Stimulating ideas for drug development and pricing

New Health Technologies. Managing Access, Value and Sustainability

This new OECD report sheds light over several issues in an heterogeneous way, but the pharma chapter has a box that I want to highlight. It is really suggestive:

Future scenarios about drug development and drug pricing

These disruptive scenarios result from an expert consultation led by ShiftN and commissioned by the Belgian Health Care Knowledge Centre of Expertise and the Dutch Health Care Institute. The aim of the consultation was to imagine disruptive ways to finance R&D that could potentially better respond to public health needs.

Scenario 1: Needs-oriented Public-Private Partnerships
Public actors and drug developers are tackling public health priorities in vigorous and pragmatic partnerships. The public actor identifies indications representing high public health needs; specifies criteria for the performance levels of drugs to be developed for those indications; and indicates his willingness to pay. Through procurements with enforceable contractual commitments, the public actor enters into a partnership with drug developers to
find solutions for these needs. Developers are prepared to enter into the partnership and to give price concessions for a pre-negotiated fixed agreement on price and volume, and speedier access to market, which reduces their development risk. This drug development and pricing model is close to existing governmental procurement practices in researchintensive areas such as public transport, defence and space exploration.

Scenario 2: Parallel Drug Development Track
EU member states set up a parallel, not-for-profit drug development track that exists alongside, but independent of, the pharmaceutical and biotechnological industry. The aim of the parallel track is to develop cheaper drugs without compromising safety and effectiveness. After having made up an inventory of the public health gaps and priorities in health care, EU member state authorities ask leading public research institutes which
discoveries, assets, tools and capabilities they possess to develop solutions addressing (some of) the needs that were identified. Starting from the match between demand and available expertise, coalitions are built between these (not-for-profit) research institutes, payers, authorities and patients’ organisations. All these partners make the commitment to participate in an open and transparent way in clinical research projects. Intellectual
property (IP) rights are acquired early on in the development process by the partners of the consortium, and ownership is shared. Alternatively, the parallel research infrastructure can completely deprioritise ownership; i.e. inventions and developments in the parallel track are not protected and are in the public domain.

Scenario 3: Pay for Patents
A consortium of European countries join forces and establish a “Public Fund for Affordable Drugs”. Each of the participating countries deposits a fixed annual percentage of what it currently spends on drugs into the Fund. Private payers (including insurance companies) can also join the Fund. The Fund continuously screens the research market for “interesting” drugs that are being developed in Phase II or in Phase III for indications with clear health priorities. The Fund buys the patent from developers, conducts or commissions the last phases of research in public research institutes or subcontracts to private partners (with strict public oversight), and guides the submission process for market authorisation. Because the drug is then put on the market at a relatively low price, substantial savings are generated for the public payer. Once the system is functioning “at cruising speed”, these
savings can (partly) serve to replenish the Fund. The “Pay for Patents” model delinks R&D from manufacturing and sales. The prices decrease because the partners in the Fund consider medicines as public goods that should not be financed through monopoly prices.
Hence, once the patent is owned by the public sector, after a successful development and authorisation trajectory, the rights to produce, distribute and sell the drug can be licenced to manufacturers and distributors that provide the best deal in terms of quality, safety and accessibility for the lowest cost. As a rule, various private partners compete with each other, with the result that “new drugs enter the market at generic prices”.

Scenario 4: Public Good from A to Z
Drug development is essentially a public enterprise, and is radically re-oriented from serving private profits towards serving the public interest and patients’ needs. In a drug development system that is essentially a public enterprise, private drug companies still have a role, albeit with a completely different business model. They mainly manufacture drugs and deliver services to the public provider on a competitive basis. With drugs and other health technologies essentially public goods, patents and monopolistic prices have no role.
Patients and public health providers, not corporations, choose which unmet needs research should address. Public authorities regularly publish lists of research priorities, based on objectively established and patient-informed unmet medical needs. Governments organise and fund that research through a variety of mechanisms, including requests for proposals based on well-defined targets that any research team, public or private, can compete for, or milestone compensation, and active management of the innovation process. By paying directly for R&D and active management of the drug development pipeline, nations and health care systems pay much less than the patent-protected prices of the past. Ultimately, drug prices are set on the basis of the real costs of manufacturing, quality control and distribution, which are decoupled from R&D.
Source: Vandenbroeck, Ph. et al. (2016), “Future Scenarios About Drug Development and Drug Pricing”, Health Care Knowledge Centre (KCE) Report 271, D/2016/10.273/59, Health Services Research (HSR), Brussels.

