NICE to lose powers to reject new drugs

The British government is expected to strip the National Institute for Health and Clinical Excellence, or NICE, of its ability to reject new drugs.

Currently, NICE “scrutinizes the cost and clinical benefits of new drugs to determine whether the state health-care system should pay for them,” The Wall Street Journal reports. “If NICE decides that a drug isn’t worth its price tag, it advises doctors not to prescribe it, which effectively results in a ban. But Britain’s new coalition government, led by the Conservative party, is planning to strip NICE of the ability to reject drugs, the Department of Health said in a written response to questions Monday. Conservative Party leaders are both trying to limit the size and reach of government and put power in the hands of doctors, rather than administrators, when it comes to treatment decisions. In the future, NICE will advise doctors on the best approaches to treating various diseases” and decisions about payment for new treatments ”will be made through ‘a new system of value-based pricing,’ the statement said” (Whalen, 11/2).

Nature.com: In value-based pricing (VBP), “fees are negotiated with companies on the basis of a scientific assessment of the drug’s clinical value. Countries such as Canada and Australia already use versions of VBP, but Britain has an enormous influence on the rest of the world, says Karl Claxton, a health economist at the University of York, UK. Other countries, for instance, use NICE guidance to help make healthcare decisions. … Some though have already warned of adverse consequences if industry does not feel the prices offered adequately reward the development of new drugs” (Cressey, 11/1).

Courtesy of Kaiser Health News’ Daily Report.

Cutting drug prices hampers innovation: study

Cutting pharmaceutical prices in the way European governments are doing now will severely reduce the number of new drugs making it to market.  There is a direct link between strict regulation and low innovation in the sector, according to a study by a Berlin-based European School of Management and Technology Competition Analysis (EMST CA) and commissioned by the drugmaker Novartis (download a PDF of the full study).

The EMST report said that while European governments predominantly see pharmaceutical pricing models as a way of controlling public health costs, they may not realize or acknowledge the implications for product value, and therefore for the development of new drugs.

The report goes on to argue that current pricing models “are often shown to favor ‘breakthrough’ pharmaceutical innovations over ‘follow-on’ drugs, or incremental improvements”.  This can lead to ‘a different understanding of innovation for patients and chemists’, the study states.

For example, a statin may be redeveloped to have fewer side effects or be more beneficial for one group of patients and while this will seem like an innovative development to the patient, “it will not necessarily be innovative enough from the pricing regulator’s point of view to benefit from favorable regulation”.

The report concludes by saying that the analysis “demonstrates the need to support both ‘first in class’ and ‘best in class’ products, rather than drawing a regulatory distinction between ‘breakthrough’ products and everything else”.

Why innovation is sometimes just as important as invention for pharmaceutical patents

An interesting article on incremental innovation, invention, access to medicines and IP — from Global Health Progress.

The Asian Age recently discussed the dilemma around the language of the Indian Patents Act, which requires “significant” improvements or efficacy in existing medicines for them to become eligible for pharmaceutical patents.  Reporter Deepak Joshi discusses the role of “incremental innovation” in many breakthrough inventions, including medical improvements like the new generation of HIV/AIDS treatments.  Joshi adds that these improvements, while not groundbreaking, nevertheless play an important role in medical progress.  Below is an excerpt from this article.

“In India, however, the debate about incremental innovations has become an unsettling one, particularly in the pharmaceutical sector. Section 3(d) of the Indian Patents Act has a controversial clause calling for “significant” improvement or efficacy in an existing compound to become eligible for a patent. Who defines “significant” and how? The issue is left delightfully vague.

Why does India more or less bar incremental innovations? There is a popular misperception that incremental innovations are unnecessary and will only result in more expensive medicines. The first point is plain wrong and the second one only half true. Of the 325 drugs on the World Health Organisation’s essential medicines list, 95 per cent are off-patent. This means they will be freely available to any drug manufacturer even if incremental innovation results in a better version also being in the market.

It is another matter that some two billion people worldwide don’t have access to these 325 drugs. That is an issue of access and health infrastructure. Patents and the presence or absence of incremental innovations have nothing to do with it. Look at it another way, if a large number of people across the planet don’t have black and white televisions, should the government stop attempts to develop and produce high-end plasma televisions? It may sound ridiculous, but that analogy holds true for the pharmaceutical industry.”

Read the full The Asian Age article here.

Italy cuts generic drug prices – to save 600 million euros

Italy is taking new steps to rein in healthcare spending by imposing a cut in generic drug prices – estimated to save the country 600 million euros ($733.8 million).

Under a package of measures, the price of off-patent generic drugs will be cut by 12.5 percent from June 2010 until the end of this year.  From 2011, reimbursement of generics will be limited to the cheapest version of a medicine within four therapeutic categories, with the lowest price established by a tender system. Purchases of goods and services by the state health service above reference prices will have to be justified.

