Time for Change? Has the Time Come for the Pharmaceutical Industry to Accept Modest Prices?
Sarah Garner, PhD, Honorary Professor, Division of Population Health, Health Services Research & Primary Care, Manchester University, Manchester, United Kingdom; Jens Grüeger, PhD, University of Washington, Seattle, WA, USA; Michael Schröter, PhD, VIOPAS, Zürich, Switzerland; Kate Dion, MA, 3D Communications, Dollar, United Kingdom
Kate Dion, former journalist, healthcare thinker, and Value Communications Lead at 3D Communications, has been observing the broader pricing debate for more than a decade. Last year, she convened an Issues Panel entitled, “Time for change? Is it time for industry to accept lower prices?” at the ISPOR Europe 2019 Conference in Copenhagen. This summer, she followed up with panel members Sarah Garner, Michael Schröter, and Jens Grüeger in a virtual meeting to discuss their views on how the pharmaceutical industry should approach pricing in the pandemic. The conversation was an exploratory discussion and did not focus on the pricing approaches of any one company.
The statistics are devastating: as of November 20, 2020, COVID-19 had killed more than 1.36 million people, sickened nearly 57 million1, and has been forecast to cost the global economy as much as $28 trillion in lost output over the next 5 years2. As the world waits impatiently for therapies and vaccines against this deadly virus, one thing is clear; now is the chance for the pharmaceutical industry to show that its pricing strategies will support, not prevent, rapid global procurement of life- and economy-saving medicines
Gilead Sciences was the first drug maker to develop and price a medicine for COVID-19. Their drug remdesivir, which has been shown to reduce the recovery time of seriously ill patients, will cost governments of developed countries $2340 for a 5-day treatment course for one patient. Private insurance companies in the United States will pay $3120. Gilead Chief Executive Dan O’Day, who has pledged to make the drug “affordable,3” believes these prices are “well below value.4”
“Taking the example of the United States, earlier hospital discharge would result in hospital savings of approximately $12,000 per patient. Even just considering these immediate savings to the healthcare system alone, we can see the potential value that remdesivir provides. This is before we factor in the direct benefit to those patients who may have a shorter stay in the hospital,” O’Day wrote in an open letter that was published on June 29, 2020 and set out the US company’s pricing rationale.
Drug makers Johnson & Johnson5 and AstraZeneca6 have both said they will forgo profits on any medicines they successfully develop for the coronavirus in order to ensure fast and equitable access, while GlaxoSmithKline7 and Pfizer8 are backing efforts to make products they develop readily available.
“If COVID-19 has shown us anything, it’s that we need novel medicines that won’t blow the budget and we need them now,” said Michael Schröter, Founding Partner of Swiss-based VIOPAS, a firm that invests only in healthcare companies that develop innovative and cost-saving health technologies.
The answer for drug makers developing COVID-19 medicines may be to adopt a “value-minus” pricing approach, according to Jens Grüeger, Affiliate Professor, University of Washington. “Exceptional times call for exceptional measures. The tremendous benefits that safe and effective coronavirus medicines would bring to patients, healthcare systems, and indeed economies, would result in them quickly becoming unaffordable if the traditional value-based pricing approach were followed,” Grüeger said.
“It is not feasible to ask healthcare systems to pay prices that would fully reflect the improved mortality, morbidity, and quality of life as well as the economic and social benefits linked to a reduction in social distancing and lockdowns that would come from a medicine. Not to mention the savings that could be realized for healthcare systems through the avoidance of additional infections and lower hospitalization rates and stays,” he said.
Instead, Grüeger believes that when companies are pricing coronavirus medicines, they should consider only the savings that would be generated within the healthcare system so that the budget impact would remain neutral, including anything else in the equation could put them out of reach. “If a drug were to reduce hospital admissions or length of hospital stay, including time spent in intensive care, this would be hugely beneficial to the health systems as it would free up capacity to treat more patients,” he said.
“At the moment, many countries are simply capping the numbers of patients eligible for treatment with the latest scientific breakthroughs in order to control budgets, but this is depriving many people of important treatment options. Pharmaceutical companies could still see healthy profits if they were to shift to a pricing strategies that also take volume into account,” —Sarah Garner
When the Coffers Are Empty but the Need Is Great
Sarah Garner, Honorary Professor, Division of Population Health, Health Services Research & Primary Care, Manchester University, United Kingdom, agrees that it would be very helpful to consider alternative pricing approaches for wealthier countries, but stresses a different strategy again would be required for developing nations whose economies have been even more overwhelmed by the far-reaching impact of the coronavirus.
