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EFPIAresponsetoDraftOpiniononInnovativepaymentmodelsforhigh-costinnovativemedicinesAuthor:EFPIA Date:07/12/2017

EFPIAresponse

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1. ExecutivesummaryThe mission of the Expert Panel on Effective Ways of Investing in Health (EXPH) is to elaborateevidence-based opinions on matters related to healthcare modernisation, responsiveness andsustainability at the request of the European Commission. InOctober 2017, the EXPH produced adraftOpiniononInnovativePaymentmodelsforhigh-costinnovativemedicines.The industry wishes to constructively engage with all stakeholders on the debate regardinginnovativepaymentmethodsbuthasanumberofseriousconcernsregardingthedraftopinionanditscontributiontoadialogueonthisissue.Thisdraftopinionisbasedonapartialandattimesoutofdate review of evidence and contains numerous statements that are contradictory andunsubstantiated.Thisisamissedopportunityintermsofprovidinganunbiasedassessmentofthefactsaswellasofthepolicyopportunitiesandchallengesrelatedtotheelaborationofnewpaymentmodels. Insteadof taking a holistic and dynamic view, the draft opinion narrowly focuses on prices andpharmaceutical spending while ignoring the broader context that is critical to understandingsustainability. Bymischaracterising data such as the trends in pricing and aggregate spending, thedraftopinionisnotofasufficientlyhighstandard.TheExpertPanelhasfocuseditsanalysisonissuesbeyond innovative paymentmodels by looking into intellectual property and the licensing regime,ratherthanlookingindetailatissuesassociatedwithanoutcome-basedapproachandforexample,consideringtheopportunityofrealworldevidenceassetoutinthePanel’stermsofreference.Thedraftopinionshouldnotmoveforwardasitstandswithoutaddressingthesefundamentalflawsin the framing and analysis of the policy problems, and consideration of possible alternativesolutions.1. Incomplete evidence base: The draft opinion has not reviewed the evidence on the cost of

medicinesandtheirimpactonhealthcaresystem.Thedraftopinionarguesthat:“ExpenditurewithnewmoleculeshasoutpacedthegrowthofGDPorthegrowthofotherhealthcareexpenditure”[270ff].However,recentdatafromtheOECDshowsthatretail pharmaceutical spending per capita is less than the growth in other parts of the healthcaresystem (2009-2015)1.OECDdata shows that total retail spendingonpharmaceuticalsper capita inreal termsacrossallnationsdeclinedatanaverageannual rateof0.5%between2009and20152.Between2009and2015,expenditureonpharmaceuticalspercapitadeclinedby0.9%inrealtermsonaverageinEurope-243.InEurope,expenditureonpharmaceuticalsrepresentsonaverage15%oftotal healthcare costs, with some countries spending as little as 8%4. The share of total healthexpenditure attributed to medicines has remained broadly consistent over the last fifteen years,thoughwithyear-to-yearvariability insomecountries.This isconsistentwithaveryrecentanalysis

1 OECD,HealthatGlance,20172 OECD,HealthatGlance,20173 OECDdatafromHealthatGlance2017,processedbyEFPIA.Countriesincludedare:Greece,Portugal,

Ireland, Iceland, Netherlands, Denmark, Czech Republic, Hungary, France, Slovenia, Finland,Luxembourg, Slovak Republic, Belgium, Spain, Poland, Sweden, Germany, Italy, Austria, EstoniaSwitzerland,Norway,Latvia.

4 OECDdatabaseaccessedinNovember2017.Europeancountriesincludedare:Austria,Belgium,CzechRepublic,Denmark,Estonia,Finland,France,Germany,Greece,Hungary,Iceland,Ireland,Italy,Latvia,Luxembourg, Netherlands, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden,Switzerland,UnitedKingdom.Cffootnote17,fordefinitionofpharmaceuticalspendingbytheOECD.