The introduction of a tender system for purchases of generics follows similar action by Germany.

(Source:  Reuters)

Innovation, IP & India – commentary from the Indian pharmaceutical industry

Ranjit Shahani, President of the Organization of Pharmaceutical Producers of India released the following statement on Intellectual Property Day concerning the effect drug patent protection is having on innovation in India:

Emotion tends to override facts when it comes to patents and patients’ concerns. Consider the fears stoked when India joined the World Trade Organization in 1995. Many feared drug prices could rise, access to medicines could be reduced and many Indian pharmaceutical companies could close down.

Fifteen years later, these fears have proved unfounded: Drugs in each category are available at multiple price points, accessibility is clearly independent of patents, and Indian companies have become multinationals and enter[ed] foreign markets worldwide.

When India reinstated patent protection via IPR (intellectual property rights) reforms, many feared this would lead to decreased access to medicine and delayed entry of generic medicines. Despite the lack of pharmaceutical patents in India for 35 years and some of the lowest prices for medicine in the world, access to medicine in India remained among the lowest in developing nations. In other words, patents have little to do with the ability to access medicines.

While many try to point fingers at drug patents and IPR protection, the lack of healthcare financing and particularly health insurance are the real culprit[s]. Limiting the types of innovations which receive patent protection, as India currently does, won’t improve the health of Indians.

Small innovations that build on existing knowledge are the true backbone and a specific strength of the pharma industry. Yet, Indian laws prohibit certain types of pharmaceutical innovations from patent protection, thereby discouraging research. Indeed, this policy hurts Indian patients the most.

There are many meaningful benefits of continued research on existing medicines. For instance, drug formulations and delivery systems can be optimised for greater effectiveness in India’s hot, humid climate. Paediatric formulations could be developed for babies suffering from diseases more often found in adults. It could also promote the development of treatment for diseases prevalent in India — tuberculosis, malaria, filariasis and other tropical diseases — where breakthroughs are unfortunately rare.

Innovation, research and patent protection are critical to introducing new drugs into the market. Innovations and effective drugs are inseparable, as diseases constantly mutate and many have inadequate treatments

Without patent protection, innovations decline, as R&D needs immense investments. Due to high, ever-increasing R&D costs, only two in 10 approved medicines earn more than the average cost of developing a new drug. Statistics are telling: a new drug discovery cost around $138 million in 1975, $318 million in 1987 and more than $1.3 billion in 2006.

The Prime Minister, Dr Manmohan Singh, has acknowledged the critical role of innovation at the 97th Indian Science Congress held in Thiruvananthapuram recently: “Our Government has declared 2010-20 as the ‘Decade of Innovations’. We need new solutions in many areas… in healthcare, in energy, in urban infrastructure, in water management, in transportation… The country must develop an Innovation Eco-system to stimulate innovations… And innovative solutions with potential must be nurtured and rapidly applied.”

As we take a look at drug patents on Intellectual Property Day, we must not forget the important role they play in keeping India and the world healthy. With viruses that mutate constantly — HIV/AIDS, H1N1, and TB — incremental innovations are imperative to stay one step ahead in the war against disease. If all innovations are protected to expand treatment options, millions of patients in India and worldwide will benefit. At stake are not just patents, but the lives of millions.

Canada’s provincial drug plans and drug rebates – negotiating savings or creating tiered healthcare?

Canada’s health care system has come under increasing scrutiny as the debate on health reform intensifies in the U.S.  The National Post recently published an interesting article on Canada’s provincial drug plans and recent changes that have allowed some of them to negotiate prices directly with drug companies in exchange for having their products listed.  The benefits of this are the significant discounts that the Ministries of Health can reinvest in the health system and access to a greater choice of medicines for patients on provincial drug plans.  The downsides are the creation of tiered healthcare (pricing differences between public and private health plans as well as between provinces) and a lack of transparency.

Drug rebates raise questions on cost, transparency

In a controversial shake-up of Canada’s pharmaceutical marketplace, drug companies have been paying provincial drug plans millions of dollars in rebates in exchange for having their products listed.

In the past, the price of a brand-name drug was the same, regardless of who paid. If a new drug came on the market, drug plans either agreed to list it at that price, or not.

Some experts say the unprecedented deal-making is already saving the health-care system money and making a wider array of medications available to patients. Others worry about the lack of transparency and a new, two-tier drug pricing system that leaves private insurers and people without any coverage paying more than public plans for the same medication.

At least five provinces have begun negotiating with manufacturers to win price cuts for the medications they include on their benefit plans. Until about two years ago, provincial governments, private insurers and individuals from east to west all paid the same prices for brand-name prescription drugs.

