Where’s the relief from drug pricing fury?

Pharma IQ
Posted: 09/05/2017

As pharma spend continues to climb, so does public scrutiny on drug pricing. Once again, medicine manufacturers are spurred to strike a fair solution to balance raging its R&D appetites with affordable access to treatments for patients  

Last year saw many pharma firms land in the spotlight over drug prices including the likes of Actavis UK, Pfizer and Mylan.

Research from the Kaiser Family Foundation states that the percentage of individuals spending over $1000 out-of -pocket annually on medicines is rising. Prescription drug expenditure is predicted to hold its ascent.

Patients need to foot higher prices to get a newer patented drug in contrast to an older generic treatment.  Some have even ventured to accuse some pharma firms of ‘debranding’ – hiking the price of generic medicines or even delaying the entry of a generic drug to prevent the loss of revenue.

The rising price points of medicines have spurred many payers to demand more controls. Pharma pricing models have advanced slightly over the years away from being depicted by market forces to the values being agreed by payers and pharma companies.

However, the climbing prices for medicines paired with various cases of questionable conduct from pharma have sparked criticism and led many to doubt whether current frameworks are adequate.

 In her book - Drug Pricing and Trust: the Time Is Right, Julie Babyar adds “large profits within the industry add to cynicism and concern from the public.” 

pharma price

Where does all this spend go?

The cost to push a drug candidate down the R&D track to approval is thought to rest somewhere between $1.2billion and $2.6 billion.  In many cases this investment is in vain because of drug discovery’s high failure rates. This expenditure then has to be swallowed by the proceeds of other products.

Researchers have argued that criticism on the pricing of prescription biopharma drugs fails to factor in key contributing factors that finance the manufacture of these medicines.

Berkeley Research Group (BRG) study examined  the distribution and payment process for prescription biopharma medicines and stated that less than half of spending on prescription medicines goes to brand biopharma companies.

Just over 40% is realised by stakeholders such as wholesalers, pharmacies, PBMS, health plans, providers and governments. This contains the 22% that is approximately consumed by supply chain parties.

Also the study proposed that prescription drug spending growth, in fact, slowed in 2016.

Some pharma companies financially support patients that need help with affording medicines by donating billions to patient assistance programmes.

How drug pricing is handled around the world

There is no unified worldwide strategy governing how medicines should be priced.  More negotiation and price control powers are considered as a key way forward alongside refreshing patent protections and stipulations to encourage further innovation from pharma firms.

The World Health Organization is understood to be examining regional pharma pricing structures to obtain a comprehensive and clear understanding of the intricate area of drug pricing and access.

Stark contrasts exist even in the business model based pricing strategies that occur in south Asia – Vietnamese and Indonesian regulations are very stringent in comparison to Malaysia, which contains fewer trading restrictions.

 Study series Pharmaceutical Pricing Strategies In Developing Countries: A Systematic Review noted that governments in developing countries need to enhance the effectiveness of centralised pricing controls for medicines. The authors state “medicine prices appeared to be influenced by poor legislative framework, lack of pre/post– implementation activities and non compliance by various stakeholders.” 

Of course in order to conjure economic systems that are functional worldwide  and mutually beneficial, analysts need to access research and data regarding drug pricing that is accurate and representative. The collection of this data would have to be gathered on a global scale.

Babyar said:” A full understanding of pharmaceutical pricing and implementation of best practices provides cost effective approaches, a better distribution of treatments for the global population and methodology for consensus on individual country policies that cooperate with worldwide systems.”

What is being done about it?

In 2014, the UK updated the Pharmaceutical Price Regulation Scheme (PPRS)  to ensure the NHS had sustainable access to branded drugs, after reform was called for by market watchdogs.

There are a number of initiatives under consultation in the US focused on drug pricing and transparency.

US President Trump announced this summer that his administration would be collaborating with Medicare to ensure treatment is affordable for seniors. It estimates that the 340 drug discount proposal could reduce drug prices by as much as $180 million per year.

The role of the Pharmacy Benefit Manager (PBM) in Texas was examined in an article by Audra L. Conwell, Alliance of Independent Pharmacists of Texas. The piece questioned PBM’s influence on drug costs for patients and pharmacies. Legislation is now underway to increase the modulation of these managers.

The confusing and fluctuating network of drug rebates and discounts in the pharma supply chain complicates the accuracy of pinpointing the actual price of a medication for a consumer. A very limited amount of these reductions actually reach the patient and are instead picked up by stakeholders higher up in the process - sometimes health plans and PBMs.

Now, some nations are trying to ensure these discounts actually reach patients ­– especially those who face unsustainable costs for certain long term conditions.

CVS health has formulated a project tasked with reducing the cost of drugs through rebates at the point of sale.

It may seem then, that the only thing needed for the pharma industry to rehabilitate its image on cost is to be more outspoken about how it reaches its decisions on pricing.  

Some pharma firms are already stepping up to the plate, both Merck  and Johnson and Johnson recently published a list clarifying their pricing in 2016.

However, some argue that being more open risks companies exposing commercially-sensitive information.


Despite this hazard, to restore public trust and achieve fair and functional drug pricing strategies worldwide; a move towards transparency may be the only option for medicine manufacturers.  

Pharma IQ
Posted: 09/05/2017

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