Your money or your life: a critical note

By Prof. Dr Walter Van Dyck, Director, Vlerick Healthcare Management Centre

This week, Doctors of the World launched ‘Your money or your life’, a campaign protesting against the high prices of medicines. Naturally, one can sympathise with this. In this era of healthcare budget constraints, moreover, there is worldwide outrage at this problem. Doctors are quite rightly concerned about the question of whether all their patients will continue to have access to lifesaving medicines at affordable prices.

And yet, I declined to sign the flyer when asked to do so. Although I agree with the fundamental problem of access, I nevertheless cannot agree with the two proposed solutions, namely to scrap the patent system and to demand transparency regarding the costs incurred by the biopharmaceutical industry for the new medicines that they want to bring onto the market. These are solutions that were also put forward in a UN report on this question last week.

However, to me it seems rather naïve to believe that prices will fall as a result of this, let alone be decimated. Indeed, patents are the vital element that makes the crucial collaboration between universities and industry possible. Without patents, there would be no open innovation, as there would be no trust between the parties. And it is precisely this that is so essential in an ever more complex world of personalised biopharmaceutical development. Collaboration is needed as early on in the process as during the first R&D stages in order to identify any disruptive therapies and the biomarkers upon which they are based.

On the other hand, the demand for cost transparency rewards ineffective R&D. Indeed, the ‘out-of-pocket’ cost of an inefficient, lengthy development process and a high failure cost in the industrial research into innovative medicines will justifiably be reflected in the price.

The only solution to this issue lies in a conditional dialogue between the community and the innovative biopharmaceutical industry. In addition, in less risky subdomains you can introduce future scenarios such as the decoupling of biopharmaceutical industrial research and price setting. Additionally, by means of increased price pressure on generic medicines – which are still far too expensive in Belgium – you can generate the necessary funds for genuine medical innovation, i.e. therapies that offer added value in areas that cause the most suffering, and for which no sufficiently effective medicine has yet been discovered.

 

In this dialogue, the balance in negotiation strength must be tilted further towards society than towards the global pharmaceutical industry. By means of a publically funded horizon scan, society must specify the pathologies for which it wishes to stimulate industry to develop promising medicines; and must even point out to them development pathways that have a greater chance of success and allow patients accelerated access. This must happen on an international scale, as illustrated by the collaboration that is currently being set up between the Benelux and Austria. In this way, you can achieve economies of scale that also exert a downward pressure on prices.

In order to gain access to the market, a public payer cannot be strict enough about the clinical added value of the candidate medicines with regard to the current market standard. You also need to state explicitly the maximum amount that you are prepared to pay for each level of innovation. The more ‘me too’ a product is, the more classic price competition should come into play. Perhaps even more importantly, strictness towards non-differentiation in the evaluation has an interesting side effect. It stimulates the industry to exchange well-trodden, price sensitive research pathways for research in more future-focused, socially valuable ‘targets’, which although more risky, will potentially deliver higher returns. As more R&D competition leads to the lowering of the risk, it has been demonstrated that this encourages institutional investors such as pension funds to lower their requisite risk premium for financing. This financial opportunity cost comprises around half of the current total estimated 2.6 million dollars required to develop a medicine, in addition to the aforementioned costs. So, encouraging the capital market in this risky sector to adopt long-term thinking is perhaps the best guarantee of accessible medicines and sustainable innovation, rather than this well-meaning appeal to people’s emotions.

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