In Ontario, where the whole trend began about two years ago, the head of the government drug plan says the process has enabled the province to sink hundreds of millions of dollars into covering drugs it otherwise would have had to leave off its formulary. The Ontario Public Drug Programs, which reimburse medication costs for about three million welfare recipients and senior citizens, negotiated $80-million in rebate savings over three years for one drug alone, said executive officer Helen Stevenson, without naming the product.

“We are compromising on transparency: we acknowledge that,” Ms. Stevenson said. “But if it means we’re getting tens of millions of dollars off the prices of drugs, and that money can be put directly back in the drug budget, we think this is a good step for Ontario.”

But some analysts say the process makes it difficult for organizations like the inter-provincial Common Drug Review to judge the cost-effectiveness of new products in a cash-strapped system.

“When you have individual provinces now doing secret, non-transparent pricing negotiations, it really sabotages the whole CDR initiative,” said Neil MacKinnon, a pharmacy professor at Dalhousie University. “Nobody knows what the final price is and it’s hard to keep governments accountable when you don’t know what the final price is.”

Ms. Stevenson said the secrecy around price arrangements is unavoidable, as the industry has said it would not enter into negotiations if the results were to become public.

About 45% of drug costs in Canada are covered by provincial plans, 35% by private insurers and 17% by individuals, according to the Canadian Institute for Health Information.

Tiered Pricing Enables Health for All

The issue of affordable access to vaccines in less developed countries was recently raised by Financial Times reporter Andrew Jack.  Specifically, Mr. Jacks’ article highlighted the contentious issue of differential pricing between rich, poor and middle-income countries — and how PAHO’s vaccine system is undermining efforts to provide vaccines to the least developed countries in Latin America, Africa and elsewhere around the world.  Patients and Patents further discussed this issue in a recent blog (PAHO’s vaccine system hampers African efforts).

Dr. Wayne Taylor, F.CIM of the Cameron Institute — a not-for-profit think tank based in Canada — recently commented on the FT article and offered his views on the issue:

The June 23, 2009 Financial Times article by Andrew Jack entitled: “Vaccine system hampers progress in Africa” examines an important and often misunderstood issue relating to access to medicines in the developing world. Mr. Jack is right, that the issue of differential pricing between rich, poor and middle-income countries is contentious and that “tensions will increase”. But going beyond the hyperbole reported from the various stakeholders and examining the reality of the issue one can only conclude that the “vaccine system” does not hamper progress in less developed countries in Africa or elsewhere.

Differential pricing or “tiered pricing” has been successfully used in many industries for many years based upon identifying different “classes” of buyers for which differentiated pricing would be used. For over a decade the World Bank’s Human Development Network has endorsed tiered pricing for vaccines as a means to increase economies of scale in production through greater sales thus reducing costs, prices and distribution inequities around the world. (1) Costs of vaccines are recovered through higher market pricing in rich nations, moderate bulk procurement pricing in middle income countries, and much reduced pricing in the poorest of countries.

Most important to understand is that this is not subsidization of one country by another. Each country pays what it can afford for its citizenry – either through private plans or government plans (and mostly the latter for vaccines) thus removing financial barriers to access.(2) According to the Global Alliance for Vaccines and Immunization (GAVI) this private sector mechanism benefits all humankind equally in that poorer nations can now afford brand new vaccines earlier in their life cycle putting them on par with the richest of countries – one of the few, measurable tactics that has moved the world towards the goal of health for all.(3)

The Pan American Health Organization (PAHO) wants to negotiate a single price for all its member states. Let’s compare two PAHO member states: Canada’s 2007 per capita income was $35,310 (4) thus placing it in the higher price market segment. Haiti’s 2007 per capita income was $560 placing it amongst the poorest countries of the world, a market segment that also includes many sub-Saharan African countries, which are most deserving of lowest possible GAVI prices. PAHO also includes middle income member states such as Argentina that had a 2007 per capita income of $12,990, and Brazil which is often grouped with Russia, India and China into the BRIC group of rising economic powers.

PAHO must accept their share of the responsibility in ensuring health for all in the 21st century. Many Latin American countries are “rich” today compared to most African states and some of their sister “south” American nations. Middle income PAHO states cannot hold much of Africa or their own poorer member countries like Haiti hostage for the self-interests of their more powerful, richer rapidly developing countries.

D. Wayne Taylor, PhD, F.CIM
Executive Director
The Cameron Institute
Hamilton, Ontario, Canada

(1) For a commentary on this see Amie Batson, “Win-Win Interactions between The Public and Private Sectors”, Nature Medicine, 1998;4(5S):487-91.
(2) Jens Plahte, “Tiered pricing of vaccines: a win-win-win situation, not a subsidy”, THE LANCET Infectious Diseases, 2005;5(1);58-63.
(3) GAVI is the organization that advocates for and works with nations that have a gross national income per capita of

PAHO’s vaccine system hampers African efforts

Efforts to make newer and more costly vaccines widely available to the poorest in Africa are being hampered by a long-standing system that makes vaccines affordable to middle-income Latin American countries, reports the Financial Times.