“We are seeing that many countries simply do not have anything left in the budget for COVID-19 treatment options so even providing medicines at a heavily discounted rate would not help them. Solidarity among all stakeholders to recognize the reality of the situation and a resolve to work jointly to bring this illness under control will be vital in the coming months. For example, research capacity and funding, voluntary licensing agreements, and patent pooling and coordination of supply will be essential,” Garner said.
She added that a coordinated global approach to the pandemic will be a vital part of helping even the poorest in the world to recover from this outbreak.
After the Virus Has Gone, What Then?
Grüeger believes it will be important to focus once again on striking a balance between rewarding innovation and ensuring the best care is made available within existing budgets once the world emerges from the pandemic.
But Garner, who has long argued that the prices of innovative medicines are preventing broad patient access even in high-income countries, thinks that COVID-19 could provide healthcare systems with the push they need to break free from a “dysfunctional status quo” and move towards new pricing and access models.
She believes the time has come for industry to accept lower prices—a move that will ultimately result in medicines reaching more people, thereby increasing sales volume. “At the moment, many countries are simply capping the numbers of patients eligible for treatment with the latest scientific breakthroughs in order to control budgets, but this is depriving many people of important treatment options. Pharmaceutical companies could still see healthy profits if they were to shift to a pricing strategies that also take volume into account,” she said.
“We have a chance to reconfigure the development and access pathways of new medicines that will drive equitable and timely access to life-changing and life-saving medicines while still providing incentives for innovation. COVID-19 is an unprecedented challenge that has expedited us through a lot of the conversations on problems, inefficiencies, costs being too high, and so on that have been going on for years. We are now seeing brilliant examples of how stakeholders are working together to reach common goals,” she said.
Tightening the Purse Strings
The ability of all countries to pay for the latest medicines looks set to become more limited in the coming years. Governments everywhere are currently spending billions of dollars in desperate attempts to prop up their ailing economies that, like their citizens, have fallen victim to the pandemic.
The implications for drug budgets that were already under considerable pressure due to years of austerity in the wake of the 2008-2009 financial crisis will become clear once countries eventually recover from the pandemic.
“Governments and policymakers will have to make trade-off decisions about where they want to spend money. It’s about making sure they achieve maximum return on their investment in innovation, prevention, and capacity,” Schröter said.
For Schröter this means the time has come for healthcare systems to get serious about embracing value-based healthcare. “COVID-19 could end up being to healthcare what 9/11 was to the defense sector. It could spur investment in new health technologies, infrastructure, and data. But the whole system needs to change, and the money we are spending needs to drive that change so that we emerge with a healthcare system that focuses on delivering better outcomes at lower cost to all stakeholders regardless of where in the value chain they are,” he said.
A results-focused and data-driven approach to healthcare delivery will enable a more holistic analysis of the cost-benefit profiles of different health interventions. Schröter said, “This will set out the right incentives so that companies invest in the areas that will deliver maximum value to their stakeholders.”
Grüeger also believes that the pandemic has highlighted just how much citizens, governments, policymakers, investors, and other key stakeholders value health. “COVID-19 has shown us all that we value health a lot more than we thought. Governments have immediately stepped in to protect lives even at a huge cost to their economies. Once this pandemic is over, I do think that we will see a return to value-based pricing, but I think our definition of value will be much broader,” he said.
“This pandemic has shown us that people want medicines that deliver far more than clinical benefits; they want medicines that have an impact on broader societal issues as well. Take Alzheimer’s disease for example. The indirect costs of this dreadful disease are huge so any medicine that can also address them will be incredibly beneficial for societies as a whole,” he said.
It may well be that the newest innovations are initially only available to the countries that are willing to pay a price that will secure faster access to it, but broader access will ultimately follow, Schröter said. “I think we may end up seeing something that is similar to the 1960s Moon Challenge in the United States. Much of the cutting-edge technology that was designed to help America succeed made its way into our lives in the years that followed; the quality has remained the same but over time the prices have come down. As long as high-end pharmaceutical research and innovation are incentivized, breakthrough products will eventually reach more patients across the world. We need some countries to spearhead and reward this innovation. The worst outcome would be that the innovation does not happen in the first place.”