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based on IMS datawhich shows that after taking into account rebates and discounts, spending isgrowingsubstantiallymoreslowlythancommonlyreported.5Thedraftopinionarguesthatthefinancialsustainabilityofhealthcaresystemsisunderpressureduetothehighpricesofnewmedicines.However, thedraftopiniondoesnotrecognisethevaluethatinnovativemedicinesdeliverand fails toexamineother componentsofhealthcare spending. Thedraftopiniondoesnotadoptadynamicviewofpharmaceuticalspendingwhichshouldnotonlytakeinto account innovativemedicines but also off-patentmedicineswhere spending is falling. Finally,thedraftopinionignoressomeofthecausesofthebudgetarychallengesthathealthcaresystemsarefacing(demographicchanges)andfailstoacknowledgethefactthatmedicinescancreatesavingsinotherpartsofthesystem.Expenditureonhealthshouldnotonlybeseenasacost(suchaspage6ofthedraftopinion)butalsoasan investmenttowards increasedwelfare,productivityandeconomicgrowthandassessedholisticallyovertime.2. Unsubstantiatedopinions:Thedraftopinioncontainsunsubstantiatedargumentsonthevalue

ofinnovation.

Thedraftopinionalsocontainsunsubstantiatedclaimsonthe lackof true innovation. It frequentlydowngrades the importance of incremental innovation (cf 592 ff; 776 ff). From the industryperspective,bothincrementalandbreakthroughinnovationareimportant.Innovationoftenhappensin small steps, yet, this contributes to significant advances for patients and transform patientoutcomes over time. Intellectual property (IP) is a pre-requisite for innovation. In contrast, to theEXPH assertion, investment in both incremental and breakthrough is costly and risky. Providing IPprotectionforbreakthroughorincrementalinnovationsisthereforecriticaltofutureinnovationandto expanding treatment options for patients. As it is the case in other industries, the process ofinnovationdoesnotstopwhenaproductislaunched.Theindustryseekstoimprovetheproductforthebenefitofpatients.Examplesofthebenefitsoftheseimprovementsinclude:• Making life easier for patients: Developing oral medications for type 2 diabetes patients to

regulate their blood glucose levels, instead of injections or developing extended releaseformulationswhichrequirelessdosesperdayandimprovepatients’compliancewithacourseoftreatment.

• Expandingtreatmentapplications:developingamedicinethatisprovenforthetreatmentofHIVinadultsforpreventingmother-to-childtransmissionofHIV.

• Developing new uses for amedicine: developing a rheumatoid arthritismedication for use intreatingotherautoimmunediseases,suchasCrohn’sdisease.

3. Contradictory: The draft opinion contains many contradictory assertions on new payments

models.The draft opinion initially recognises that the principle of value-based pricing is sound in that itrewardsinnovationandcreatespositiveincentivesforR&Dofmedicineswhichwillbringbenefitstopatients,healthcaresystemsandsocieties.Thedraftopinionalsohighlightstheneedtohave“betterrewards for higher therapeutic added value” [1669ff] and to “move towards acquisitionof serviceratherthanproduct”[1674ff.].Itthensubsequentlycriticisesvalue-basedapproachesascreatinganincentiveframeworkthatencourageshigherprices.The draft opinion initially refutes the idea of “cost plus pricing” because this would createinefficienciesandwouldnotcreateincentivesfornewinnovation–apositionthatEFPIAagreeswith.Thedraftopinionstatesthat:“…newpaymentmodelsshouldnotbebasedonpayingforR&Dcostsincurred” ([803 ff.] It then suggests that cost information should be requested by payers and