The Pan American Health Organization’s (PAHO) revolving fund, which began in 1979, negotiates substantial discounts with manufacturers on prices in richer countries, offering in exchange significant volumes, predictable demand and funding.

At issue is a clause demanding that the vaccines purchased for these middle-income countries are made available at the “lowest possible price” charged anywhere in the world, making it impossible to negotiate even lower prices to poorer countries.

Disagreement between PAHO and the Global Alliance on Vaccines and Immunisations (GAVI), has already delayed wider use of certain vaccines amongst the poorest of countries.

GAVI uses mechanisms such as advance market commitments and IFFIm’s (long-term, guaranteed aid funding from donor countries) to overcome historic limitations to development funding for immunisation.

GAVI also relies on the principle of tiered pricing to provide vaccines to the poorest of countries.  Countries are grouped using a range of indicators of ability to pay, with poorer countries paying less per vaccine.

Companies have been increasingly willing to offer discounts on western prices to poorer countries, but they want richer countries to pay more in line with income levels to help support access to the poorest as well as research for future products.

Tension emerged last year over Wyeth’s vaccine against pneumonia and meningitis, which was offered to the revolving fund at $26 a dose, less than a third of its price in richer countries.  However, the fund’s demand for the lowest possible price clashes with negotiations at $7 a dose for countries served by Gavi – with gross national income less than $1,000 a head.

Counterfeits and drug resistance: the global concern of malaria

Many health experts are concerned that the growing resistance to artemisinin drugs in western Cambodia could result in a repeat of the fate of chloroquine, which became largely ineffective. Counterfeit drugs can contain insufficient amounts of active ingredient, failing to cure the disease parasite and allowing it to mutate and resist the drug.  With half the world’s population at risk of malaria, it is important to prevent the spread of drug-resistant strains of this disease.

According to a recent article by Julian Harris from IPN, fake drugs are a leading cause of resistance.  Unfortunately, the proposal to simply supply cheaper artemisinin drugs is no silver bullet.

Too often, western health activists focus narrowly on the cost of drugs, as if this were the sole (let alone primary) barrier to treatment. But as explained by former US President Bill Clinton, the environment in which drugs are dispersed is vitally important: “You just can’t get the medicine, ship it into a country, and drop it from the sky. If it is going to save people’s lives, the medicine must be accompanied by instructions, monitoring, by follow-up, and changing the medicine if necessary.”

He could have added that poor storage and the degradation of drugs in transit have been shown to be major causes of substandard drugs – a problem exacerbated by pharmaceuticals being held up in tropical ports due to excessive red tape and tariffs.

Lower prices would be good, but only good drugs can save the world from a resistant strand of malaria that would claim millions more lives.

Innovation in Drug Access

A recent article in Global Health Magazine (Big pharma bets on emerging economies) focuses on the increasing use of tiered pricing by pharmaceutical companies to remain competitive in the global economy. 

“Such nuanced approaches to drug pricing that more closely reflect the ability to pay represent an attractive new trade-off for pharmaceutical companies: they provide greater sales to please their shareholders, while improving access to medicines for patients on lower incomes in the developing world.”

Interestingly, the article also notes that while some generic companies and NGOs continue to fight against patents, arguing that competition is the only way to bring down drugs to affordable levels, a report from the United Nations (released just ahead of a special session on the Millennium Development Goals in September) highlighted that one of the biggest gaps in access to medicines did not relate to patented medicines at all, but rather generic drugs with often very high prices.

The following is the beginning of the article.  The full text is available on the Global Health Magazine site.

On the shelves of pharmacies across India, a new form of competition is taking hold. Patients long neglected by multinational drug groups are beginning to gain access to a wider variety of innovative medicines at more affordable prices.

In the past, even when newer drugs were physically available, they were typically charged at Western prices, too costly for most to buy. Now Merck is offering its diabetes drug Januvia at a fifth of the U.S. price, and GlaxoSmithKline (GSK) is charging different prices even within India to reach more of the population.

Such nuanced approaches to drug pricing that more closely reflect the ability to pay represent an attractive new trade-off for pharmaceutical companies: they provide greater sales to please their shareholders, while improving access to medicines for patients on lower incomes in the developing world.

“The pharma industry has realized that the vanilla solutions that were effective in the past now require significant differentiation,” says Todd Evans, director of the health-care advisory group at PricewaterhouseCoopers, the accountancy and advisory firm. “Pricing is going to be highly varied.”