Drug Pricing: The OECD Weighs in on the Debate

Health ministers from more than 35 countries of the Organisation for Economic Co-operation and Development (OECD) met this week in Paris to discuss next-generation healthcare reforms. Drug pricing was on top of the agenda, with the OECD issuing a report in advance of the meeting to examine new approaches to address the issue of drug pricing while still encouraging innovation. So what was discussed?

At the same time, Joseph Jimenez, CEO of Novartis and president of the European Federation of Pharmaceutical Industries and Associations (EFPIA), weighed in on the OECD meeting. DCAT Value Chain Insights takes an inside look. 

Inside the OECD findings
The OECD issued a report, New Health Technologies: Managing Access, Value and Sustainability, which examines the issue of rising drug prices and the resulting pressure on public health authorities. The report calls calls on governments, industry, and regulators to 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.

The OECD report says that pharmaceutical spending is increasingly leaning toward high-cost products. The report is critical of the rise of launch prices of new drugs for cancer and rare diseases without a commensurate increase in health benefit. “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,” said the report. “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 report said that 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,” said the report. 

The report says that a rebalancing of the negotiating powers of payers and manufacturers is needed, which could be through increased transparency and cooperation between payers and international joint procurement initiatives, pointed to practices in Europe and Latin America. The report also said that 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 also said that 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 realize these benefits while managing the privacy risks, notes the study.

Addressing these challenges
In advance of the OECD Ministerial meeting, Joseph Jimenez, CEO of Novartis and president of the European Federation of Pharmaceutical Industries and Associations (EFPIA), cautioned that innovation should not curtailed and should be use to advanced overall healthcare needs. “The challenges that arise when new technology causes disruption in established systems are significant and must be addressed,” he said. “However, when innovation is perceived more as a threat than an opportunity, we have a problem. The answer should never be to reject scientific progress. Instead, we must work together to develop new approaches for realizing the full potential of new technologies.”

To that end, Jimenez, underscored three points. He said that the impact of new technologies should be assessed before they reach the market through better horizon scanning across technologies – be it medicines, cell- and gene therapies, devices, or digital healthcare tools. “With good forecasting, healthcare systems should be able to project how scientific developments will impact patient outcomes, healthcare delivery, and society,” said. “The adoption of breakthrough technologies becomes much less disruptive for a system if their impact is understood and their introduction is planned in good time.”

With respect to pricing, “Rather than focusing on the price of individual technologies, we should systematically scrutinize the overall cost of healthcare and ask ourselves how we can deliver the most value to patients for the money we spend,” said Jimenez. “Today, too many resources are wasted on low value care – healthcare interventions that deliver suboptimal results compared to alternatives. This needs to be stopped. The OECD project on reducing waste across the whole spectrum of healthcare is therefore very important, and should be supported by all actors.”

The last point made by Jimenez is that there is a need to better access health outcomes. “To be able to assess the true value of medicines and other healthcare interventions, we must become better at measuring the actual health outcomes that our healthcare systems deliver,” said Jimenez. “We still focus too much on the various inputs into—number of doctors, number of pills, or number of screenings. Instead, we should focus on the value these inputs create in terms of better health for patients, savings for the healthcare budgets, and benefits to society as a whole.”

To that end, Jimenez, pointed to the use of Patient Reported Outcomes (PROMs) and agreed with the proposal by the OECD to develop cross-country comparisons of PROMs. “Outcomes measures should be used for improving quality in healthcare, for better resource allocation, and to set incentives,” he said. “If payment can be tied to the result of a treatment rather than to the production of a healthcare input, it would send a powerful signal to healthcare providers, including private sector players. Our industry is ready to move to a model where we are rewarded not for the number of pills that we sell, but for the actual results achieved in patients. Applying such a model across the whole spectrum of healthcare services would allow us to reduce waste, save lives, and better address the needs of our ageing populations.”

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