5 ForecastingpharmaceuticalexpenditureinEurope:Adjustingfortheimpactofrebatesanddiscounts,

EspinJetal.PresentedatISPOR20thEuropeanconference

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providedbymanufacturersduringthepricingandreimbursementprocess.ItcallsfortransparencyofpriceandR&Dcosts related to theHTAsubmission [1563ff]. Indeed, thedraftopinionargues that“creating greater transparency around the costs of pharmaceutical products and the price ofmedicines would provide better grounds for assessing affordability, equitable access, fairness inpricingandincentivestodevelopnewmedicines”[1126ff.]EFPIAagreesthata“costplusapproach”isnotanappropriatepaymentmodelforpharmaceuticals.The‘cost-plus’methodisinefficientsinceitinadequatelyrewardsaddedtherapeuticvalueanddoesnotprovideappropriateincentives.Inaddition,itisextremelydifficult(orimpossible)todisentanglecosts of R&D for a specific product. The cost-plus pricingmethod represents a “static” approach,whichfocusesmainlyonbudgetaryconstraintsandignoresbothshort-termandlong-termbenefitsofinnovativetreatments.EFPIAalsosupportstheneedtomovetowardsvalue-basedpricing,whichrelies on a greater flexibility acrossmarkets and indications. A report from the OECD shows thatgreaterflexibilitythatmovesawayfroma“singleprice”canimproveaccessandaffordability[OECD(2008), Pharmaceutical Pricing Policies in a Global Market, p. 205]. This requires, however, thatcertainpoliciessuchasexternalreferencepricingarerevisited.Transparencyofpricesandcostswouldleadtoa“costplusapproach”,whichwouldbedetrimentalto innovation and hinder patients’ access to new medicines. Confidentiality of net prices allowsprices to benegotiated and adaptedbasedon an individual country’s health and economic needswhich isoneof thekeypillarsofvalue-basedpricing. Increased transparencyanddisclosingofnetpriceswouldleadtoloweraccesstomedicinesincountriesthattodaygetrebatesduetotheirlowerincome levels/ability to pay. Confidentiality of net prices creates incentives for innovation whilefacilitatingaccesstomedicinesforcountrieswithlowerabilitytopay6.4. Confusing: The confusing assessment of Managed Entry Agreements underestimates their

potentialbenefits

WhendiscussingManagedEntryAgreements(MEAs),thedraftopinionusesarangeofterminology–sometimes it recognises the many different forms of MEAs (e.g. financial price/volume typeagreements, coverage with evidence developments, performance-linked reimbursement etc.), butsometimes“MEA”seemstoreferonlytooutcomes-basedtypeschemes.Thedraftopinionwouldalsohavebenefitedfromamoredetailedexaminationofalldifferenttypesof innovativepaymentsmodelsandadiscussionontheconditionsunderwhichthevariousmodelscandelivermostvalueforstakeholders(e.g.dependingonexpectedsizeofpatientpopulation,caresetting(primaryorsecondary),diseasearea,healthcaresystemset-upetc.).Thedraftopinionarguesthat:“they[MEAs]aredesignedtoaddresstheissueofuncertaintyaboutthevalueof theeffectivenessof thedrugandnot the (high)pricetagor therisingpharmaceuticalexpenditure” [585ff.]. This assumption,which largely ignores thediversity ofMEAs, is not correct.Indeed, governments and payers can use MEAs to address budget uncertainty through financialagreements (e.g. price-volume) and outcomes-based agreements (e.g. payment per results)7.Therefore, in contrast to the conclusions at the end of the chapter, MEAs – as a tool to findagreementonprice(andmargin)betweenpayerandinnovator–canhelptomanagepharmaceuticalexpenditure.

6 For instance, Dumoulin (2001) shows that price discrimination increases access by a factor of

approximately4–7times(citedbyDanzon&Towse,2003).7 KlempMetal.(2011),Whatprinciplesshouldgoverntheuseofmanagedentryagreements;IntJTech

AssinHealthCare.

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5. Erroneous:Thedraftopinionprovidesunsubstantiatedconcernsregardingmarketpower

