Pathways to better and affordable medicines

Access to Medicines Eurohealth — Vol.23 | No.3 | 2017 31 PATHWAYS TO BETTER AND AFFORDABLE MEDICINES By: Suzanne Edwards and Dimitra Panteli Summary: The pharmaceutical sector has been recognised as a key driver for economic competitiveness in the European Union. Balancing industrial interests with health policy goals is becoming increasingly difficult as new, high-priced medicines – often with unproven and variable value – and imperfect alignment with public health priorities enter the market. In order to stimulate the creation and dissemination of true medical innovation that meets the needs of the European population, governments will have to consider solutions that go beyond those that have already been attempted to date. This article presents a number of existing and potential future options in context. Keywords: Pharmaceuticals, Health Needs, Innovation, Access, Sustainability Suzanne Edwards is Research Affiliate and Dimitra Panteli is Research Fellow at the Department of Health Care Management, Berlin University of Technology, Germany. Email: dimitra.panteli@tu-berlin.de The growing tension between Europe’s innovation economy and health systems The value of the pharmaceutical sector to the European economy was estimated at just above €200 billion in 2016. 1 Not only is the industry a major contributor to the EU’s trading power, it also employed some 725,000 people in 2016 with one of the highest labour productivity rates of any sector. Its innovative nature and high R&D intensity (with an estimated investment of €35 billion in 2016), 1 is a key factor in driving economic competitiveness. In 2012, the European Commission identified the pharmaceutical sector as a ‘strategic sector’ and prioritised it for further competitive strengthening. 2 However, the sector also comprises one of the most sizable budget components for health systems. Among OECD countries, average pharmaceutical spending accounts for approximately 20% of total health expenditure. 3 The vast majority of EU Member states finance more than half of this spending through statutory sources (average 64%, with a range of 83% in Germany to 20% in Cyprus in 2014). 2 Moreover, due to the impact of the economic crisis, pharmaceutical cost containment was a frequent priority among EU countries’ health system responses and is likely to remain so moving forward. In several countries, this has been combined with an increasing tendency to shift the cost burden towards private households. 3 Like most markets, the supply side (manufacturers) and demand side (health systems) of the market are linked through medicine sales. In the case of innovative medicines development there is almost complete reliance on market exclusivity privileges (including patent-based monopoly) to strengthen the magnitude of sales-based rewards and provide an incentive for innovation. Implicitly and perhaps theoretically, this means governments allow developers to set the prices as high as they expect the system to bear. In the context of finite resources, > #EHFG2017 Access to Medicines Track (Forum 4, Forum 11, Lunch Workshop 1, Lunch Workshop 3) Access to Medicines Eurohealth — Vol.23 | No.3 | 2017 32 the tension between industrial and health policy objectives has always presented governments with challenges. However, in the last five years, this issue garnered increasing political attention, due in part to the market entry of breakthrough therapies with large target populations and steep price tags (such as the pharmaceuticals against Hepatitis C), and the proliferation of high-cost specialty medicines. In fact, spending on the latter accounts for 30 to 50% of total pharmaceutical spending in OECD countries and is projected to remain one of the central drivers of future spending growth. 4 In response to these pressures, the Netherlands Presidency of the European Council in 2016 starkly placed the imbalances in the system in the limelight and raised questions about the sustainability of the current system for Europe and Europeans. 5 Market failures in the pharmaceutical sector There are a number of ways in which pharmaceutical markets currently fall short in optimally serving patients. The main issues are considered briefly below. Unmet clinical need Medical needs are imperfectly represented by the market forces of supply and demand. 