Drug price transparency – Don’t play the blame game! 5 Feb 2020
Catching up on the past issues of New England Journal of Medicine, one article in particular
made me reflect on who gets what, in return on pharmaceutical protections. From the
outside looking in, US politicians appear to be playing high stakes roulette with the
international trade deals affecting global economies, research and development, health of
nations, and that includes you and me as potential patients!
Bollyky and Kesselheim, the authors of the NEJM article are questioning the benefits gained
by the US from the IP protection provisions for pharmaceuticals in international trade over
the past few decades. This will undoubtedly have a knock on effect globally as IP systems
vary from country to country. Having concluded free-trade deals with 19 countries, including
the terms affecting the approval process and subsequent availability of medicines, US
dictates a minimum level of patent protection for pharmaceuticals and other guarantees of
exclusivity that these countries have to provide. These controversial provisions are said to
limit which medicines these non US regulatory agencies may approve and the data
considered in approving them. This ultimately leads to questions such as why did the US
begin pushing for expanding the pharmaceutical protections in trade agreements and have
the US folk got anything in return from pursuing this strategy? There is an increased
momentum on greater transparency of drug pricing globally.
The trade deal called the US Mexico Canada Agreement (USMCA) is awaiting congressional
approval and if passed, it will replace North American Free Trade Agreement (NAFTA). If it
goes through that means expanding protection of proprietary manufacturers requiring
member nations to provide 10 years of data exclusivity to new biologics (such as vaccines);
worth noting that this is a longer period than any other previous agreement.
The Trans-Pacific Partnership negotiated by President Obama’s administration mandated
either 5 or 8 years of data exclusivity for biologicals (depending on the member nation’s
market circumstances). President Trump withdrew that deal on the first day in office and
two years later the USMCA with its 10-year exclusivity mandate was announced. This
provision would force Canada and Mexico to lengthen their own exclusivity periods for new
biologics by 2 years and 5 years respectively, delaying market entry of future biosimilars.
USMCA also binds the US to granting 10 years of exclusivity to new biologics; presently US
law provides 12 years’ protection to allow originator companies to recoup their investment.
But it seems like the US ‘domestic’ policy debate appears to be embedded in the
‘international’ trade agreement negotiations. To expedite availability of biosimilars and
reduce drug prices, Obama and the legislators have argued that this period of exclusivity
should be reduced to 7 years and if Congress passes the USMCA, however, any outstanding
domestic Bills could be seen as contravening the binding trade obligations.
So, what’s pricing got to do with any of this? It seems Trump believes that lower prices that
other countries pay are forcing US patients and taxpayers to pay more to help ‘subsidize’
cost of global medical innovation. Trump provocatively calls it ‘freeloading’
1 Bollyky T, Kesselheim A, N Eng J Med 2019; 380:1993-1995. DOI: 10.1056/NEJMp1902240
– other countries spending less than US for same drug. The article explains greater
protections in the trade deals could possibly ‘change the incentives’ for partner countries
and in turn this can lead to an increase in their own drug prices. The White House Council of
Economic Advisers issued a report in February 2 that described in a rather incendiary
language such as “free-riding” by wealthy countries as “the root of the problem.” The reason
some drugs are cheaper outside the US is because many nations, including Europe, negotiate
or regulate drug prices as part of their healthcare systems. The US system, by contrast,
allows drug prices to be set in negotiations between insurers and the companies, which,
studies suggest, often leads to higher prices. Pharmaceutical Benefit Managers (PBMs)
negotiating discounts from manufacturers from the so called ‘list price’ may not always pass
on their profit margins and therefore the inevitable savings forwarded to the patients.
Interestingly, industry has not opposed the USMCA and its extended protection for biologics
which account for 1% of US prescriptions but more than 30% of US pharmaceutical spending
and is increasing by 10% each year. Biosimilars have become available globally and have
achieved reductions in price that can exceed 50%. The article points out that as soon as
Trump signed the USMCA, manufacturers announced US drug price increases on more than
250 prescription medicines.
The inclusion of the pharmaceutical provisions in trade deals has a mixed record in
delivering on its goals as on one hand the pharmaceutical industry has been among the most
viable in the US directly employing many thousands of people in the US, yet the companies
have increasingly shifted their manufacturing and ownership of their patents abroad to low
tax countries e.g. Ireland with a 12.5% corporate tax rate and is now leading pharmaceutical
exporter to US. FDA estimates 80% of active pharmaceutical ingredients (APIs) and 40% of
the finished products used in US are being imported.