ThroughouttheEXPHDraftOpinion,thereisanextensivereferencemadetotheexerciseofmarketpower by pharmaceuticals companies, as well as to the high prices generated by the use of thismarket power (e.g. “…high prices as a result of exercise of market power by pharmaceuticalcompanies” [410 ff].). The document assumes that pharmaceutical companies have an excessivebargainingpower. (e.g.“Thatroleofprices ismuchweaker inhealthcare,as insuranceprotectingpatients from the financial hardship associatedwith health care needs alsowithdraws the naturalbarriertoveryhighpricessetbyprovidersofcare,includingpharmaceuticalcompanies”[1662ff.]).Firstly,thepanelhasdevelopedatheoryontheimpactofhealthinsuranceonpricesensitivityandpricelevels.Theyarguethatbecausepatientsarecoveredbynationalhealthinsuranceschemes,andhencearenotresponsibleforpayingthepriceofthemedicines,thisreducesthepricesensitivityofthemarket,contributingtohigherprices.Onthecontrary:first,patientsasconsumerswouldbeinaweakpositiontonegotiatethepriceinacontextofalife-savingmedicine(notwithstandingthatthiswouldbeunethical).Second,delegatingthenegotiationtoapayer(andagenciesundertakingHealthTechnology Assessment (HTA)) de facto increases the negotiation power by having a single agentwhonegotiatesonbehalfofmultipleconsumers.Third,duetothefactthatthepayerisnotaffectedbytherespectivedisease/healthsituation,he/shecanmakeaneutraljudgmentaboutvalue.Finally,payers rely on sophisticated value assessment systems. In conclusion, patientsmay be less price-sensitive in terms of health resource use because of the insurance system; however, in today’senvironment theprice isdeterminedby thepayerwho ismuchmorepowerful than the individualpatient. The EXPH has not included any analysis of themanymandatory price changes that havebeenappliedtotheindustryoverthelastfiveyears,whichillustratethispoint.Secondly, thedraftopiniondoesnot take intoaccountcompetitionbetweenon-patentmedicines.This is perfectly illustrated by the case of Hepatitis C. As new, competing treatments entered themarket, netpricesofHepatitis Cdrugsdecreased significantly.Over time, theperiodof growth inexpenditureisinevitablyfollowedbypatentexpiriesandgenericcompetitionthatresultinreductioninexpenditure.Forexample,inGermany,12%ofdrugspendingin1995wenttowardsthecostsofantihypertensiveorcholesterolloweringagents,yettodayitis4%ofdrugspending.8Thirdly, from the industry perspective, it is important to recognise that a “legal monopoly” for amedicine that can be conferred by incentives does not necessarily translate into an economicmonopoly: the vastmajority of pharmaceutical products competebothwitholder products, otherinterventions, and with innovative products in their therapeutic class. Moreover, the Europeanpharmaceutical industry works within the confines of an array of price regulations: price control,profit control, international price comparisons, external reference pricing andHTA. The price of amedicine is determined to reflect the clinical and economic value it brings to patients, healthcaresystemsandsociety.Competitionbetween innovativecompanieswithintherapeuticclassesand itsimpactonpricesshouldnotbeunderestimated.Between2005-2011,halfofsecondmedicinesinaclasswereapprovedwithin2.3yearsofthefirstmedicine’sapproval–comparedto10.2yearsinthe1930’s.9

Finally,thepharmaceuticalindustryissubjecttoEuropeancompetitionlaw,asiseveryothersector.Indeed,thepharmaceuticalindustryhasbeensubjecttoadetailedsectorinquiry.On8July2009,theEuropean Commission published the conclusions of its 18-month pharmaceutical sector, whichlookedindetailatcompetition.10ThisdoesnotsupporttheEXPHrecommendations.

8 2017QuintilesIMSreportonUnderstandingtheDynamicsofDrugExpenditure.9 Storz.‘Intellectualpropertyissuesofimmunecheckpointinhibitors’(2016)10 http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/

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6. Policyoptions:Thedraftopinionpromotespolicyoptions,whichwouldhaveanegativeimpactontheenvironmentforR&D

Thedraftopinionshouldpromoteoptions,whichcouldhaveapositive impactontheenvironmentfor researchanddevelopment,ultimatelybenefitingpatients, thehealthcaresystemorsocietynotpandertoparticularstakeholders.

The draft opinion makes a set of unsupported policy recommendations on the request forinformationonR&Dcosts,introducingacompetitionpolicyreviewofhighpricesaskedbycompanieswith cooperation of competition authorities. In Europe, given the regulated pricing andreimbursementenvironmentforinnovativemedicines,thesepoliciesdonotmakesenseandwouldhavesignificantnegativeconsequences.

