Pharma Forum: Fair Price for Innovative Drugs

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© Shutterstock

With the arrival of Sovaldi the pricing problem brought by the new generation of specialty drugs has scaled and created havoc in the pharma sector and beyond. While some argue that such high prices threaten health-care financing systems others revolt against Gilead’s  “hidden-agenda” behind the price of its ”wonder-drug” and the high geographic variations by scooping for undermining reasons for such a value. Whether or not Sovaldi’s price was intended to cover R&D expenses and/or the acquisition costs of the biotech that discovered the treatment the question that arises is which price would be appropriate for life-changing or life-saving drug therapies?

 

The topic of “the fair price for innovative drugs” was debated this year at the Pharma Forum by well-known experts and general managers. Pharma Forum is an event designed as a thing thong of an exclusive network of reflective members of the field that share their experiences and viewpoints as part of the International Marketing Trends Congress. The congress gathers annually more than 500 speakers and contributors from over 50 countries, alternatively in Paris (France) and Venice (Italy), covering a wide variety of subjects including challenges faced within the pharma sector.

 

The speakers that displayed their opinions on fair price for innovation amongst which: Dr. Pierre LE SOURD (Vice-President – FEFIS), Michel GINESTET (Président – PFIZER FRANCE), Dana VIGIER (Market Access Director – BMS FRANCE), François GARY (Director of Hospital Biotech Sandoz France), Dr. Francis MEGERLIN (Paris Descartes University – BCHT UC Berkeley), Pr. Christophe BENAVENT (Paris X University), pinpointed several aspects that should be taking into consideration when defining fairness in pricing strategies and its constrains.

 

In the case of France Mme. Vigier reminds the importance the healthcare system gives to evaluating patients’ need for the drug, the efficacy degree and whether or not it was proven in order to decide the added therapeutic value that will be then used as a multiplying factor in establishing what aims to be a fair price. It is agreed that price should reflect value but there are multiple values that can be brought by innovative drugs. Consequently, the question that rises is whether or not there is only one faire price or, as Mr. Benavent points out, there is no faire price at all but a smart price and thus a culture of multiple prices or a culture of a price attached to multiple values should be developed.

 

Mr. Megerlin, on the other hand, draws attention on the distinction that should be made and considered between the list price and the practiced price as the first is used as basis of negotiation for the latter. The practiced price, once established will only go down through discount mechanisms such as price-volume, price-performance at individual and public level.  While the price obtained in a market can be used to negotiate the price in another there is a continuous challenge to compensate losses and explain geographical variations. Even though there would be a need for a harmonization of the list price in order to achieve balance, micro- and macro-economic divergents constitute barriers too high to overcome.

 

In other words, even though highly regulated the price is the system’s variable that decreases in time and space and that nowadays triggers alarm signals not only in terms of healthcare expenditures but also in terms of future R&D financing.

 

As Mr. Ginestet highlights, price levels should encourage innovation but the way innovation is approached should change as the benefits brought by a drug do not repercute only on patient health improvement but also on collateral savings for the healthcare system such as hospitalization costs. As a result the price should be based on performance not on volume. An example could be constituted by rare disease treatments as in this cases the reasoning is not based on units but on therapeutic value.

 

Nevertheless, the problem goes well beyond the challenge of establishing a fair price for an innovative drug which, should not be fully accounted for the system’s affordability concerns. Given nowadays context, the ambition to grant free healthcare access to everyone is not sustainable anymore neither for the system not for R&D. But what could the healthcare system do to afford universal treatment access?

 

 

Sources:

  1. The Wall Street Journal: http://www.wsj.com/articles/no-justification-for-solvadis-price-letters-to-the-editor-1409346750 (accessed on 20/02/2015)
  2. Voice of America: http://www.voanews.com/content/australia-hepatitis-drug-costs/1965904.html (accessed on 20/02/2015)
  3. International Marketing Trends Congress : http://www.marketing-trends-congress.com/ (accessed on 20/02/2015)