6 7 8 Because return on investment for new medicines is dependent on market revenues through sales, if these revenues are expected to be low or unpredictable, some clinical needs may be underserved or neglected by developers. This is often the case for small target populations (e.g. rare conditions or specific patient groups, such as children and pregnant women) or short courses of curative treatment (e.g. antibiotics). While this problem has long been acknowledged in the developing world (diseases with high or exclusive prevalence in countries with limited ability to pay), the disconnect between clinical need and innovative solutions is now also becoming a political issue in high income countries, especially following a resurgence in the threat from infectious diseases manifested in recent pandemics, the growing incidence and visibility of multi-drug resistance and the realisation that health systems do not currently have adequate tools to address these challenges. Although governments have the opportunity at various points along the product life-cycle (from the issuance of patents to the decision on pricing and reimbursement) to communicate and signal to companies what are the most important and valuable medical products for their populations, product labels still fail to truly align closely with societies’ greater unmet need. ‘‘ the disconnect between clinical need and innovative solutions is becoming a political issue An innovation challenge A second problem lies with defining and assessing what constitutes true medical innovation. In spite of record numbers of market approvals for new medicines by stringent regulatory authorities, such as the European Medicines Agency (EMA) and the US Food and Drug Administration (FDA), there is an increasing body of evidence to support that only a few of these new products offer any (substantial) clinical advantage over existing therapies. 9 While it has been recognised that small and medium enterprises (SMEs) as well as academia are important sources of pharmaceutical innovation, most newly authorised medicinal products are marketed by large and intermediate- sized companies. 10 To overcome these issues, creative solutions are required, for example in removing the barriers to the dissemination of complete and unbiased research findings, particularly those resulting from public funding, and addressing the complexities of conducting clinical trials in the most vulnerable patient populations. Limitations in access and availability A third problem is related to reimbursement and pricing decisions and strategies that may hamper product availability and access to pharmaceuticals. Long post-marketing evaluations may contribute to an increased time to market, while the widespread use of external reference pricing may induce strategic launching. 11 Furthermore, two pricing practices have recently gained in prominence to the concern of public payers: the very high launch prices of certain new products and the increasing incidence of ‘price gouging’, or sudden steep price increases of older, frequently off-patent products. 12 The first particularly impacts medicines that have been either developed for niche patient populations or are based on new enabling technologies, such as biologics. While these medicines are concentrated within certain therapeutic areas (e.g. oncology), examples of price increases of older medicines are more broadly spread. These practices may generate additional pressures that need to be curbed by regulatory instruments in the context of constrained public budgets, for example by increasing patient cost-sharing. Cost-sharing for pharmaceuticals is widespread and is not always capped or linked to other financial protection measures. 11 Because high prices are generally concentrated in few therapeutic areas, health system spending is becoming skewed towards a relatively small proportion of patients, compounding existing challenges of health system equity. 13 Finally, unsatisfactory projected revenues, either due to small country populations or regulated prices, may lead to products being withdrawn from the market or even not being launched at all. Availability and access can also be curtailed by medicine shortages. This is not a new phenomenon but its incidence seems to be increasing in recent years, raising questions about the long-term supply of essential medicines. Problems leading to such shortages lie both on the demand and on the supply side and include strict rules on tenders and shelf life requirements as well as increasing competition for raw materials, unreliable information from peripheral facilities and payment issues. Access to Medicines Eurohealth — Vol.23 | No.3 | 2017 33 The potential of future policy responses In light of the aforementioned characteristics of the pharmaceutical sector and the need to tailor responses to new or evolving challenges, a number of options are under discussion. However, it may be time for a more comprehensive review of the whole innovation cycle. Despite the apparent divergence in governments’ industrial and public health policy objectives, innovative policy options could provide win-win solutions to simultaneously achieve and strengthen both. Prioritising therapeutic needs According to the UN high-level panel on access to medicines, efforts to improve the alignment of innovation with unmet clinical needs to date “tend to be fragmented, disparate and insufficient to deal with priority health needs on a sustainable, long-term basis”. 