Inparticular,thedraftopiniondoesnotadequatelyrecognisetheimportanceofintellectualproperty(IP)rightsasavitalpartofincentivisinginnovationandensuringthatnewmedicinesaredevelopedto address patient needs. The draft opinion gives the impression that IP protection stiflescompetition,however,this isnotthecase. IPprotectioncreatesthepreconditionsforcompetition.Byfilingforapatent,apatentholderactuallymakespubliclyavailabletheir‘stateoftheart’whichcreatesaspill-over learningeffect thatencouragesotherplayerstoexplorethesciencemorefully.This enables further innovation, leading to more choice andmore competition during the periodwhere products have a degree of IP protection.Without the patent system, innovatorswould beencouragedtohidetheirinnovationpriortolaunch.Thus,IPprotectionenablesinnovationbeyondaspecificcompanyorproduct,allowingcompetitiveconditionstodrivepricesdownacrosscountriesand therapy areas. Today’s innovativemedicines are tomorrow’s generics and biosimilars, alreadyresulting in lowercostoptions fortreatingconditions likeheartdiseaseanddepressiontoday.Thiswillextendtoconditionslikecancer,rheumatoidarthritisandotherdiseasesinthenearfuture.Thedraftopiniondiscussesradicalmeasuresliketheuseofprizemodelsoreven“compulsorylicensing”.Thiswouldhaveachillingeffectonfutureinnovation.Increaseduseofaggressivepricecontrolsandother “last resort approaches” would hamper future innovation without improving access orsustainability.

In other areas, the EXPH sets out recommendations where initiatives already exist. For example,“selectoneneglectedareaandlaunchinternationalprizeinitiativewithpatentbeingretainedbythesetofcountriesparticipating”.Therearealreadyadvancedmarketcommitments(AMCs)foraseriesofproducts.TheEXPHsuggeststhatpolicymakersshould“assessvalueofnewproductsofuncertainbenefitusingsoundandtransparenthealthtechnologyevaluationmethods”withoutanydiscussionofcurrentHTAmethods.Thepaneladvocatesforthedevelopmentof jointnegotiationprocedureswhenthereareaseriesofinitiativescurrentlybeingtested.

The draft opinion contains certain elements that could be the basis for further discussion andanalysis such as thedefinition andmeasurementof value, new flexible paymentmodels to betterrewardhigher addedvaluemedicines and the recognitionof the shift in the industry toprovideaholistichealthcareservicesratherthanonlyaproduct.However,giventheinadequatequalityoftheanalysis,theinconsistenciesinthearguments,andtheincoherenceofthepolicyconclusions,EFPIAfeelsthatthevalueofthisdraftopinionisquestionable.

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2.Specificcommentsonthestudy

CommentsonsummaryPage CommentsPage497-98ff

“Thegrowthofpharmaceuticalexpendituresduetonewhigh-costinnovativemedicines,underthecurrentinstitutionalframework,createsfinancialchallengestohealthsystems.”

FormostOECDcountries,pharmaceuticalspendingisnotrisingmorequicklythanotherareas of health spending. 11 In fact, recent evidence shows that products and therapyareasresponsibleforalargesliceofbudgetin1995-2000nowaccountforafarsmallerfinancial impact.12 Moreover, recent data from the OECD shows that retailpharmaceuticalspendingpercapitaismorecontainedthanthegrowthinotherpartsofthe health care system (2009-2015).13 OECD data shows that the total spending onpharmaceuticalspercapitainrealtermsacrossallnationsdeclinedatanaverageannualrate of 0.5% between 2009 and 2015.14 Between 2009 and 2015, expenditure onpharmaceuticals per capita declined by 0.9% in real terms on average in EU-24.15 InEurope,expenditureonpharmaceuticalsrepresentsonaverage15%oftotalhealthcarecosts, with some countries spending as little as 8%16. The share of total healthexpenditure attributed to medicines has remained broadly consistent over the lastfifteenyears,thoughwithyear-to-yearvariabilityinsomecountries.

QuintilesIMS(IQVIA)publishesEuropeandrugexpenditureforecastsbasedonitsauditedvolumedataand,inmostcases,publiclyavailablelistprices.However,itiswellknownthatnetprices,andthereforeexpenditure,canvarysignificantlyfromlistprices.Withincreasingpricepressures,listtonetpricedivergenceisbelievedtobegrowing.AccordingtoEspinJ,etal.“Afteradjustingfordiscountsandrebates,netexpendituregrowthinEU5ispredictedtobe1%-2%overthenext5years.ThisisbelowpredictedhealthcareexpendituregrowthinEuropeandinlinewithlong-termeconomicgrowthrates”.17However,thecompositionofhealthcarespendingisclearlychangingandthismeansspendingisincreasinginsomeareasanddecreasinginothers–reinforcingthenecessitytobreakdownsilosbetweenbudgetsandtheneedtoencourageanoutcomes-

