Science and technology

New approach needed to tackle rising drug prices

 

16/01/2017 - The proliferation of high-cost medicines and rising drug prices are increasing pressures on public health spending and calling into question the pharmaceutical industry’s pricing strategies. Governments need to work with the industry and regulators to define a new approach to the development and use of new health technologies that encourages innovation while also delivering more affordable and value for money treatments, according to a new OECD report.

 

New Health Technologies: Managing Access, Value and Sustainability says that pharmaceutical spending is increasingly skewed towards high-cost products. The launch prices of drugs for cancer and rare diseases are rising, sometimes without a commensurate increase in health benefits for patients. For instance in the United States, the launch price of oncology drugs per life-year gained has been multiplied by four in less than 20 years - in constant terms - and now exceeds USD 200 000.

 

Payers, such as insurers or public health providers, are also increasingly struggling to pay for high-cost medicines targeting very small populations, which are expected to proliferate with the development of precision medicine. On the other side of spectrum, new treatments for hepatitis which are very effective and cost-effective in the long-term but target a wide population, are unaffordable to many who would benefit in almost all OECD countries because of their high budget impact.

 

The prices paid for technologies must reflect their real-world health benefits compared to alternatives, and be adjusted based on evidence about their actual impact. Payers must be equipped with the necessary powers to adjust prices and withdraw payment for ineffective technologies.

A rebalancing of the negotiating powers of payers and manufacturers is needed, says the report. This could be through increased transparency and co-operation between payers and international joint procurement initiatives, as tested in Europe and Latin America. Pricing agreements, which link the final price paid to the actual performance of the drug, as used in Italy and England, may also be effective if management and administration costs are controlled and the clinical data and evidence collected made widely available to the scientific community.

 

The report, which will be discussed at an OECD meeting for Ministers of Health on “The Next Generation of Health Reforms” in Paris on 17 January, highlights other challenges facing the adoption of new technologies. Investment in R&D to treat neglected diseases, such as HIV/AIDS or tuberculosis, fight antimicrobial resistance and address dementia has also become less attractive as their profitability is lower. The incentives for private investment in these areas should be strengthened.

 

Many biomedical technologies are today approved and adopted based on limited evidence of their safety and effectiveness. Assessment of their performance in real world conditions is rare. This compromises safety, is wasteful and no longer sustainable.

 

More efforts are also needed to harness the potential of health data more effectively. Use of personal health data creates major opportunities for health system improvement, research and disease surveillance, but requires the right governance frameworks to realise these benefits while managing the privacy risks.

 

For further information or comment, journalists should contact Valerie Paris, Senior Policy Analyst at the OECD’s Health Division and main author of the report (tel. + 33 1 45 24 80 29).

 

For a copy of the report, please contact the OECD’s Media Division (+33 1 45 24 97 00).

 

Working with over 100 countries, the OECD is a global policy forum that promotes policies to improve the economic and social well-being of people around the world.

 

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