Sun, Oct 28, 2012 - Page 9 News List

Creative drug pricing flourishing in today’s hard-up Europe

By Ben Hirschler  /  Reuters, LONDON

Fifty percent off the first three months of cancer medicine. Buy a course of eye treatment and get extra injections free. A money-back guarantee if your erectile dysfunction pills do not work.

“Special offers” on prescription medicines are all the rage in state-backed healthcare systems across Europe as governments struggle to balance the books.

Such money-off and pay-for-performance schemes are being fueled by both austerity budgets and competition from cheap generics, which are forcing drugmakers to be more inventive in showing that their expensive new medicines still offer value for money.

The complex schemes do nothing for transparency — something the EU advocates in medicine pricing — but they often suit both governments and companies, with the latter keen to avoid commercially damaging cuts in list prices.

“Global companies do not want their list prices to drop because that will have a knock-on effect as different countries increasingly reference each other over drug prices,” said Brian Godman, a researcher at Sweden’s Karolinska Institute.

“The only way round that is for companies to enter into some form of arrangement with the authorities,” said Godman, who works with various health authorities across Europe researching drug pricing and reimbursement options.

Reference pricing is a growing headache for drugmakers because Greece and other indebted EU states are slashing the prices they pay for drugs, in some cases by more than a quarter, triggering a downward spiral internationally as other countries follow suit.

As a result, Europe’s already fragmented pharmaceutical market is becoming increasingly opaque, although one thing is clear: The pressure on medicine prices across the continent is not going to end any time soon.

Drug companies are already hurting, with GlaxoSmithKline, for example, cutting its sales outlook for this year in July due to lower European prices.

NICE OR NASTY?

Many of today’s complicated pricing arrangements have their origins in pioneering work by Britain’s National Institute for Health and Clinical Excellence (NICE), which was set up in 1999 to systematically assess the cost-effectiveness of new drugs.

Its refusal to accept some pricey products has angered patients, and the tough line has forced drugmakers to find novel ways to make medicines affordable — either by offering discounts or making payment conditional on measurable benefits.

It is an approach now being adopted from Spain to Poland, resulting in a patchwork of schemes that can cause frustration among doctors struggling to assess the true cost of treatments.

“It is spreading pretty quickly,” said Patrick Flochel, global pharmaceuticals leader at Ernst & Young. “There is a big push everywhere with healthcare reforms.”

Britain remains the leader, but Italy has emerged as the second-biggest market for so-called risk-sharing schemes, which have been embraced enthusiastically by the Italian Medicines Agency. One reason for this is that drug spending in Italy is tied by law to total healthcare expenditure.

Cancer drugs are a major focus, reflecting the dilemma posed by costly new treatments that may help some patients, but often only extend life by only a few months.

Cancer accounts for 15 of the 25 special schemes detailed on NICE’s Web site whereby drugs companies can offer patients ways to access high-cost drugs. It also dominates in Italy, where arrangements typically call for provision of cancer drugs at a 50 percent discount for the first two or three months.

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