11 OECD(2015)PharmaceuticalSpending.HealthatGlance2015fadop12 Quintiles IMS(2017)UnderstandingtheDynamicsofDrugExpenditure:Shares,Levels,Compositions

andDrivers13 OECD,HealthatGlance,2017.AccordingtotheOECD:“Pharmaceuticalspendingcoversexpenditure

onprescriptionmedicinesandself-medication,oftenreferredtoasover-the-counterproducts.Insomecountries,othermedicalnon-durablegoodsarealsoincluded.Pharmaceuticalsconsumedinhospitalsandotherhealthcaresettingsareexcluded.Finalexpenditureonpharmaceuticalsincludeswholesaleand retail margins and value-added tax. Total pharmaceutical spending refers inmost countries to“net” spending, i.e. adjusted for possible rebates payable by manufacturers, wholesalers orpharmacies”. Source: OECD website available: https://data.oecd.org/healthres/pharmaceutical-spending.htm(accessedDecember2017).

14 OECD,HealthatGlance,2017.15 OECDdatafromHealthatGlance2017,processedbyEFPIA.Cffootnoten°3forfurtherdetails.16 OECDdatabaseaccessedinNovember2017.Europeancountriesincludedare:Austria,Belgium,Czech

Republic,Denmark,Estonia,Finland,France,Germany,Greece,Hungary,Iceland,Ireland,Italy,Latvia,Luxembourg, Netherlands, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden,Switzerland,UnitedKingdom

17 ForecastingpharmaceuticalexpenditureinEurope:Adjustingfortheimpactofrebatesanddiscounts,EspinJetal.PresentedatISPOR20thEuropeanconference

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basedapproach.

Inanyevent,healthcaresustainabilityneedsto lookbeyondpharmaceuticals. Itshouldconsiderallofthedemand-andsupply-sidefactorsimpactingthesustainabilityofaccesstoinnovativetherapies,suchasresourcelevels,efficiencyofthehealthcare(HC)system,appropriatenessofbudgetallocationsacrossdifferenttypesofHCservicesandproducts,cost/benefitofdifferenttypesofinputs,etc.

Page4100ff

“toensurethatinnovation“thatmatters”isproduced”TheEXPHhasnotdefinedwhattypesofinnovationmatterandwhodecidesthis.Innovationshouldbenefitpatients,thehealthcaresystemandsociety.

Therehavebeenmanyattemptstodefinevalueforpharmaceuticals.Medicinesshouldbeconsideredinnovativeiftheyprovideclearbenefitsforpatientsand/oriftheirdosingoradministrationmakesthetreatmentmoreconvenientforpatientsortheircaregivers.Thedefinitionshouldinclude

• broader(non-healthrelated)costsavings

• benefitsofincreasedproductivityofpatientsandcaregivers

• reductionoftheburdenoncarers

• tolerabilityandeaseofuse

Forinstance,theWHOnotesthat“fromapublichealthperspective,however,thelevelofinnovativenessofamedicineisprimarilydefinedbythebenefitsthemedicinegeneratesforpatients.Thesebenefitscanbeinthetherapeuticorclinicaldomain,thequalityoflifedomain,butalsointhesocio-economicdomain.Examplesofbenefitsinthesocio-economicdomainincludeamedicinethatwouldprevent(expensive)hospitaladmissionsorthatwouldenablepatientstowork”.18TheEXPHdoesnotconsideranyofthissignificantliterature.

Page4107-108ff

“Greaterpriceandcosttransparency,includingtheacknowledgementthathighprices(highcoststopayers)mayormaynothaveunderlyinghighcostsofR&D”. Inthedraftopinion,theEXPHrejectscostpluspricing.EFPIAagreesthata“costplusapproach”isnotanadequatepaymentmodelforpharmaceuticals.The‘cost-plus’methodisinefficientsinceitinadequatelyrewardsaddedtherapeuticvalueanddoesnotprovideappropriateincentives.Inaddition,itisextremelydifficult(orimpossible)todisentanglecostsofR&Dfromthepriceofaspecificproduct.Thecost-pluspricingmethodrepresentsa“static”approach,whichfocusesmainlyonbudgetaryconstraintsandignoresbothshort-termandlong-termbenefitsofinnovativetreatments.So,itisunclearwhytheyreflectontherelationbetweenpriceandcostofR&Dinthesummary.Manyeconomistshaveshownthatpricetransparencyinthecaseofpharmaceuticalscanhavedetrimentaleffectsonaccess.Forexample,Glynn(2015)concludesthatinthecaseofthepharmaceuticalmarket,transparencyparticularlyexternalreferencepricingcanharmpatients.19