Authors of the NEJM article are legitimately asking whether longer exclusivity for biologics
will actually redress US trade deficit, loss of manufacturing jobs and high prescription drug
prices, in the knowledge that history has appeared to have shown that other countries have
not raised prices to be in line with US and also US citizens are not necessarily paying less for
their proprietary medicines.
Under the International Pricing Index (IPI) payment model which is meant to reduce
payments for prescription drugs, Trump has made his intention clear to bring down prices of
medicines in the US. Unintended consequences of this model can be far reaching to
innovation and R&D leadership.
Intellectual Property (IP) system creates an environment where investors can gain a return
on investment. Despite having e.g. approximately 250 failures in Alzheimer’s treatments, the
IP system creates an impetus for research and development to bring medicines to market.
This is relevant in areas of unmet medical needs where investors accrue return on their
investment by bringing the medicine to market but with enforcing solid IP rights.
In Europe, debate around IP rights appear to be increasingly confused as driver for pricing
and in the US a compulsory licensing in Medicare part B has been discussed too. How do
you convince investors and start ups to put money into R&D given the small chance that it is
successful and get return on investment if it is going to be taken away for example by
compulsory licensing? Parliamentary Under Secretary of State for Public Health and Primary
care, Seema Kennedy, spoke to Parliament on 10 June, about exploring all options including
Crown use and a large scale clinical trial to get access.
There is a trend to increase transparency of costs In the US. Health and Human Services
Secretary Alex Azar announced a final rule from the Centers for Medicare & Medicaid
Services (CMS) that will require direct-to-consumer television advertisements for
prescription pharmaceuticals covered by Medicare or Medicaid to include the list price – the
Wholesale Acquisition Cost – if that price is equal to or greater than $35 for a month’s
supply or the usual course of therapy.
WHO adopts resolution to expand access to medicine by improving pricing transparency
At the 72nd session of the World Health Assembly (WHA), the World Health Organization
(WHO) adopted a resolution to improve the transparency of markets for medicines,
vaccines, and other healthcare products in an effort to expand patient access.
The pharmaceutical industry is facing increasing scrutiny over increasing drug costs. The
resolution follows hot on the heels of the FDA approval of the world’s most expensive drug
to date, Novartis’ Zolgensma® (onasemnogene abeparvovec), a revolutionary one-time
treatment for spinal muscular atrophy in children less than 2 years of age priced at $2.1M.
The WHO resolution was initially proposed by Italy with the ultimate aim of helping other
Member States make informed decisions regarding the procurement of healthcare products,
negotiating affordable prices, and expanding access.
WHO Member States are being urged to enhance public sharing of pricing information and
increase transparency on pharmaceutical patents, clinical trial results, and other elements of
pricing. WHO is therefore intending to monitor the impact of transparency on the
affordability and availability of healthcare products.
An earlier draft of the resolution proposed that the WHO should collect and analyze data
relating to the costs to pharma companies of producing and investigating healthcare
products. This was omitted from the final version due to pharmaceutical companies raising
concerns about publication of commercially sensitive information. Additionally, a number of
Member States including the UK and Germany refused to support the resolution, arguing
that the debate had been rushed and did not fully consider all potential implications.
Thomas Cueni, DG IFPMA said the pharmaceutical industry is sensitive to the debate about
pricing and acknowledged that it needs to do more to find ways to make its medicines more
affordable in more countries. But he also drew attention to the industry’s concerns about
other barriers to access to medicines, such as weak supply chains, corruption, counterfeit
medicines, and the mark-ups levied between factory gate and pharmacy shelf. A blog by
Cueni on Fair Pricing – Striking a Balance is available.
The visit to the UK by Trump last year prompted media coverage including whether a US
trade deal would really lead to the privatisation of the NHS.
Are the headlines scaremongering or a real cause for concern?
NHS is free for UK patients by being funded from UK taxes so it remains unclear why a trade
agreement with the US would necessarily change this, or lead to the adoption of an US-style
private health care insurance system in the UK.
When the Transatlantic Trade & Investment Partnership (TTIP) negotiations were
underway, the EU said it was working on the principle that no agreement could force a
Member State to open public health services to competition from the private sector, or
prevent them from bringing outsourced services back into the public sector. US companies
already have the right to bid for contracts and some are already embedded in the NHS
supply chain. The NHS has been outsourcing services to the private sector since Tony Blair
welcomed bids from independent providers in the 2000s 5 . It has been said that NHS pays
around £9bn a year to private companies to deliver services on behalf of the taxpayer. Other
recent trade deals have often included clauses specifically stating that the agreement will
not affect the ability of domestic governments to administer public services.
We can only wait to see how the debate unfolds across varying Member States as the WHA
resolution is further analysed for impact.