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 Meeting Summary
U.S. Summit I: December 5th, 2003
Washington, DC
Global Medical Forum Foundation
Is the U.S. Subsidizing the Global Pharmaceutical Market? A European Perspective
Speech Title: Introduction by the organizers
Speakers
Prof. Raphael Levey; Chairman, Global Medical Forum Foundation
Robert Laszewski; Chairman North America, Global medical Forum Foundation
Takeaways
The summit is to address the following questions:
- What can we learn form other leading Western systems about managing both the cost and the use of pharmaceuticals?
- Does the U.S. need to rethink its current laissez-faire policy toward the global pharmaceutical market place or not?
Speech Title: A Case Study from the European Market
Speaker
Prof. Panos Kanavos; London School of Economics
Interlocutor
James Roberts; President, Health Actuaries LLC
Takeaways
Parallel trade is a large force within the European markets. Patients, providers tend to benefit little, governments and health insurance organizations gain modest savings ( UK € 56 million, Germany € 18 million pa), while parallel importers gain large benefits of e.g. € 500 million in the UK or € 98 million in Germany. Manufactures incur significant losses from parallel trade.
In addition there is an adverse health effect due to the depletion of drugs in the origin country.
Speech Title: How Pharmaceutical Pricing was changed in France: A Lesson
Speaker
Annie Chicoye; Founder and CEO, A.C.E.
Interlocutor
Tobias J. Levey; Executive Director, Global Medical Forum Foundation
Takeaways
Mme. Chicoye’s description of the French healthcare system showed that through the introduction of various regulations France has achieved a system that costs $2550 PPP versus $4950 PPP in the U.S., yet was ranked #1 in the efficiency of its healthcare system by the WHO.
While drug prices are heavily regulated, there is an initiative called “depot de prix”, where higher prices are permitted for innovative patented drugs. Interventions employed include positive lists and public bargaining for the hospital drug market (16% of all pharmaceuticals).
Despite those interventions prescription drug prices have risen significantly (+16% hospital, +31% out-patient delivery drugs), because of structural changes in the pharmaceutical market.
The impact of these structural changes on pharmaceutical prices is similar across all European countries:
- Aging population, more elderly - especially in Europe - and longer life expectancy
- Increased demand: more cures, new categories - e.g. lifestyle drugs
- New Launches are complex drugs: easy targets have been addressed, advent of biotech drugs
Speech Title: An overview of Pharmaceutical Pricing in the European Community & the Effects of Reference Pricing
Speaker
Dr. Robert Geursen; Former SVP Corporate Public Policy, Aventis
Interlocutor
Dr. Paul Ginsburg; President, Center for Studying Health System Change
Takeaways
There are three types of price controls employed in various European member states for pharmaceuticals:
- National: Set a ceiling level within a cluster of equivalent drugs below the highest priced. Patients will have to pay the differential. Tends to discourage expensive “me-too” drugs
- International: Select three reference states to set price for new drug
- Pharmaco-economics: Price according to economic impact of health status, emerging for high impact expensive block-buster drugs
Dr. Geursen referenced Thomas Lundgren from the EMEA (European Agency for the Evaluation of Medicinal Products) re pharmaceutical pricing:
“Given the restricted national budgets in the EU, the aging population and high unemployment the current levels of drug, medical device and healthcare system funding are all the EU can afford”.
Germany and the UK are the only countries that allow free price setting at launch. All other European counties set prices according to a basket of reference countries.
Differences that may contribute to the differential price levels for prescription drugs:
- European member states tend to negotiate on behalf of their population. As Dr. Levin from Kaiser remarked: The bargaining power of an individual group like Kaiser does not compare to a Belgian government negotiating for its population
- Litigation provisions are not as important in Europe, as the awards are generally capped and modest. No class action suits unless gross negligence can be demonstrated
- There is more regulation at launch in the EU member countries, but more freedom to operate
- Direct to consumer advertising is not allowed in Europe, but increasingly European consumers frequent US websites to inform themselves about pharmaceuticals
Dr. Geursen asserted that European policymakers do not generally subscribe to the notion that the U.S. is subsidizing drug innovation on behalf of Europe. Europeans point to lower managed care drug prices that make up more of the U.S. market, the additional cost of the U.S. tort system, the benefits the U.S. receives from having a larger R&D infrastructure, and the costs associated with so many Americans being uninsured and therefore outside the lower managed care costs for drugs.
Speech Title: A Mid-Atlantic Approach to Rational Pharmaceutical Pricing
Speaker
Dr. Heinz Redwood; Consultant & Advisor to the Pharmaceutical Industry
Interlocutor
Jane Sarasohn-Kahn; THINK- Health, Institute for the Future
Takeaways
Recommended objectives for the EU member countries:
- Accept pricing freedom at launch (German /French model)
- Encourage generic competition
- De-list obsolete drugs
- Revive industrial policy for the pharmaceutical industry
Recommended Objectives for the U.S.:
- Drop attempt to influence EU pricing
- Move towards universal access
Bilateral Recommendations:
- Establish a narrower price corridor for launches in both regions
- End political warfare between Rx and Generics
- Improve access
- Establish rational pricing based on health value
Speech Title: Keynote Reaction
Speaker
Dr. Mark McClellan; Commissioner, U.S. Food & Drug Administration
Interlocutor
Dr. John McLaughlin: The McLaughlin Group
Takeaways
Thesis: Higher pharmaceutical prices support the R&D efforts of the pharmaceutical industry. Other developed countries should contribute by paying higher prices for prescription drugs. Generally 17% of Sales are spend on R&D.
There is a need to support R&D in the pharmaceutical industry as the cost for launching a new drug has risen to $800 million and the number of INDs (Investigational New Drug applications) has dropped.
This drop in IND filings at the FDA is related to:
- More expensive clinical trials
- Post marketing commitments are up to 26% of clinical R&D budgets
- Increasing safety and efficacy expectations
- Different clinical trial structures
- US: efficacy versus placebo
- EU: New versus best available in class
- More complex drugs
- Personalization of medicine. Fewer “one pill fits all” launches that have more attractive economics
Dr. McClellan suggests:
- That the U.S. demand higher price levels from other developed nations in relation to their GDP. A point in case is the current request that Australia raises their Rx price levels
- That European countries drop their relatively higher price levels for generics and raise the percentage of generics in the mix. These funds should than be redeployed towards higher Rx prices
- Alternatively nations could contribute a % of GDP towards national funding of biomedical research such as that for the NIH
- If the imbalance between the U.S. and the E.U. is not addressed it may lead to price controls in the U.S., which would be unfortunate
Comments from the audience:
- The U.S. has a much more expensive pharmaceutical marketing approach
- Drug advertising in the U.S. amounts to 1% of the drug launch cost, an expense that does not occur in other markets. $10 billion are given out in free samples to doctors in the U.S. and the detailing cost is the highest worldwide
- True blockbuster drugs, with no “me too” or generic competition will command equally as high prices as in the U.S. Only “me toos” whose price can be set within a reference cluster are priced at a lower level that in the U.S.
- The uninsured have no purchasing leverage in the U.S.—the poorest are paying the highest prices
- Which raises the question of access, as the majority of the US population will get their drugs through managed care plans or the government plans such as the senior drug bill
- Given the relatively small magnitude of sales to the uninsured at “retail” the pharmaceutical industry may choose to examine its retail price levels in the U.S. to avert potential legislation on price controls or re-importation
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