14 To address this, EU Member States could step up cooperation to better identify and prioritise current and future therapeutic needs based on burden of disease and assess the greatest anticipated benefit from genuine therapeutic advances. This greater coordination could help eliminate the use of overly broad incentives. In the mid-term, national research funding could be aligned to these agreed priorities. The WHO, which has already taken steps to communicate and signal public health priorities more clearly to the private sector with initiatives such as the development of a priority pathogen list and the R&D Blueprint (a global strategy and preparedness plan for epidemics), could provide important support to such an initiative. Collaboration with the WHO’s R&D Observatory could be institutionalised to ensure that knowledge is shared with other funders globally to improve efficiency, synergies and coordination of increasingly scarce financing. Furthermore, EU Member States could reignite discussions 15 16 around the creation of a pooled financing mechanism for implementing new R&D models and providing incentives for therapeutic areas or populations that will never be well served by the current system. This could also be a source of support for a) clinical trial networks to facilitate the testing of new compounds in challenging but often high-need patient groups and b) greater assistance to SMEs in translating and commercialising their innovations. 17 ‘‘ national research funding could be aligned to agreed priorities Strengthened goverance While important steps have already been taken to address fragmentation and duplication in market authorisation procedures and speed up market approval based on a product’s perceived priority, this should not lead to lowering patient safety standards or lessening evidentiary requirements with respect to the actual patient benefit of new products. These concerns were recently demonstrated in the debate over the EMA’s adaptive pathways pilot. 18 Furthermore, expedited market access schemes should be accompanied by broader and more systematic post-market checks as well as clear and tested redress and delisting pathways if safety and innovation goals are not fulfilled. Post-launch data collection on the safety and effectiveness of new and established products could be further systematised and fostered. This would include reviewing and strengthening real- world evidence generation and introducing appropriate regulatory requirements towards expediting the timely and high-quality collection, harmonisation and incorporation of information into regulatory and health-system decision- making. This may involve broadening the mandate of regulators and expanding their post-market resources and powers. Increasing access Where products are slow to launch or not made available to countries, additional tools could be mobilised such as the implementation of national compassionate use programmes. Governments could also consider additional legal mechanisms to removing proprietary barriers to (publicly financed) knowledge generation and dissemination, such as public-health justified waivers to data and market exclusivity to facilitate the possibility of compulsory licenses by Member States. 19 EU Member states could further facilitate the improved reporting and oversight of anti-competitive/anti-trust practices that undermine optimal post-patent market functioning. In conjunction, scrutiny, application and coherence across anti- competitive/anti-trust tools in the EU could be strengthened. Member States could enhance transparent, proactive collaboration in activities such as horizon scanning, post-marketing evaluations (Health Technology Assessment) and other stages of procurement to better anticipate budgetary impacts and strengthen bargaining power, especially for Member States with small markets. This would also facilitate a) the consideration of rewarding priority medicines with preferential rates or premium prices and b) the more appropriate and effective use of outcome-based managed entry agreements (conditional reimbursement schemes), which have already been established in many countries to mitigate the impacts of new, high-cost products. Finally, the EU could also consider the establishment of medicine shortage reporting systems as a first step to improve knowledge and enable appropriate responses to medicines supply issues. Conclusion New challenges facing pharmaceutical markets require solutions beyond those that have already been attempted to date. A number of options could be considered that would be beneficial on both the demand and supply side of the market. Existing initiatives along the product life-cycle could be critically reflected and built on if appropriate across policy sectors. In general, considering the whole system as a single ‘innovation entity’ would ensure a more cohesive policy response. From a European perspective, an overall streamlining, defragmentation and Access to Medicines Eurohealth — Vol.23 | No.3 | 2017 34 re-orientation of the policy and regulatory landscape towards a more transparent needs and innovation-centric system for ensuring sustainable and timely access to one of the largest patient pools in the world should remain the overarching goal. References 1 EFPIA. The pharmaceutical industry in figures. Key data 2017. European Federation of Pharmaceutical Industries and Associations, 2017. 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