Research and results

The Biomedical Bubble: Why UK research and innovation needs a greater diversity of priorities, politics, places and people

More resources for research are needed. This is the usual mantra. However, what about outcomes?. Since this is not so easy to measure it really lies in an uncertain land. A new report tries to put things clearer, at least for UK. It explains the mismatch about research funding and what is needed to improve health. This is exactly what I consider the right approach. It is useless to ask for more money unless we explain and focus on the priorities for achieveing better health.

A biomedical bubble has developed, which threatens to unbalance the UK’s research and
innovation system, by crowding out the space and funding for alternative priorities. This
is not a speculative bubble, as developed for tulips in the 1630s, or dotcoms in the early
2000s; there is far too much substance in the biomedical sciences for this. But it is a social, political and epistemic bubble (similar to the ‘Westminster bubble’, or the ‘filter bubble’), in which supporters of biomedical science create reinforcing networks, feedback loops and commitments beyond anything that can be rationalised through cost-benefit analysis.

The biomedical bubble represents a risky bet on the continued success of the pharmaceutical industry, despite mounting evidence that this sector faces a deepening
crisis of R&D productivity, and is cutting its own investment. And it favours a particular approach to the commercialisation of science, based on protectable intellectual property and venture capital based spinouts – despite the evidence that this model rarely works. Our health and social care system is under growing strain, and as the NHS marks its 70th birthday this month, there is renewed debate about its long-term affordability. Too often, the biomedical bubble distracts attention and draws resources away from alternative ways of improving health outcomes. Only 5 per cent of health research funding is spent on researching ways of preventing poor health. And more than half is spent in three cities - London, Oxford and Cambridge - despite variations in life expectancies of up to eight years across the country. This paper argues for a more balanced distribution, aligned to what the evidence clearly shows are crucial social, economic, environmental and behavioural determinants of better health outcomes.

 Food for thought.

Shomei Tomatsu in Barcelona

Fasten seat belts

We have entered into an unknown new world: drug prices -for innovative drugs- are on track to disappear. The NHS has agreed a cap on expenditure for a hepatitis C (sofobusvir) new drug in €125m without disclosing the unit price. Some people may consider it an opaque strategy in times that politicians claim transparency.
In my opinion, such a situation allows to understand better that the pharmaceutical market for innovative drugs is mostly a monopsony (one buyer) in a monopoly (one seller), it is not a competitive market - and this is what I have always considered. Therefore, resource allocation is the result of a bargaining between both parties, and the unit price is irrelevant. The buyer wants to maximize health,  the seller is maximizing income, this is exactly the struggle.
The key question is: How much is NHS willing to pay for better health?. As far as  the budget is limited, the number of treatments times the price is not the right way to proceed to maximize health under constrained resources.
Any government has to set priorities for expenditure according to expected health value created. This information should be public. In any case, when a new drug is available the government should clearly define which benefits are cancelled and which are acceptable. A responsible minister can't  agree new expenditures without any budget.
Therefore, innovative pharmaceutical market is not really a market -right now is clear- and governments should set priorities according to resources available -right now is also clear that they haven't done it-.
Fasten seat belts, we are entering into trying times without any political compass-gps. Citizens are expecting something different. I still remember when Victor Fuchs told long time ago: usually health economists discuss incremental cost-effectiveness in limited marginal terms, the real issue appears when such an amount is enormous. The case of hepatitis C is the example of such a situation, and only health policy and deliberative democracy are the tools to confront it. Unfortunately, this was not the strategy applied nearby.

