Europe's Transparency Directive Revisited

December 1, 2011

Pharmaceutical Executive

Pharmaceutical Executive, Pharmaceutical Executive-12-01-2011, Volume 0, Issue 0

The effect on pharma of the EU's Transparency Directive has been overly constraining, but will the mooted revisions offer any room to maneuver?

The European Union's so-called Transparency Directive is edging slowly closer to revision, with an initial draft of the proposed changes now moving through confidential internal consultation among senior officials prior to a public launch, possibly by the time you read this.

The "transparency"—the directive brought about over health authorities' pricing and reimbursement procedures—was so specific as to be virtually counter-productive. By focusing on deadlines for decision-making, with merely some passing genuflection to clarity of criteria, the directive has had the effect of limiting discussion largely to a question of numbers, such as "Was a pricing decision reached in the prescribed 90 days or not?" In reality, it offered only a semblance of openness, and it ignored the real questions underlying national policies on pricing and reimbursement.

This was convenient for governments, which were determined to preserve their national autonomy. But it has been increasingly inconvenient for the pharmaceutical industry, which has found that the generous timelines the directive established are widely ignored by national authorities, and with almost total impunity. As to any prospect of seeing timelines shortened so as to speed new products to market and to patients, the outlook is currently far from auspicious.

The limited scope of the directive has proved even more inconvenient. Companies operate now in an environment vastly more complicated than a quarter-century ago, when the legislation was drafted. Industry wants a discussion about more than timelines. But sophisticated discussion of tradeoffs between innovative medicines and overall healthcare costs is not even allowed for by the directive. This leaves the industry often at the mercy of autocratic—and even idiosyncratic—national decisions.

Angling for an Edge

Some of the current inputs into the discussions about revising the directive demonstrate the persistence of these distinct agendas. Several national authorities have been exploiting the opportunity to entrench their positions still further—not merely focusing on the numbers game, but even arguing that the numbers game as laid down in the 1980s is too strict for them and that they should be given even longer to make their decisions.

The Italian regulatory authority, for instance, admits that the pricing and reimbursement procedures can extend to 307 days for new chemical entities—compared to the maximum laid down in the directive of 180 days. Overall, it says, in a plea for longer rather than shorter deadlines, "time limits should take into account problems related to the complexity of the emerging situation with medicines."

The French authorities, rarely famous for generosity towards the innovative industry, are unflinching in their defense of the status quo. "The timelines are appropriate and their reduction would be highly prejudicial to the quality of the evaluation," they say. Their position is reinforced by the views of the highly influential French mutual insurance organizations, which say with equal directness that it is essential to "maintain the current time limits for evaluation of reimbursement and pricing."

Poland, a relative newcomer to the EU, is characteristically blunt in its observations: "Time limits should be extended due to the broad and time-consuming health technology assessment important for the final decision."

The European Social Insurance Platform, representing a number of the organizations that fund national health systems, also wants more time to make decisions. "For advanced therapies and personalized medicines it should be possible to request an extension (2 x 60 days) to the decision-making period," it argues. "In cases of extraordinary workload, the period for processing new applications should be eligible for extension by an additional 60 days," it adds. Too short a time for pricing decisions would risk authorities being obliged to make premature decisions to grant manufacturers' bids, with a cost to health systems that would "amount to recurrent costs of hundreds of millions of euros per year," it warns.

Directive Cheat Sheet

Even the Netherlands, in many respects a pillar of rectitude in industrial policy, wants longer to make its decisions. "The time limit of 90 days has proven to be too tight for making decisions on the reimbursement status of medicines," it says. "Since 1989, the evaluation procedure of reimbursement applications for new medicines has become more complex," so "especially when a pharmacoeconomic evaluation is part of the evaluation process, the time limit of 90 days is too short," it insists. "Time limits should be extended to allow for the increased complexity of reimbursement procedures."

The health authorities in the Czech Republic—which, like Poland, joined the EU long after the legislation was introduced—are not happy with the directive either, and in their case it is because they feel too constrained by it, and want greater liberty to knock products off the reimbursement list. The combined impacts of the directive and of its interpretation by the European Court of Justice "make every change of national reimbursement measures very hard, even impossible," they say. Paying no more than lip service to one of the central tenets of the European Union (and one of the explicit justifications for the directive), they remark dismissively that "the free movement of goods is very important," but go on to insist that, notwithstanding, "National government should have more freedom to decide or change its opinion in a fast and flexible way that some categories of medicinal products will not be covered by the national health insurance system anymore."

Out of Options?

The way the debate is shaping up at present is not leaving much room for the more nuanced approaches that the European pharmaceutical industry would like to see taken account of. Richard Bergstrom, Director General of EFPIA, recently spelled out the real dilemma in the pricing and market access challenges facing the research-based pharmaceutical industry.

Of course payers have the right to assess the added value of new medicines, he acknowledged. In the course of that assessment, companies are ready to make their case. But the case will inevitably adopt wider perspectives of value than are, for instance, currently allowed for in the transparency directive. Company arguments will embrace concepts such as the value for the individual patient as opposed to the average, and the economic value of a treatment to society, rather than just to the budget of a clinic. "Added value should be recognized and rewarded," he insisted, addressing industry colleagues in Austria.

There should be some quid pro quos for this, he recognized. Once patents expire, prices, of course, should fall to a lower level, for instance. Increased use of generics is necessary to free up some of the healthcare budget to fund innovation, EFPIA accepts. Another corollary of recognizing added value is that there should indeed be greater transparency—real transparency, and not just a fig leaf—about prices.

But the big problem in all this for the innovative pharmaceutical industry in Europe is what use national authorities should be allowed to make of the information. At present, most European countries take into consideration prices in other countries when they make their own decisions. This could prove catastrophic, suggests EFPIA, if prices in the lowest-price countries become the dominant influence across the region—if, as Bergstrom put it, Denmark and Norway start limiting their prices to the same level that is fixed by Greece. How far a modified transparency directive will prevent such an outcome is something industry is reflecting on with increasing anxiety.

Reflector is Pharm Exec Europe's anonymous columnist, a commentator so close to the action in Europe that his identity must remain secret.