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EU financial crisis continues to hit drug pricing

World News | August 22, 2012


Selina McKee

EU financial crisis continues to hit drug pricing

Drug pricing in Europe is continuing to shift in direct response to the region's financial crisis, a new report by market intelligence provider GlobalData has found. 

Many governments are turning to slashing costs in their healthcare systems as a means of helping them deal with the ongoing sovereign debt crisis, according to the report Global Healthcare Policy Analysis 2012 – Regulatory, Pricing, and Reimbursement Assessment.

“The largest issue facing the pharmaceutical industry in the European Union (EU) is renewed pricing pressure from all directions," warned GlobalData’s senior analyst for healthcare industry dynamics, Michael Leibfried.

Indeed, earlier this year, in a letter to the continent's leaders, the European Federation of Pharmaceutical Industries and Associations (EFPIA) stressed that in just five financially troubled countries - Greece, Ireland, Italy, Portugal and Spain - the pharmaceutical industry has contributed, through price-cuts and discounts, more than 7 billion euros for the years 2010 and 2011, more than 8% of the sector’s turnover in those markets on a yearly basis.

According to GlobalData's report, pharmacies in cash-strapped Greece have been dropping drug prices so that the country's citizens can afford their medications, but this action has had the side-effect of creating a "lucrative export carry trade, and shrinking prices in other countries due to reference pricing".

It also points out that the UK and its drugs cost watchdog the National Institute for Health and Clinical Excellence have been turning the heat on companies to decrease their drug prices for many years, and that a new pricing order in Europe's biggest player Germany "is creating new headaches". 

Germany's AMNOG under fire

Germany has chosen to address the rise in healthcare costs by upping the mandatory health insurance charge - via a tax hike on everyone in employment - to help pay for public healthcare.

However, the Law for Reforming the Market for Pharmaceuticals (AMNOG) has also paved the way for price controls into the German market, as pricing of new branded medicines is judged by the Federal Joint Committee (G-BA) on evidence of clinical benefit and set against that of a comparator drug.

According to GlobalData, this policy "has been favorably looked upon by many neighboring countries as a solution to control rising healthcare costs".

However, the EFPIA recently urged the German government to "protect patient access to new medicines and ensure that Germany remains a home for pharmaceutical innovation" on fears over the real effects of AMNOG.

"It is absolutely appropriate that Germany manages its healthcare budget carefully and assesses medicines to ensure that they are priced at a level that reflects the value they deliver," said Richard Bergström, Director General of EFPIA, but he stressed that "early experience with AMNOG is very disappointing".

EFPIA member companies have found that the choice of comparator often differs from that chosen for the development programme, and this is being used to force German pricing for new medicines towards generic prices, which "will undermine incentives to life-changing medical discovery".  

It is feared that AMNOG may end up strangling innovation, as a reduction in profits in the country and subsequently elsewhere will see a reduction in spend on research and development. "Europe is in a crisis. Growth will only come from sectors that innovate," warned Birgit Fischer, Director General of vfa, Germany's pharmaceutical association.

Value-based pricing imminent in UK

Drug pricing in the UK - also considered an important reference point for other countries in the world - is also facing a somewhat uncertain future as the government and Association of the British Pharmaceutical Industry gear up to hammer out a new regime for 2014 next month, which will include value-based pricing for all new medicines entering the market. 

There, fears over the effect of such a system on innovation have also been expressed.

ABPI chief executive Stephen Whitehead recently said the industry remains to be convinced that value-based pricing will encourage innovation or reward the most effective medicines, and voiced concern that it could "stifle innovation because it will struggle to accurately reflect the inherent gradual and incremental nature of innovation". 


www.globaldata.com

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