On September 28, 2020, the World Health Organization (WHO) published a new edition of its Guideline on country pharmaceutical pricing policies, which discusses different types of country pricing policies after a systematic review of the evidence on their desirable and undesirable effects. The Guideline provides a useful reminder of the dual purpose of pricing policies (enabling greater patient access, whilst allowing companies to continue to operate and innovate).
In recent years, WHO has become increasingly involved in the debate on what is — or what should be — a “fair” price for vaccines, pharmaceuticals, and diagnostics. The debate has only gained momentum during the COVID-19 pandemic. At a time when companies rush to develop vaccines, therapeutics, and diagnostics for SARS-CoV-2, calls for a “people’s vaccine” against COVID-19 have become louder, fueled by concerns over the fair and equitable access to lifesaving health products. Yet what is a “fair” price? Not only for COVID-19-related products but for vaccines, treatments, and tests more broadly? WHO guidelines are not binding but can be used as a blueprint for domestic regulation.
The Guideline notes that high prices “have impaired the ability of many health-care systems to provide population-wide access.” Conversely, “low prices could result in profit margins deemed insufficient for meeting commercial participants’ expectations for maintaining the scale and scope of business operation. This could potentially cause unavailability, supply interruptions or shortages of certain medicines, disrupt health service operations and lead to negative patient health outcomes.”
The Guideline discusses 10 pricing policies:
- external reference pricing
- internal reference pricing
- value-based pricing
- regulation of markups across the pharmaceutical supply and distribution chain
- price transparency
- tenders and negotiations
- use of quality assured generic and biosimilar medicines
- pooled procurement
- cost-plus pricing
- tax exemptions/reductions
Notably, the Guideline makes a “conditional recommendation” against cost-plus pricing based on several factors identified in the Guideline and Annexes. First, there is a lack of agreement regarding the inputs for price determination. Second, as noted in Annex A, there is a “lack of robust quantitative and comparative evidence assessing the impact of cost-plus pricing.” It remains uncertain what the “impact of cost-plus pricing on prices, volumes, availability and affordability of medicines” would be. Among the disadvantages, Annex A mentions that cost-plus pricing might reduce the incentive for manufacturers “to invest in R&D, as only investments in a small proportion of pharmaceuticals actually reaching the market would be recovered, whereas costs of failed R&D efforts would not be compensated.” The reviewers conclude that “[r]esearch is required to substantiate the use of this pricing policy using robust study designs, particularly since this method may be increasingly used for innovative therapies and orphan medicines.” WHO conditionally recommends the use of the other pricing policies identified above, and particularly recommends the use of generics and biosimilars
The Guideline and the detailed Annexes provide an overview of current pricing policy considerations for governments, policymakers, and other stakeholders.
It is to be hoped that the follow-on research the Guideline recommends will take into account how companies prepare decisions on whether to develop new drugs (e.g., the use of models that take into account the risks to be undertaken, such as risk-adjusted net present value models).
In the coming years, WHO will intensify its work on the pricing of pharmaceutical products, including through discussion and information sharing at its Fair Pricing Fora. Two fora have already taken place — one in 2016 in the Netherlands, the second in 2019 in South Africa. The next Fair Pricing Forum is scheduled for 2021, where Fair Pricing Working Groups will report on different topics, including on pricing approaches, and on incentives for research and development for pharmaceuticals (link).
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