18 Henry, D. et al. (2004) Background Paper 8.3Pricing and Reimbursement Policies: impacts on

innovation. [Last Accessed 23 June 2017]:http://www.who.int/medicines/areas/priority_medicines/BP8_3_pricing.pdf

19 Glynn,D.(2015)Thecasefortransparencyinpricing.CompetitionLaw

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Page4112-113ff

“Thepatentsystemisthecurrentbestoptionfordecentralizedinnovationeffortswhenconsumersarepricesensitive,butnotnecessarilyotherwise.”ThebenefitsofIntellectualProperty(IP)rightshavenotbeendiscussedinanydetailinthisdraftopinion.IPallowscompaniestohaveexclusiverightstotheinnovationforaperiodoftime.Whileacknowledgingtheheavyandcomplexregulatorysysteminwhichtheindustryoperates,theEXPHviewsIPfromapurelyfinancialperspective,asamechanismtomaintainpriceabovecompetitiveequilibrium.Theyfailtosufficientlyhighlight1)thatIPisnotpharma-specific,2)theincentivizingroleofIPwhichisparticularlynecessarytoattractinvestmentinthisheavilyregulatedmarket,3)thehighlyregulatednatureofpharmaceuticaldevelopmentinfactdecreasesthedurationofexclusivityasyearsofIPlifeareconsumedlongbeforefirstcommercialization.Thepatentsystemhasaprovenhistoryindevelopinglifesavinginnovations.Otheroptionsareentirelyhypothetical.TheEXPHhasdevelopedatheorythatthathealthinsuranceistheproblem.Withouthealthinsurance,pricesensitivitywouldbehigherandthiswouldconstrainpharmaceuticalprices.Thistheoryisunsupported,indeed:

• NationalHealth insuranceresults inasinglepurchaser,whonegotiatepriceonbehalf of consumers. Most analysis suggests this increases bargaining power(evenresultinginamonopsonistpurchaser).20,21

• Therearemanypricingandreimbursementrulesthatregulatethewaypricesaredetermined.Pricesarenotsetbymanufacturers.

Page4119-120ff

“Haveanassessmentofexerciseofmarketpowerineachpricenegotiation,asaresultofinsuranceprotectionsetbyhealthsystems,reducingtheroleofconsumer’spricesensitivityinlimitingpriceincreasesofnewproductsunderpatentprotection.”Thepharmaceuticalindustryissubjecttocompetitionrules.Incaseswherethereareconcerns,thesecanbeinvestigatedbythecompetitionauthorities.However,theEXPHignorestheroleofcompetitionintheon-patentpharmaceuticalmarket.Inreality,companiescompetewithoneanotherandthisresultsinlowerpricestothepayer.ThisisillustratedbythecaseofHepatitisC.Asnew,competingtreatmentsenteredthemarket,netpricesofHepatitisCdrugsdecreasedsignificantlyintheEurope,andthewidelydiscussedhighpricesofthesetreatmentsisestimatedtobe15-20%lowerin2016afternegotiatedrebates.22Evidencehasshownthatthatcompetitionisincreasing.Indeed,wecanobservethat,overtime,competitiveproductscometothemarketmoreandmorequicklyafterthefirstmedicinehasbeenlaunched.Inthe1970s,theaveragetimebetweenthefirstandthesecondmedicineinatherapeuticcategorywas10.2years.Between2005and2011,thetimehaddeclinedtoanaverageof2.3years.23Companiesalsofacecompetitionatpatentexpiry,whichresultsinreductionsinexpenditure.Forexample,inGermany,12%ofdrugspendingin1995wenttowardsthe

