India has taken steps to improve access to medicines to its population, be it putting together a pricing policy that brings a larger list of essential medicines under price control or utilising the flexibilities in TRIPs to its advantage by revoking patents or issuing compulsory licences for drugs that are not available to the public at ‘reasonable’ prices: moves which have invited criticism and analysis from its peers worldwide. We shall take a look at pricing policies and intellectual property rights (IPRs)- two highly visible barriers to access and reflect on others beyond these two.
As per the Global Use of Medicines Report released by IMS Institute last year, the global spending on medicines will grow from ~$856 billion in 2010 to ~$1095 billion in 2015. While the share of US and European countries will decline, the share of 17 emerging markets including India and China is all set to increase (second to the US) in 2015. Generics will contribute upto ~40 per cent of the spending, almost double from that in 2005. While the data above points out to governments spending more on procuring medicines, with generics forming almost half of it, accessibility and affordability is important too. WHO’s World Medicine Report 2011 enumerates medicine availability and prices in both public and private sectors as key indicators of access to treatment. As per the report, private sector scored higher vis-a-vis public sector on the availability of generic medicines in all regions. In countries where patients pay for medicines in the public sector, generic medicines were found to be priced 1.9 to 3.5 times higher than international reference prices (IRPs) in the Eastern Mediterranean and Western Pacific Regions, respectively. Originator brand medicines were 5.3 times to 20 times IRPs. The situation gets worse when patients purchase medicines from the private sector with lowest priced generics 2.6 (South-east Asia) to 9.5 (in US) times IRPs. Prices of originator brand products take the cake with private sector prices at least 10 times higher than IRPs in all WHO regions. Patients pay four times more on an average when originator brands are prescribed and dispensed for products that are also available in generic form.
Price control: Government or pharma companies?
Neeraj Vashisht Sr. Principal Consulting, IMS Health |
The role of policy regulations in controlling price cannot be discounted. It is pertinent to note that governments worldwide have set regulations in place to bring prices under control, be it the Affordable Care Act (ACA) of US, price cuts in Japan, reduction in off patent and generic drugs in Spain and Italy, cost-benefit evaluation of new medicines in Germany or price cuts in the wake of Universal Health Coverage (UHC) in China. India’s National Pharmaceutical Pricing Authority (NPPA) came up with a pharmaceutical pricing policy last year, expanding the ambit of essential medicines from the earlier 74 to 348, in a move that was met with both criticism and relief. After seven years of deliberation, the government decided to go with market-based pricing of drugs, a move that was unwelcome to civil society groups who demanded a cost-based approach. While the effects of the policy are still to trickle down, Neeraj Vashisht, Senior Principal, Consulting, IMS Health is not so gung ho about its impact. “The answer to whether pricing regulations improve access to medicines is mixed. It really depends on which section of the Indian population is being examined. The reason: medicines are the last frontier in healthcare delivery,” he emphasises. He is of the opinion that while the proposed pharma policy may reduce prices for certain sections of the population, it may not have a significant impact on those at the low end of the socio-economic strata. They have to overcome several other barriers such as availability of doctors, quality of care etc. which become increasingly significant as one moves beyond urban areas, as revealed by a survey conducted by IMS.
Jaideep Singh Panwar Manager – Research Products, Sustainalytics |
Even as governments worldwide, tighten the noose on price regulations, pharma companies often come in the line of fire for their exorbitant pricing and rising profit margins, to which they have found a solution: tiered pricing. While some have it for institutions (hospitals and/or government supplies), others target trade/pharmacies. MNCs with speciality care portfolios (e.g. costly patented medicines in areas like cancer) also have patient access programmes, offering drugs at discounted prices. However, it is not clear as to how many of Big Pharma have such programmes in place in developing countries, even if they do, there’s not much clarity on the methodology. Jaideep Singh Panwar, Manager, Research Products, Sustainalytics, a research firm based in Amsterdam, gives a perspective. “So far, access to medicines programmes of companies have often been add-ons and not necessarily integral to company strategy. While MNCs will continue to hold their prices where they can, they will be challenged to simultaneously stay ahead of the curve of regulatory action. MNC pharma has struggled to move out of entrenched high prices – low volumes business model. The companies which shed that mould are likely to meet with greater mass-market success in developing markets that demonstrate the willingness to impose price restrictions.” However, there are exceptions in companies such as GlaxoSmithkline, which has a more integrated and synchronised access to medicine strategy, demonstrating a relatively higher state of readiness for operating environments in which pricing is increasingly a critical factor.
