An Organisation of Economic Co-operation and Development report has criticised the pricing strategy of the pharmaceutical industry, claiming that many new drugs are simply bad value for money. The report says that there needs to be a rebalancing of power between the organisations paying for healthcare and drug manufacturers.
With the pharmaceutical industry under substantial political and public scrutiny, many drug makers are finding themselves forced to justify their pricing methods. The Organisation for Economic Co-operation and Development (OECD) has now added to the debate, releasing a new report criticising the value for money offered by many new drugs.
In the New Health Technologies: Managing access, value and sustainability report, the OECD claims that while the price of newly developed drugs has substantially increased, the relative benefits for patients have not.
Additionally, with healthcare’s future focusing on specialised and tailor-made treatments, insurers and public healthcare providers are struggling to afford new and expensive custom medications. For less specialised and more general drugs, the high prices are making it difficult to afford the large volumes required.
The OECD concludes these factors have ultimately made many new drugs poor value for money. One specific example is the price for oncology medication in the US. The cost-per-year gained for patients has quadrupled in less than two decades, and now exceeds $200,000.
Ultimately, the report suggests there needs to be a rebalancing of power between the organisations paying for healthcare and drug manufacturers. This could be achieved through greater transparency and cooperation between the countries and organisations that purchase drugs, using deals like international purchasing agreements.
Another potential solution offered by the report is the adoption of pricing agreements based on the effectiveness of medications, as used in the UK and Italy. This would preserve competition and innovation within the industry, while making sure the pricing of drugs effectively represents their value.
The price of drugs has been a controversial issue recently. A particular example that captured the media’s attention was the price of an EpiPen in the US. After the price surged to over $600 for two doses, public outcry pushed manufacturer Mylan to offer a cheaper generic alternative. The pharmaceutical industry has also been undergoing a transformation, with Reuters predicting Donald Trump’s policies could potentially result in a slew of mergers.Full report on the World Finance site
OECD PRESS RELEASE
The proliferation of high-cost medicines and rising drug prices are increasing pressures on public health spending and calling into question the pharmaceutical industry’s pricing strategies. Governments need to work with the industry and regulators to define a new approach to the development and use of new health technologies that encourages innovation while also delivering more affordable and value for money treatments, according to a new OECD report.
New Health Technologies: Managing Access, Value and Sustainability says that pharmaceutical spending is increasingly skewed towards high-cost products. The launch prices of drugs for cancer and rare diseases are rising, sometimes without a commensurate increase in health benefits for patients. For instance in the United States, the launch price of oncology drugs per life-year gained has been multiplied by four in less than 20 years – in constant terms – and now exceeds US$200,000.
Payers, such as insurers or public health providers, are also increasingly struggling to pay for high-cost medicines targeting very small populations, which are expected to proliferate with the development of precision medicine. On the other side of spectrum, new treatments for hepatitis which are very effective and cost-effective in the long-term but target a wide population, are unaffordable to many who would benefit in almost all OECD countries because of their high budget impact.
The prices paid for technologies must reflect their real-world health benefits compared to alternatives, and be adjusted based on evidence about their actual impact. Payers must be equipped with the necessary powers to adjust prices and withdraw payment for ineffective technologies.
A rebalancing of the negotiating powers of payers and manufacturers is needed, says the report. This could be through increased transparency and co-operation between payers and international joint procurement initiatives, as tested in Europe and Latin America. Pricing agreements, which link the final price paid to the actual performance of the drug, as used in Italy and England, may also be effective if management and administration costs are controlled and the clinical data and evidence collected made widely available to the scientific community.
The report, which will be discussed at an OECD meeting for Ministers of Health on “The Next Generation of Health Reforms” in Paris, highlights other challenges facing the adoption of new technologies. Investment in R&D to treat neglected diseases, such as HIV/AIDS or tuberculosis, fight antimicrobial resistance and address dementia has also become less attractive as their profitability is lower. The incentives for private investment in these areas should be strengthened.
Many biomedical technologies are today approved and adopted based on limited evidence of their safety and effectiveness. Assessment of their performance in real world conditions is rare. This compromises safety, is wasteful and no longer sustainable.
More efforts are also needed to harness the potential of health data more effectively. Use of personal health data creates major opportunities for health system improvement, research and disease surveillance, but requires the right governance frameworks to realise these benefits while managing the privacy risks.
For further information or comment, journalists should contact Valerie Paris, Senior Policy Analyst at the OECD’s Health Division and main author of the report (tel. + 33 1 45 24 80 29).
New Health Technologies: Managing access, value and sustainability
This report discusses the need for an integrated and cyclical approach to managing health technology in order to mitigate clinical and financial risks, and ensure acceptable value for money. The analysis considers how health systems and policy makers should adapt in terms of development, assessment and uptake of health technologies.
The first chapter provides an examination of adoption and impact of medical technology in the past and how health systems are preparing for continuation of such trends in the future. Subsequent chapters examine the need to balance innovation, value, and access for pharmaceuticals and medical devices, respectively, followed by a consideration of their combined promise in the area of precision medicine.
The final chapter examines how health systems can make better use of health data and digital technologies. The report focuses on opportunities linked to new and emerging technologies as well as current challenges faced by policy makers, and suggests a new governance framework to address these challenges.