under patent. The study
focused on Indian exports of the API, and factored in the need for safety
and quality standards.

These results were compared with publicly available databases of medicine
prices from India, South Africa and the United Kingdom. This showed that
governments often pay many times more than the cost of production for
generics, and one suggestion was that price transparency might reduce high
generic prices. This might also drive down prices for some patented
medications, it said.

The group analysed data on shortages, low price and low profit margin. When
there are few competitors, small disruptions can lead to shortages. The
advisory group offered suggestions on further research on the effects of
low price on availability.

R&D Costs

The report acknowledges that a major cost for new medicines is the research
and development, and that “for patented medicines, … medicine prices must
be sufficient to cover R&D investment, including costs of R&D into
medicines that fail to secure final approval.”

Yet, it says, “there is a notable lack of robust data and transparency on
R&D costs.”

The report says that in the absence of better information from the
pharmaceutical industry, which keeps R&D costs mostly secret, WHO’s most
recent figures based on an in-house study, “may offer a starting point.”

The group looked sceptically upon the argument that rising prices reflect
greater investments in R&D, instead leaning toward the practice of charging
whatever the market will bear and maximizing revenue.

It points out that R&D investments are not only made by industry, but also
governments, academic institutions and non-profit organisations.

Other Issues

There are many other issues addressed in further depth in the 21-page
report, including price transparency, country experiences, value-based
pricing (price set to therapeutic value not market), and orphan drugs, for
rare diseases, for which manufacturers “can command exceptionally high

It also addresses voluntary and compulsory licensing, viewing voluntary
having many benefits but with no guarantee that the medicine the licence
covers will go to market.

It talks about how countries are allowed to issue compulsory licences, and
may do it because of unaffordable medicines. It states that to date,
compulsory licences (for medicines) have been used only by a small number
of countries, a point which is sometimes disputed. The group discussed
reasons why such licences have not been used more often, including pressure
from other governments.

In conclusion, the report said, “The Advisory Group’s discussions confirmed
that the prices of essential medicines have appropriately become a matter
of global concern.” But “fairness” is still a subjective term and needs
further defining.

And on the May forum, it recommended all relevant stakeholders be included,
but by invitation only.

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