The 4 Biggest Battles in Drug Pricing



Gerald Clarke
05/10/2013

The global financial atmosphere in the past years has catalysed many changes in the relationship between the pharma industry and governments. In a fiscally constrained environment it is unsurprising that one of the lightening rods has been drug pricing. Listed below are 4 of the biggest battles that have erupted on this contentious topic in recent years. Let us know where you think these battles are headed and what can be done to resolve them.

First Blood

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100 experts in chromic myeloid leukaemia (CML) recently published an article in the respected journal Blood which argued that the price of cancer drugs has increased unreasonably. The researchers pointed out that of the 12 cancer drugs approved by the FDA in 2012, 11 cost over $100,000. John J. Castellani President and Chief Executive of PhRMA responded by saying that policy makers needed to do more to “support innovation and promote access and affordability for patients.”

Play NICE

The British government revealed in March that NICE would be providing a central role in the value based pricing (VBP) of medicines from 2014. The main bone of contention in this battle is over the ‘V’ in VBP; how should it be judged? People and cases are all very different and what is valued by one person might not be by another. The desire to tailor drug availability to each case could cost much more and so reduce ‘value’, should the system try to be fair through consistency at the cost of individual values?

Arzneimittelmarktneuordnungsgesetz Easy for You to Say

On January 1st2011, the Pharmaceutical Market Reform Act (AMNOG) came into force in Germany. This act, aimed at reducing increasing drug prices, links price to performance on a 6 point scale of ‘added benefit’. This scale compares the drug against a comparable treatment and if it passes the test, then the pharmaceutical company and German regulators negotiate a price, if it fails then a price is set by the reference-pricing system. Objections have been many and varied, however one common one is that the ‘added benefit’ testing compares incomparable treatments such as first and second line cancer treatments. The assessment of orphan drugs has also angered those in industry as they were set to be exempt.

Suits You

In the United States healthcare program Medicaid, the cost of drugs is reimbursed to companies at the average wholesale price (AWP). The setting of this AWP has always been controversial and there have been numerous law suits over the years involving the US government claiming that prices have been set too high. In the US there has been an effort to restrict the government’s ability to negotiate drug prices with companies, including the banning of the practice in the other health program for senior citizens, Medicare. Is this regulation then just delaying this negotiation until after the payments are made in a ‘pay first, sue later’ system?

The main global objection to drug pricing is a lack of transparency, with Scotland’s Health Secretary Alex Neil recently quoted as saying “I would welcome more information on cost”. It may seem then, that the only thing needed for the pharma industry to rehabilitate its image on cost is to be more open about how it reaches its decisions on pricing. However this argument encounters the problem that being more transparent risks companies exposing commercially-sensitive information. Perhaps it is an intractable problem, perhaps the to-and-fro tug of war between governments and industry on this topic is just part of a healthy marketplace where both vendor and consumer have a say in what changes hands.

What do you think? Is there a way for companies to be more open about drug pricing? Are regulators too heavy handed in their dealing with industry? Leave a comment below!

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