To patent or not to patent
The past one year has seen India take bold moves, utilising the provisions in TRIPS for the larger benefit of its population, which has ruffled feathers of MNC pharma companies operating in the country. The latest ruling against Novartis could be aptly termed a shot in the arm, however that doesn’t relegate those espousing the demerits of patent protection, even as voices negating evergreening reach a crescendo. It helps to understand the reason. “Patent protection is required if newer drugs have to be discovered and made available to the public. The key to improving access to medicines is to make sure that these are made accessible to the public through insurance cover or a reimbursement mechanism. Many developing countries cover the cost for such expensive products – especially in areas like cancer and HIV. Unless a payer steps in to fund these drugs, access will always be a challenge in a country like India,” chips in Vashisht.
The degree of reimbursement could vary depending on nature of the disease, treatment costs and the economic status of the patient. This requires strengthening of the overall healthcare system with appropriate funding while also ensuring strong governance and monitoring mechanisms for proper functioning. On the other hand, one can’t help but notice the work on Medicines Patent Pool (MPP), created in 2010 in order to increase access to affordable and quality HIV drugs to the world’s population by enabling voluntary licensing of HIV medicines. A new report released by WTO, WIPO and WHO released earlier this year commends MPP’s work saying that patents can be used “expressly to leverage public health outcomes” when licensed with the right terms and conditions. Patent pools were a key recommendation of an expert working group at WHO on incentivising research and development (R&D) for the developing world. MPP was endorsed in a 2011 UN Political Declaration on HIV/AIDS to help reduce the price of medicines and encourage the development of needed new formulations. It is also encouraging to note that as a part of the Access to Medicine Index 2012, prepared by the Access to Medicine Foundation based in Netherlands, 16 companies are engaged in patent pooling for R&D through partnerships for product development to share data for R&D purposes (although agreements about patents vary by partnership).
As we discuss further, one thing is clear, there are more than two barriers to access. The focus needs to be broadened to include factors such as poverty, taxes and tariffs, corruption and pharma counterfeiting. Each of these elements inhibits access to medicines, through financial challenges, higher prices, shortages, and spurious products. Improving procurement and monitoring systems could be a major step while widening the ambit of factors even as we look for solutions to these problems.
“Access to medicines is the responsibility of multiple stakeholders in the healthcare system and not just the pharma companies, law makers and regulatory authorities, health ministry officials, medical practitioners, providers, insurance companies (payers) and NGOs will all have to play a role together. Pharma companies can make drugs available and affordable, but unless the entire healthcare system is overhauled and strengthened, access will always be a challenge,” sums up Vashisht. One thing is clear, access will remain an illusion as long as we work in silos.
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Jayasree Iyer, Head of Research Access to Medicine Foundation What are the key indicators that signal greater access to medicines by pharma companies?
The methodology framework of the 2012 Access to Medicine Index captures seven areas: general access to medicine management, public policy and market influence, research and development, pricing, manufacturing and distribution, patents and licensing, capability advancement and donations and philanthropic activities. All the indicators that fall under these areas are relevant for access, and the weights of the groups of indicators are determined through stakeholder input. Research and development (20 per cent) and pricing, manufacturing and distribution (25 per cent) weighted more even as the weight of the performance set of indicators was increased to 40 per cent of the total score. What have been the findings? 17 out of 20 companies have risen in their scores, based on the entire overall number of indicators. Out of the 66 indicators, their combined average score increased in 52 of them since 2010. Not only are they developing more products for more diseases that particularly affect the world’s poor, and collaborating more in the process, but also setting targets and paying attention to codes of conduct while also rewarding access-oriented behaviour in employees. Access to medicines in developing countries has increased in priority in many companies. How many companies have a more managed approach to access? What is driving it? Access is an important part of the business strategy with more than 60 per cent of companies having direct board-level ownership for access with better organisation of policies and procedures that lead to better performance its monitoring. Not only do they realise that access to emerging and new markets is important for their sustainability, they also feel more social responsibility to ensure medicines for a growing global population. 17 companies have tiered pricing initiatives for developing countries, including India. The impact of tiered pricing on making drugs affordable is not clear. Your comments. One of the main goals of the Index is to encourage transparency, which presents a particular challenge in the area of pricing. We aim to encourage suppliers (in this case pharma companies) to disclose their prices and strategies for reaching target populations through price setting. However, other parties (procurers, governments, manufacturers, policy makers) in developing country supply chains affect pricing through indirect costs and hence they need to engage in dialogue with pharma companies to increase transparency and to ensure affordable pricing. What remain some of the areas of improvement? One for affordable pricing, that I mentioned above, the other is to ensure that the quality of medicines available is not compromised, by aligning pharmacovigilance programmes from companies and developing countries. Moreover the creation and sharing of data is important for a healthy pipeline to address unmet medical needs as well as strengthening of supply chain capabilities to ensure adequate supply of medicines. |