The ongoing increases in the cost of innovative medicines, such as Sovaldi (sofosbuvir), have put healthcare budgets under significant pressure. As some of these new treatments offer exceptional clinical benefits, payers feel compelled to provide reimbursement to enable patient access, but how can payers manage the financial implications? As a result, some governments have looked to collective procurement with other countries, in order to (theoretically) increase the bargaining power and result in lower drug prices. Recent developments in South America are showing how effective this approach can be.
The announcement in November that the Southern Common Market (Mercosur) has agreed to jointly procure Prezista (darunavir) for $1.26 per unit is a huge benefit to patients and payers alike, with cost saving estimated at $20 million. This price is up to three times lower than some South American markets are currently paying (e.g. Chile) and up to ten times lower than in Germany, where a unit costs $12.12. An agreement was also reached to use the Brazilian price for Sovaldi ($9,425 for a 12 week treatment course) for Mercosur members. This is almost 10 fold cheaper than the US, where a 12 week treatment course cost ~$84,000.
Mercosur is a trade bloc consisting of Argentina, Bolivia, Brazil, Chile, Ecuador, Paraguay, Suriname, Uruguay, and Venezuela, which aims to promote the free movement of goods, services and people among member states. Achieving the joint procurement was a collaborative approach with the Pan-American Health Organization (PAHO) and the Union of South American Nations (UNASUR). The PAHO has been used to procure low cost medicines in the past, but this is the first time that it will be used for high cost medicines. What is impressive is that this collaboration has achieve its first results within 6 months of initiation and has up to 40 high cost products (including oncology treatments) on its radar over the coming years.
How should pharmaceutical companies react to this news? Whilst there will obviously be a financial impact, it may have some positive aspects in that it could expand patient access and eligibility, which might mitigate part of the revenue impact. It would encourage used of the original brand and minimise the threat of compulsory purchasing, with its associated costs and market access delays. The risks to companies are that, given the publicity, other countries seek similar discounts and price reductions. Additionally, if this joint procurement is declared a success, will this approach be the standard methodology for all new launching pharmaceutical products in South America? It would be interesting to see how pharmaceutical companies react if this were to happen.
The joint procurement concept is also being considered by other regions. Recent discussions in the EU between Belgium and the Netherlands have focused on the possibility of joint procurement of orphan and high value drugs. The head of CEPS in France has also added his support to joint procurement, stating that “national purchasing is no longer suited” and “Why wouldn’t France ally with Germany or with a similar-size country to purchase products, starting with orphan medicinal products?” Whether the words will translate into actions remains to be seen, as no concrete initiatives have yet been put forward.
Joint procurement is part of a wider trend in pricing cooperation between markets. Middle East markets already harmonize their prices at the wholesale level, Commonwealth of Independent States markets have proposals to share more pricing information, whilst in the EU, a joint price database and closer price information sharing are ongoing initiatives. With all these in the pipeline, it is certain that payers focus on price is only likely to increase in the near term.