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“Own Goals”: the price is higher than you might think

Posted on December 28th, 2016 by in Pharma R&D

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As a professional, giving points away, or being involved in an “own goal,” must be quite an emotional roller coaster. However, in professional sports, the individual needs to get on with the game, put the error behind them, and move on to deal with the immediate situation. Later, after the game, there will be time to reflect and consider what might have been different, or new things to learn.

The capacity to score against yourself and the team is not just a feature of professional and amateur sports. It can also happen in business, and the industry has scored some “own goals” regarding pricing of medicines in 2016. Over the last week or so in the UK, there has been considerable negative debate regarding the change in price of phenytoin, an epilepsy medicine. The companies involved were fined £90M, accused of ripping off the NHS, and were directed to find a suitable price, despite the claim of the product being loss making (1). Other price hikes have been noted in the industry and have led to the US President-elect suggesting he will keep medicine prices low (2).

Perhaps these responses are not surprising. The pricing of medicines is a complex business involving a range variables, including the cost of development, the cost of failure of other products, the cost saving to the provider and payer of having taken the medicine, and a range of others. The regulators increasingly have a focus on whether the medicine works in the real world and adds financial value. Not surprisingly, the negotiations determining the pricing of new medicines involve several competing priorities.

Allergan have taken an approach to manage societal expectations regarding price rises (3) and Novo-Nordisk are committed to try and simplify the highly complex system that impacts the consumer (4). These approaches, I hope, will be well received.

However, perhaps we need to do more to manage expectations for the future. R&D has had a significant focus on rare diseases, perhaps for a variety of justifications, including target identification and validation, patient stratification, and outcomes assessment. Historically, medications that are safe and effective have commanded high prices. With more agents moving towards development and registration, will the high pricing strategy be affordable and sustainable for the industry and society?

New medicines, such as gene therapies, have the potential to “cure” disease — how will these agents be priced?  It is difficult to envisage a single price per pill or treatment that will satisfy all stakeholders. New approaches will be needed. Perhaps a more holistic approach of payment “to be well or maintain function” is a different way of looking at the problem. Payment for the continued function of an individual following treatment is one way to assess the value of a medicine. This will create some different perspectives and dilemmas. New medicines have the capability to increase survival and reduce immediate morbidity, but once an individual is treated for the primary disease or condition, it is possible to imagine that other aspects of the disease or treatment may become apparent.

Recent advances in cancer therapies have been highly successful and people have much better survival prospects across a range of conditions. As more people find themselves surviving the initial medical crisis, other issues regarding their psychological and emotional wellbeing often become apparent. Living through these life changing events can impact people in creating new expectations in their lives — there may be late side effects of treatment and changes in relationships in the family and professionally. Surviving one medical crisis also means we continue to live and therefore have the potential to develop other pathologies or diseases. Follow-up medical care is very important in supporting the patient and maintaining their health and wellbeing.

We may need to consider a range of consequences that will arise following treatment, and I am sure this will impact the value and price of the agent.

However, managing expectations and behaviors of those in the industry regarding the price and value of assets across all stages of R&D will be important. If individual members of the industry continue to score “own goals,” these difficult discussions about how the industry will develop will just become even more complicated.

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All opinions shared in this post are the author’s own.

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