'Fairness', Risk Sharing and the European Price Cuts

Jun 29, 2010
By Pharmaceutical Executive

As pharma companies protest decisions to cut drug prices in Greece, Spain and Germany, the question of fair play is brought in sharp focus. But, says Jacky Law, even-handedness in drug pricing works both ways.

Evaluating the cost-effectiveness of drugs has always been as cumbersome an exercise as it is controversial and challenging. But the effort to at least try to ensure fair play to payers, companies and patients is surely better than governments unilaterally cutting prices to deal with out-of-control public spending deficits.

It is for this reason that the outcome of the UK’s first risk-sharing deal is so disturbing. This early attempt at fair play was struck in 2002 between the Department of Health and four pharma companies to provide beta-interferon and glatiramer acetate to people suffering from multiple sclerosis (MS). It seemed at the time to be a huge validation of the MS Society’s campaign to enable access to these £8000-a-year drugs, while also protecting taxpayers if they proved less effective than what was required to ensure NICE’s benchmark cost of a single year of better-quality life, £36,000, was not exceeded.

Under the scheme, prices were to be reduced if patient outcomes proved worse than expected and the QALY (quality-adjusted life year) cost rose above this figure. Around 5000 patients were enlisted at a cost of around £50 million a year (once the costs of specialist MS nurses and of monitoring the scheme are added in). Seven years later, the first report on the scheme was published and showed disease progression was not only worse than predicted, but worse than in the untreated group.

Christopher McCabe, Professor of health economics at Leeds University, told the British Medical Journal this month (June) the results were so bad “the manufacturers would need to pay the NHS to use the drugs to make them cost effective.” Prices have not been reduced because the scientific advisory group overseeing the scheme, whose independence has been questioned, considers this to be a premature decision for reasons that are too long and complicated to go into here. The result is the NHS has spent £50 million a year for at least seven years and patients are no better off. Even the MS Society withdrew its support after the first results became known in 2009.

Moreover, according to Alastair Compston, Professor of neurology at the University of Cambridge, “attempts to force the drug companies to repay costs would be likely trigger complex legal arguments given the debate over methodological issues.”

Risk-sharing schemes are an attempt at fairness in the face of stakeholders with very different agendas: doctors and patients who want the best treatment options; companies who want the highest prices for their shareholders and taxpayers who want, above all, value for money. This drawn-out experiment has not only cost the taxpayer dearly but, according to James Raftery, Professor of health technology assessment at the University of Southampton, by establishing beta interferon as the “current standard of practice” for MS, it has made it easier to get a newer drug, natalizumab, approved by NICE at the higher cost of £15,000 a year.

Now, while lengthy processes to ascertain the effectiveness of drugs and unravel methodological muddles can seem a welcome boon, as they usually take place during a drug’s patent life, such thinking is surely short-sighted if it reduces confidence in them, particularly so when cash to pay for new drugs becomes harder to find.

And fairness can simply go out of the window altogether, as we have seen in recent months with Gemany, Spain and Greece all either cutting drug prices unilaterally or announcing their intention to do so. Italy, Ireland and Portugal are also struggling with huge public spending deficits and may well follow suit. There is no talk of fairness here; just the simple imperative to cut the drugs bill to get out of a short-term hole.  And the cuts are steep. Greece, which already boasts the cheapest prices in Europe, plans to slash them by a further 20% on average. This is leading to real fears that prices everywhere in the union will also be forced down, as the only winners in all this are the parallel importers.

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