Moves to price new pharmaceuticals sensibly shouldn't damage the industry's health.
Europe has long had a love–hate relationship with the pharmaceutical industry. When politicians wish to boast of the high-tech and knowledge-based economies they have fostered, they wheel out the profitable returns from drug companies. Yet when the public mood suits, those same politicians criticize the profits, and use them to justify calls for price cuts.
The price of medicines, especially costly new drugs, is again a hot topic in cash-strapped Europe. Several countries are weighing up new ways to determine both the cost and the value of such medicines. The move would have pleased Oscar Wilde, who famously remarked that a cynic knew the price of everything and the value of nothing; but the pharmaceutical giants are nervous.
“Poorly cast drug pricing mechanisms could drive a wedge between government and big pharma.”
Done well, novel pricing mechanisms could foster innovative research and spread the benefits of new medicines more widely. Done poorly, they could drive a wedge between governments and the industry, one of the most important parts of Europe's research base.
Whether an individual believes that drugs are overpriced is often determined by their politics, their health and whether they have ever worked in the pharmaceutical sector. What is not in doubt is that uncontrolled drug pricing is not a sustainable policy and that governments are taking action to drive prices down. Price cuts forced on the industry by politicians can be divisive. More innovative approaches, already under discussion in a number of countries, seem a better bet. Science can and should inform this reform.
Earlier this month, Germany pushed a law through its lower house to restructure its pharmaceutical market. These rules will allow companies to set prices for a year, after which they will have to prove that new medicines deserve to be priced higher than the going market rate for similar products. This is a sensible strategy. A healthy market needs significantly better drugs, not more of the same.
Britain, too, is seeking to pay for drugs only what it thinks they are worth. At the moment, the National Institute for Health and Clinical Excellence (NICE) helps in the task by producing solid research on the cost-effectiveness of new drugs. At present, the deliberations of NICE are merely used to accept or reject a drug for widespread use as priced by its manufacturers. Recently, it rejected Roche's Avastin (bevacizumab)treatment for patients with colorectal cancer, which costs £20,800 (US$33,000) per patient but was judged to bring only modest benefit.
Next month the UK government will consult on plans to shift from this approach to a value-based pricing model, under which drug companies and health officials would effectively haggle over price. Such a move is fraught with difficulty and must be very carefully managed. NICE may be the enemy of patient groups desperate for expensive treatments, but it is internationally respected for its robust use of scientific evidence. Under the coming changes, some experts fear that decisions on whether to introduce high-priced drugs will be fobbed off onto regions or even individual physicians — a move that could bring widespread variation in the availability of new drugs.
There are also legitimate concerns about the impact of such variable pricing systems on the pharmaceutical sector. With the approximate cost of bringing a drug to market now $1 billion, and an expensive new wave of medicines such as the protein-derived biologics on the horizon, governments must be prepared to pay a high price for innovative drugs, or risk seeing science stall.
If industry is to cooperate with the changes, which it should, politicians must proceed on the basis that a new regime must be designed to value and distribute drugs in a better way, not simply to reduce national deficits by shrinking their health-care bills.
Some dire warnings are unlikely to be realized — such as those from industry groups that a system that hits profits could see their members abandon an ungrateful Europe. But governments must remember that big pharma is a crucial component of the continent's research ecology. It should not be exploited for short-term political and economic gain.