[Ip-health] Swiss Info: Push for drug pricing transparency strikes a nerve with industry

Thiru Balasubramaniam thiru at keionline.org
Sun May 19 15:17:18 PDT 2019

WORLD HEALTH ASSEMBLYPush for drug pricing transparency strikes a nerve
with industryBy Jessica Davis Plüss
THIS CONTENT WAS PUBLISHED ON MAY 19, 2019 7:00 PMMAY 19, 2019 - 19:0

Ahead of the World Health Assembly in Geneva, an Italian draft
resolution to end secrecy around drug pricing has already ruffled feathers
among some governments and industry players. Could Italy be on to something?

The resolution
 proposed by Italy’s Minister of Health Giulia Grillo in February urges the
World Health Organization (WHO) and governments to boost transparency in
four areas: drug prices, R&D costs, clinical trial data, and patent

Arriving late in the typical resolution submission process, a frenzied
review of the text revealed sharp divisions
<https://www.keionline.org/30760> among governments. It quickly gained
widespread support from many NGOs and struck a nerve with some in the
pharmaceutical industry.

The fact that documents from closed-door sessions
 were made open-source by some media helped draw attention to the debate.
But another reason the resolution is creating such buzz is that it shines a
spotlight on the well-kept secrets around how drug prices are determined.
This raises uncomfortable questions about which governments are benefiting
from special deals and how companies might be profiting from high drug

Switzerland has a stake in the discussions as a WHO member state but also
as home to some of the largest pharmaceutical companies, including Roche
and Novartis.
Why now?

Access to medicines has long been considered a developing country issue of
vaccines and basic medicines. But the rise in chronic diseases and
expensive life-saving treatments is bringing the access debate to rich
countries worried about the burden on healthcare budgets. The sense of
urgency is growing as people wrestle with the shock of a $475,000 cancer
a $4 million (CHF4 million) drug to treat spinal muscular atrophy.

Supporters of the resolution argue that transparency is essential to
determine a fair price for medicines <https://reg.unog.ch/event/28787/> and
ultimately make them more affordable. A recent OECD report
 on the industry reinforced this, stating that, “R&D costs and pricing
structures are often opaque, raising legitimate questions about the value
offered by some increasingly costly new treatments.”

WHO's definition of a fair drug price

A ‘fair’ price is one that is affordable for health systems and patients
and that at the same time provides sufficient market incentive for industry
to invest in innovation and the production of medicines.

While transparency has been discussed in global health circles for years,
Swiss Global Health Ambassador Nora Kronig told swissinfo.ch that seeing
transparency as a way to improve access to medicines is a new development.

"This has become more important to member states as they face the huge
challenge of rare diseases and expensive treatments for diseases like
cancer," she said.

In Switzerland, the cost of medicine per person has increased by 13% in
just three years to CHF814 in 2017. The costs are largely driven by
oncology and expensive combination therapies, explained the Federal Office
of Public Health (FOPH) at a press conference earlier this month. The FOPH
estimates that nearly half of the 90 or so requests for approval last year
were for treatments exceeding CHF100,000 ($99,097) per person per year.

Late last year, the Federal Council (executive body) proposed a cost
containment programme
the gravity of the situation.

Debates on the topic are not only raging in Switzerland. In February, seven
executives of top pharmaceutical companies were grilled in a 3-hour US
congressional hearing
skyrocketing drug prices. Lowering drug prices has become one of the rare
issues on which a deeply divided US government agrees.

Even investors are sounding the alarm. At the Novartis annual general
few days after the Senate hearing, Swiss shareholder group Actares said
insurance systems are being “taken hostage” by high prices for life-saving
Sticking points

Kronig strongly supports transparency on prices at an international level.

Switzerland sets drug prices
on a comparison to nine other countries and negotiations with individual
manufacturers. But it is common knowledge
<https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3471187/> that many countries
receive special discounts from companies on certain drugs. Kronig says
“this means that the basket of prices we use for comparison is wrong. In a
sense, we lose because we are the only ones that are transparent.”

But the industry is pushing back, arguing that transparency could have
unintended consequences. Both Roche and Novartis referred swissinfo.ch to
the International Federation of Pharmaceutical Manufacturers and
Associations (IPFMA) for industry perspective.

Director General of IFPMA Thomas Cueni argues that “requiring the
disclosure of confidential discounts and other commercial pricing
arrangements would not benefit patients, but rather would impose new
burdens on companies, could undermine differential pricing that benefits
poorer countries, and disrupt market competition.”

Some recent research
expresses concern that price transparency, particularly for on-patent
medicines, could slow the diffusion of these products to poorer countries.

How transparent is Switzerland?

Based on the Freedom of Information Act
came into force in 2006, any Swiss citizens can request access to any
public documents. There are some exceptions in cases of ongoing diplomatic
negotiations, personal privacy, and national security.

When it comes to drug pricing, Kronig explains, “we are one of the only
countries that are fully transparent about prices. There are no secret
deals.” In the face of difficult negotiations with pharmaceutical
companies, the FOPH recently introduced discounts, which it says is in
place for about 20 or so treatments.

In effect, this means there are two prices for certain drugs. This double
price list drew criticism
some NGOs for the lack of transparency after it was revealed by the Swiss
public television programme Runds
few months ago. Although the information about the discount price
<http://www.xn--spezialittenliste-yqb.ch/> is available, some NGOs argue
that it is difficult to find and calculate.

There is even greater debate on other aspects of the resolution. Kronig
explains that “transparency is an important part of building trust but
there are a few cases where it can be counterproductive. We have to ask if
transparency will help or hinder access?”

Cueni points out that transparency on R&D costs could discourage the
introduction of innovative treatments and delay patient access to
critically-needed and life-saving new medicines.

To Kronig, there isn’t enough clarity on what impact revealing R&D costs
could have on innovation. And right now, she explains R&D costs are not
factors Switzerland considers in price negotiations.

Patrick Durisch of the NGO Public Eye sees it differently. “How can any
authority, not just the Swiss, set a price without knowing how much has
been invested? What were the R&D costs? These are still considered a trade
secret. Even the FOPH whose task is to set the price, does not know how
much the R&D costs are. How do you want to set a fair price?”
Is there such a thing as a fair price?

What is a fair price for drugs has become the question shadowing the
discussions on transparency. Companies have typically defended high prices
by pointing to much needed investments in research and development. But
more research from the WHO <https://gh.bmj.com/content/3/1/e000571>,
Switzerland and elsewhere shows that prices are disconnected from costs and
that drug company profits continue to rise

Companies like Novartis and Roche have even said that costs are not the
best way to determine prices. With new gene therapy treatments that cure
diseases with a single treatment, they are calling for a shift to a
value-based model based on patient outcomes and savings to hospitals and
health systems.

Cueni backs this up saying that focusing narrowly on R&D costs and other
inputs, does not say anything about the value that medicines provide to
patients and health care systems.

But, this model is unlikely to simplify calculations when faced with the
uncomfortable question of how much a life is worth.

Durisch says: “Imagine if we used value-based pricing for all goods. How
much would you value a life vest or an airbag? How much is a life?”

Durisch believes that value-based pricing is a strategy of the
pharmaceutical industry to avoid unveiling their real investment cost.
“There are no limits [with value-based pricing] because basically every
patient suffering from a deadly disease is ready to pay a lot for a
medicine. You are just taking patients hostage. You are taking the
government hostage.”

The fate of Italy’s resolution may be decided next week but whatever the
outcome, it is unlikely that the topic will fade away anytime soon.

Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International
41 22 791 6727
thiru at keionline.org

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