Brussels-Breakfast-Debate, Wednesday, 16 March 2016 from 8:00 to 9:30 hrs

“Transparent prices versus confidential agreements:

What’s best for patient access and sustainable healthcare?”

Introduction: Paul RÜBIG MEP, EVP/Austria, Member of the Committees on Industry, Research and Energy and Budgets

Presentation: Dermot GLYNN, Europe Economics, Author of the Study « External Reference Pricing – the case for transparency in pricing »

Panelists:

• Andrzej Jan RYS, Director, Health Systems, Medical Products and Innovation, DG SANTE

• David SAUNDERS, former Chief Executive of UK Competition Commission

• Erik MEINHARDT, Market Access Lead for Europe and Canada, MSD Menno AARNOUT, Executive Director, International Association of Mutual Benefits Societies (AIM)

Conclusion: Nicola BEDLINGTON, Secretary General of the European Patients' Forum (EPF)

Report of this event by Karl von Wogau:

"Pharmaceuticals is one of the major leftovers of the internal market. Some progress was made, as for example by the creation of the Medicines Agency, but we are still far away from a European Home Market for Pharmaceuticals. One of the main reasons for this are the different rules for pricing in the Member States.

Our breakfast debate about pharmaceutical pricing was introduced by Karl von Wogau and Paul Rübig. Dermot Glynn presented his Study about reference pricing and the case for transparency in pricing. As usual in Kangaroo meetings, the panel reflected the different points of view of the different stakeholders. It consisted of Andrzeij Jan Rys from the European Commission, David Saunders, former Chief Executive of the UK competition Commission, Erik Meinhardt from MSD, Menno Aarnaut from the International Association of Mutual Benefits Societies and Nicola Bedlington from the European Patients Forum.

The case was made for transparency in pricing, but also for the possibility of confidential agreements in the case of innovative drugs which are under patent protection."

Summary

With the completion of the Single Market being one of its key goals, inequalities in access to innovative medicines are of concern to the Kangaroo Group. The Dutch EU Council Presidency has called for greater transparency in how prices are set in its “Summary of Medicines Plan”. Health minister Edith Schippers furthermore argued that it was unfair that pharmaceutical companies knew the prices of their drugs in 28 EU Member States, but that health ministers could not exchange such information. The European Commission has recently published a study “Enhanced cross-country collaboration in the area of pharmaceutical product pricing” and is also in the process of developing, together with Member States, the EURIPID pricing database to help exchange information in the context of the Transparency Directive.

The Kangaroo Group therefore looked more closely into this issue during a panel discussion on “Transparent prices versus confidential agreements: What’s best for patient access and sustainable healthcare?” in the European Parliament on 16 March 2016, under the Chatham House Rule. Representatives of the European Commission, the European Parliament, public sick funds, patients, industry and a former member of a competition authority attended the debate, which was kicked off by economist Dermot Glynn from Europe Economics (see Agenda). Glynn presented his paper “The case for transparency in pricing”, which was funded by the pharmaceutical company, MSD, and which has recently been published in the UK Competition Law Journal.¹

Some participants argued in favour of having transparency of prices to improve patient access to medicines. Some also argued against value-based pricing, pointing out that a traffic light did not increase in price based on the number of accidents prevented. They argued that R&D costs should instead be taken into account to establish a “fair and healthy price”. Others referred to examples where confidential agreements improved patients’ access to innovative drugs. One participant criticised the cap on reimbursement established in the UK by the National Institute for Health and Care Excellence (NICE) based on quality-adjusted life year (QALY). This participant argued that value should be established compared to price of the drugs already available.

Glynn agreed that the current system was not efficient because it did not promote patient access. Companies would not be able to provide drugs at lower prices in certain countries as these are then referenced through External Reference Pricing (ERP), thus undermining the prices in other Member States. Glynn went on to explain that with transparency of prices, these prices would converge to a level that was unaffordable for lower income countries and therefore impede patient access.

In his view, a common Health Technology Assessment, assessing the clinical effectiveness, would increase efficiency by improving timely access and reducing costs. However, as noted by one of the panel participants, such an efficiency gain could only be achieved as long as any assessment at the Member State level would recognise the clinical effectiveness assessment made at the Pan-European level and not re-assess the elements on which the marketing authorisation is based. But, assessments of the economic value (including cost-effectiveness) should be done at national level.

Based on such a clinical effectiveness assessment, companies and payers should – according to Glynn – be able to negotiate in confidence based on the value of the drug to the health system in question. This would allow companies to offer a differentiated price without impacting prices elsewhere and also allow payers to decide how much they are willing to pay, hence improving both access and sustainability of the respective health system.

Differentiated prices are in place in other markets, such as railways (e.g. lower rail fares for pensioners, students, etc., lower track charges for freight as opposed to passenger trains) as well as theatre and flight tickets. Glynn clarified that for a differentiated pricing system to work it was not necessary to first establish a “European price” and to subsequently peg this price to different GDP levels. Instead, it could be left to companies and payers to come to a mutually beneficial agreement.

In response to some contributions, which reiterated Schipper’s perceived asymmetry of information in such confidential agreements, one participant suggested using an independent auditor who would monitor how much different countries paid for a drug.

As one panel member pointed out, there was not a clear answer whether transparency was good or bad. Rather it would depend on the respective situation. In some cases as e.g. in the UK cement industry, transparency has led to tacit collusion which in the end increased prices. On other cases, transparency created greater competition among suppliers and increased consumer surplus.

Glynn agreed that the answer to the question whether transparency in prices was good or bad, would depend on the context: In many markets there were numerous competing suppliers, and price transparency helped consumers to choose the best option. Competitive forces were reinforced to the general benefit. However, where large differences in income and affordability levels existed it would be difficult to serve low-income markets at lower prices because of External Reference Pricing. The best option in that case was confidential agreements, so as to prevent or at least limit the scope for price comparisons and facilitate affordable supply to those in greatest needs.

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