The European Commission has recently published a report investigating ways EU member states can recognise savings through improved international reference pricing (IRP) practices. The study also considered the feasibility of introducing differential pricing across the EU whereby price would be based on the GDP (or other parameter) of individual EU countries.
The report identified four areas where IRP schemes could be improved:
Use of an extended centralised pricing database
Whereby a centralised pricing database (EURIPID) is used by member states to obtain prices for their IRP analysis. It is currently unclear if pharmaceutical companies will be allowed access to EURIPID to monitor the prices of their products to determine if they are correct. The EURIPID pricing database would offer a number of benefits to member states such as providing comparability of standard price information across countries in an efficient way, from a time and cost perspective.
However, the pricing database does have drawbacks in that some countries (such as Germany) pricing data is owned by third parties and it may not be possible to share such price information within EURIPID. The database will also only focus on public prices and the discrepancy between published prices and net prices may undermine the relevance of the database. Finally, the participation in EURIPID will be voluntary so the validity of the data within the database may not be accurate or up to date leading to incorrect pricing information potentially being used in IRP analysis.
Remap Consulting’s perspective: Quick win. The database already exists and additional funding has been made available to continue with the development of the pricing database. It is important for pharmaceutical companies to lobby for access to the EURIPID pricing database to ensure that the pricing information for their products is accurate and up to date. There is also potential for increased price transparency from markets which have historically not made their prices publicly available.
Regular price monitoring and price revisions
Undertaking regular price reviews (other than just at launch) can be a very effective tool in the way of savings. However, the cost and resources from administering regular price reviews is also significant. The report states that minimizing the country reference basket or only performing a price re-assessment when a price change occurs in a reference country are potential ways of minimising the administrative costs and maximising cost savings.
Remap Consulting’s perspective: Quick win. It is an easy approach for countries to recognise savings especially if price re-reviews are only conducted when a price change occurs in a reference country (which could be monitored through the EURIPID pricing database).
Incorporation of price discounts into IRP calculations
The report states that significant savings could be made if statutory (and potentially confidential) discounts were incorporated into the IRP calculations. The report states that the disclosure of confidential discounts is a sensitive issue that is likely to be opposed by the pharmaceutical industry. Some member states fear that removal of the confidential discounts would increase pharmaceutical spend in their country, which may prevent patient access in some countries for patients who are unable to afford the full price of the medicines.
Remap Consulting’s perspective: Longer term. It is unlikely that countries will provide the level of confidential discounts that has been negotiated as it may impact the ability for future confidential discounts to be negotiated. However, mandatory publicly available discounts, such as those in Germany may well be incorporated into IRP analysis.
Incorporation of ability to pay within IRP formulae
This refers to adapting the IRP formulae to account for individual countries economic situation (e.g. based on GDP). It has been hypothesised that this approach would make pricing fairer in individual countries as the price will take into account the economic situation of that country and will therefore facilitate patient access. However, in order for such a scheme to work, there must be a universal agreement on the methodology used to incorporate GDP into the IRP calculation. Such an approach may actually decrease patient access if pharmaceutical companies are concerned about the impact of parallel trade and decide not to launch in countries with low GDP due to the relatively low price achievable in that country.
Remap Consulting’s perspective: Unlikely, due to the high administrative burden of calculating such prices and the potential negative impact it could have on patient access in smaller markets.
In addition to IRP, another topic the report investigated was the concept of adopting differential pharmaceutical pricing across the EU. The report defined differential pricing as ‘the strategy of selling the same product to different customers at different prices’. In the case of reimbursable medicines, prices vary according to member state’s ability to pay. The report identified a number of significant challenges with regards to implementing differential pricing across the EU that would need to be addressed, namely:
- A mechanism to avoid leakage of products from lower-priced to higher-priced countries
- A strong political will and commitment
- A common understanding of the scope and mechanisms of the differential pricing
- An administrative structure (secretariat) and clear, transparent mechanisms for sharing information and decision-making
- The involvement of the member states and a dialogue with the stakeholders
Given these challenges and the political will required to achieve a framework for differential pricing the authors conclude that differential pricing is unlikely to be adopted across the EU.
Governments across the EU are still of the opinion that pharmaceutical prices are too high and need to be reduced. This report has highlighted some ‘quick wins’ that member states can quickly and easily adopt to decrease the cost of pharmaceuticals in their country. As a result Remap Consulting believe that those countries who have a formal IRP mechanism in place are likely to adopt some of the report’s recommendations, such as participating in the EURIPID pricing database, conducting more regular IRP evaluations and including formal discounts in IRP analysis. It will be important for pharmaceutical companies to ensure that the prices in the EURIPID database are correct and that the IRP analysis is conducted properly to ensure that prices across the EU are maximised. Other concepts, such as differential pricing, are nice in theory, but unlikely to be implemented due to the political and logistical challenges