PS. Catalonia in contention, at Harvard Political Review. Must read, if you are interested on what's going on. Otherwise, try Bloomberg op-ed or LAtimes.

PS. Reading Francesc-Marc Alvaro op-ed I always learn something.

PS. Rating catalans' well-being by OECD.

Ricard Molina. Muntaner-Velódromo. Galeria Barnadas

A prescription for pharmaceutical expenditure, is there any one?

Pharmaceutical Expenditure And Policies

If you want to know what's going on in OECD countries on pharmaceuticals, just read this paper. The challenges are huge, and policy answers are delayed. My impression is that beyond the standard approach (the one in the paper), somebody should start talking about priorities for research and innovation according to health needs and potential benefit from recent advances in basic science. There is a need for a dialogue between firms and governments about it. Just a signaling game, saying how much are willing to pay for new innovations if they fit with health needs and potential benefit.

PS.Drug prices: Tweaking the formula excellent article in FT

Determinants of change in life expectancy

Contributions Of Public Health, Pharmaceuticals, And Other Medical Care To US Life Expectancy Changes, 1990-2015

Life expectancy in the US increased 3.3 years between 1990 and 2015, but the drivers of this increase are not well understood. We used vital statistics data and cause-deletion analysis to identify the conditions most responsible for changing life expectancy and quantified how public health, pharmaceuticals, other (nonpharmaceutical) medical care, and other/unknown factors contributed to the improvement. We found that twelve conditions most responsible for changing life expectancy explained 2.9 years of net improvement (85 percent of the total). Ischemic heart disease was the largest positive contributor to life expectancy, and accidental poisoning or drug overdose was the largest negative contributor. Forty-four percent of improved life expectancy was attributable to public health, 35 percent was attributable to pharmaceuticals, 13 percent was attributable to other medical care, and −7 percent was attributable to other/unknown factors. Our findings emphasize the crucial role of public health advances, as well as pharmaceutical innovation, in explaining improving life expectancy.

 A must read article. This is the kind of messages that can inform policymakers and redefine priorities. Unfortunately, there is no similar study for my country.

PS. If you want the same study over two centurys, check here

Vaquero at Marlborough

TTIP and health

The Transatlantic Trade and Investment Partnership (TTIP) Towards an EU-US trade deal
EU position paper on medical devices
EU position on pharmaceutical products

Up to now the negotiation about the TTIP has avoided health care and has focused on pharmaceuticals and medical devices. This is the latest summary:

Round 9
Pharmaceuticals
The progress of the task force in charge of assessing the equivalence of EU and US Good Manufacturing Practices (GMP) systems was reviewed. Audits of Member States GMP inspectorates observed by US FDA took place and will continue during 2015. The EU will audit the US inspectoratate in September 2015. Other areas such as biosimilars, generics and international cooperation were discussed. The EU welcomed the first authorisation of a biosimilar by FDA. EU committed to submit a proposal for cooperation on generics ahead of next round. 

Medical devices
The EU presented its position paper on medical devices recently published in the web site. The US asked clarifications on the mutual recognition of quality management system audits concept (one of the objectives detailed in the paper) and its relation with the international Medical Devices Single Audit Programme (MDSAP). The EU noted that while it is committed to MDSAP work, a legal basis needs to be established for it to be able to accept audit reports carried out by US inspectors (TTIP could serve as such legal basis). Both sides took stock of progress on the two other TTIP priorities (Unique Device Identifier -UDI and Regulated Product Submission - RPS). Next steps were agreed for each topic.

On May 27th, a meeting in Brussels will be held with all stakeholders. Position papers on both issues are available. The assesment of the whole implications of this Treaty is still pending. A general approach is available in the paper by LSE scholars. The key documents and position papers are here.
A summary of the current regulation is here. As far as there is only limited information I will avoid any opinion about it by now.

PS. Alberto Alemanno paper on TTIP