Ensuring That Everyone Has Access to the Latest Medicines
Grüeger believes the pandemic may result in a greater willingness amongst countries to more formally and transparently adopt a tiered approach to the funding of innovation both during and after the pandemic. “Some countries, such as the United States, are clearly willing to pay a premium for innovation in order to ensure faster access to it. This was the case before the pandemic and we are seeing that it remains the case during the pandemic,” he said. “The reality is that only high-income countries, such as the United States, Japan, Europe, and possibly China can afford to pay value-based prices for the most innovative products. For other countries, a cost-neutral approach may make more sense. Budget holders in less wealthy countries will have to make a trade-off between incremental benefits, affordability, and how quickly they want to be able to access the medicine. We are already seeing that many countries are not willing to pay a premium to ensure faster access to the most innovative medicines,” he said. “For lower income countries, a cost-based model would be the most appropriate way of ensuring that patients in these areas can access the latest medicines.”
"“COVID-19 has shown us all that we value health a lot more than we thought.." —Jens Grüeger
Garner agrees that COVID-19 might accelerate a more comprehensive evaluation of whether tiered pricing is a feasible way forward. She believes it could even result in companies revising their traditional launch sequences so that drugs come to more markets at the same time. This would result in governments and budget holders, rather than pharmaceutical companies, determining how quickly their citizens are able to access these medicines. “We may well see that tiered pricing gains in importance due to this infectious disease. We clearly need to make any medicines that could save people’s lives and slow the spread of COVID-19 available around the world. There have been a number of companies that have taken a major step in this direction through the access agreements that are being put in place. This could provide a model for drug launches after the pandemic,” she said.
Such a change could mark the beginning of a new order in terms of health ownership and the way decisions are made by all stakeholders.
Concurrent launches would mean that it would be possible for patients to access effective innovative therapies more quickly. Of course, availability of the medicine would still depend on budget holders’ willingness and ability to pay. But this important shift could shake up the dynamic of healthcare discussions; citizens would be emboldened to hold policymakers, governments, and payers to account for their decisions about whether to fund the latest medicines.
Good health is fragile. The pandemic has made this clear to everyone. People are beginning to understand there is a lot they can do to determine their own health outcomes. They are also becoming more aware that the job of policymakers and governments is to provide a functioning healthcare system; a system that makes it possible for doctors and nurses to deliver the care people need when their health fails. A key element of this will be to make sure effective medicines are available. Prices of medicines are one very important part of the equation, but access will require that all parts of the equation are balanced.
1. COVID-19 situation update worldwide, as of 21 November 2020. https://www.ecdc.europa.eu/en/geographical-distribution-2019-ncov-cases; accessed November 20, 2020.
2. A Long, Uneven and Uncertain Ascent; https://blogs.imf.org/2020/10/13/a-long-uneven-and-uncertain-ascent/. Accessed November 20, 2020.
3. Remdesivir coronavirus treatment will eventually need a “sustainable model” to keep it accessible, Gilead CEO says. https://www.cnbc.com/2020/05/01/coronavirus-remdesivir-will-need-a-sustainable-model-gilead-ceo-says.html. Accessed June 14, 2020.
4. An Open Letter from Daniel O’Day, Chairman & CEO, Gilead Sciences. https://www.gilead.com/news-and-press/press-room/press-releases/2020/6/an-open-letter-from-daniel-oday-chairman--ceo-gilead-sciences. Accessed June 15, 2020.
5. Coronavirus: Johnson & Johnson vows to make “not-for-profit” vaccine. https://news.sky.com/story/coronavirus-johnsonjohnson-vows-to-make-not-for-profitvaccine-11966292. Accessed June 15, 2020.
6. AstraZeneca to supply Europe with up to 400 million doses of Oxford University’s vaccine at no profit. https://www.astrazeneca.com/content/astraz/media-centre/press-releases/2020/astrazeneca-to-supply-europe-with-up-to-400-million-doses-of-oxford-universitys-vaccine-at-no-profit.html. Accessed June 15, 2020.
7. GSK actions to support the global response to COVID-19. https://www.gsk.com/media/5978/coronavirus_factsheet_2.pdf. Accessed June 15, 2020.
8. 9 Pharmaceutical Companies Racing for A COVID-19 Vaccine. https://www.forbes.com/sites/moneyshow/2020/06/16/9-pharmaceutical-companies-racing-for-a-covid-19-vaccine/?sh=5265e96276ad. Accessed June 16, 2020.