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Regulators enter drug pricing debate

Posted on over 1 year ago by Gerry Kennedy

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By Anjali Shukla

The Chinese authorities have come down strongly on the issue of drug costs, slashing the prices of some expensive medicines by up to two-thirds.  

The Chinese regulators have cut the cost of GlaxoSmithKline's (LSE: GSK) hepatitis B drug Viread would fall to 490 yuan ($75) a month from 1,500 yuan, and AstraZeneca's (LSE: AZN) lung cancer medicine Iressa to 7,000 yuan from 15,000 yuan.

Even though drug regulators don’t play a role in pricing, lately they’ve been drawn into an acrimonious debate over the cost of medicines. However, the action by the authorities in China is a clear indication the policymakers are willing to step into the territory and take on the issue head-on.

Pricing Mystery

The regulators may be partly held responsible for the drug pricing according to a latest report by the European Medicines Agency (EMA). The rigorous standards for the generation and analysis of clinical trial data and for acceptable trial end points and study designs have undoubtedly made pharmaceutical R&D expensive, the EMA said. This in turn has helped drive up pricing.

If we eliminated regulation, the current biopharmaceutical business model would collapse — and so would science-based drug development. Without a requirement for regulatory approval, companies would have no incentive to conduct expensive clinical trials of their products, EMA says.

Policymakers in the European Union use complex tools to assess the amount they would assign to the pharmaceutical industry for its products. The regulators also have set guidelines to prioritise the clearing of drugs for patients.

However, the industry has maintained regulatory requirements aren’t the only factor that constitutes pricing for a product. In addition to costs related to regulation, the end price of the product also reflects clinical trial outlay as well as cost of setting aside funds for the long duration of development and the research challenges faced on the way to drug discovery.

Further, the overall drug development process is a complicated one and makes it hard to provide a clear break down on the pricing for any treatment.

The pharma industry has been either evasive or largely vague when it comes to outlining the components that contribute to assigning a price to the product. The players have often called it a complex process where it was difficult to enlist the mechanism used to arrive at a certain price point. Lately, this ambiguity is being fiercely questioned with lawmakers and regulators called to action.      

What steps could regulators take?

Maintaining that a stringent and complex regulatory process is a must to maintain the quality thresholds, the EMA has offered ideas to tackle the issue. 

The regulator has guided for rapid approval of generics and biosimilars and allowing them to enter the market once patents or exclusivity periods have expired. This way the regulators can facilitate competition, which in turn would help drive down prices. The EMA said the policymakers could look at fast-tracking additional generic authorizations in cases where companies are taking advantage of monopoly conditions for generic drugs. 

Further, the regulator suggested a system to ensure that competitive products make it to the markets regularly and at a reasonable speed. The availability of these products can at times put pressure on prices nearly as much as the generics. 

Another way of implementing price checks, the EMA says, can be by way of encouraging clinical trials that measure value. Payers need data that enable them to assess value in order to determine how much they should pay for a given drug. Health technology assessment (HTA) bodies that advise payers say that the clinical trials supporting marketing authorization often fall short in providing such data. The additional information required may relate to measures of quality of life or health care resource utilization. These studies can be designed in line with needs for regulatory approvals and would also help showcase value to payers. 

With calls for pay for performance gaining ground, the EMA suggested facilitating collection of other kinds of data significant to the patients. The key players have been mulling an outcome based approach to assign price to a product. However, it may be a difficult task to implement despite the seamless theory. Effective data collection is crucial to the implementation of this approach and the regulators could pitch in by facilitating data gathering from the patient perspective when seeking post approval studies from the pharma industry. 

Road Ahead 

While the regulators can offer certain plans to help check the pricing of pharma products, they cannot take on the issue by themselves. In order to achieve sustainable long-term results, the regulators, patient groups and the pharma industry will need to engage in a collective dialogue, share perspective and redraw policy. Most importantly, the regulators will need to remain invested in the task of assessing quality, safety, and efficacy of the products separately from pricing and reimbursement decisions.

It is unlikely the debate will die down any time soon and neither are there any hopes of a resolution to the problem on the horizon yet. However, with the pharma industry and the regulators trying to devise measures to aid mutually agreed pricing via different approaches this may just be the start of a long road to reconciliation. 

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