20 Roberts,E.T.,Chernew,M.E.andMcWilliams,J.M.(2017)MarketShareMatters:EvidenceofInsurer

and Provider Bargaining Over Prices. Health Affairs. 36(1). Available from:https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2016.0479

21 Kirkwood,J.B.(2016)BuyerPowerandHealthcarePrices.WashingtonLawReview.253(286)22 QuintilesIMS(2017)MedicinesUseandspendingintheUS:areviewof2016andoutlookto202123 TuftsCenter for theStudyofDrugDevelopment (CSDD) (2015)Personalizedmedicinegains traction

butstillfacesmultiplechallenges.TuftsCSDDImpactReport

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costsofantihypertensiveorcholesterolloweringagents,todayitis4%ofdrugspending.Thisisadramaticchangetogetherwithanequallydramatictherapeuticsuccessinreducingmortalityofheartdisease.24Thus,itisgrosslymisleadingtofocustheanalysisnarrowlyonareasofcurrentgrowth.

24 Quintiles IMS Institute (2017)Understanding theDynamicCompositionofDrugExpenditure:Shares,

Levels,CompositionandDrivers

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CommentsonSection1:BackgroundPage CommentsPage6202ff

“Theemergenceofhigh-priceinnovativemedicines,implyinghighcostsforhealthcarepayers,…”Costsforhealthcarepayersareacompositeofpriceandvolume;therefore,highpricesalonedonotnecessarilymeanhighbudgetaryimpactforthesystem,especiallybecausespendinginsomeareascancreatesavingsinotherpartsofthesystem.Inlightoftherecentcancercareexpenditure,thestatementshouldbedifferentiated.Cancermedicinesexpenditurehasmorethandoubledoverthepast20years;however,cancercareexpenditure,includingcancermedicines,hasremainedstableat6%overthepast20years.25.Thismeansthattheuseofmedicineshasoffsetothercostsincancercare.

Page6209ff/213ff

“Recentyearshaveseenagrowingnumberofnewmedicineswithpriceincreasesthatledhealthauthoritiesandhealthcarepayerstoquestiontheimplicationsforthefinancialsustainabilityofhealthsystems”“Howardetal.(2015)documentpriceincreasesintheanticancerdrugmarketofabout10%ayearinthepast20years,aftercontrollingforincreasedbenefits(survival)”PriceincreasesforindividualinnovativemedicinesareusuallynotpossibleinEurope.Thestatementisprobablyreflectingthefactthatthecostoftherapyperoutcomehasincreasedovertimeinsomeareas.Thestatementshouldbephraseddifferently.Inaddition,Howardetal.arereferringtoUSlistpriceswhich–astheOpinionofEXPHstatesatvariousoccasions–donotreflecttheactualpricepaidandarelessrelevantfortheEuropeanmarket.TheEXPHopiniondoesnotputthevalueofthesemedicinesintocontext.Itsnarrowfocusonbudgetimpactdoesnottakeintoaccounttheoutcomesthathavebeenachievedthankstoinvestinginmedicalinnovation.AsJönssonetal.show,medicinescosthaveoffsetdirectandindirectcost(-11%)overtime,whichcontributedtothestablespendingoncancerasashareoftotalhealthcareexpenditure.26Moreover,whilethelistpriceofanticancerdrugslaunchedappeartobegrowing,therealcostofnewanticancerdrugsisnotsystematicallyincreasingovertime.Thisisbecausepricesdependonanumberoffactorsincludingpre-existingtreatmentoptionswithinatherapeuticclass.AsstatedbyBarron&Wilsdon“Lookingatindividualtherapeuticclass(e.g.,breastcancer,colorectalcancer,etc.),weobservethatthecostofnewanticancerdrugsisnotnecessarilyincreasingovertimewhentakingintoaccountthebenefitsoftheseproducts.TwostudiesbyWhalenetal.estimatetheincrementalcostpermonthof

25 JönssonBetal.(2016),ComparatorReportonPatientAccesstoCancerMedicinesinEuropeRevisited26 Jönsson,B.,Horfmacher,T.,Lindgren,P.andWilking.P.(2016)Thecostandburdenofcancerinthe

EuropeanUnion1995–2014.EuropeanJournalofCancer

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medianOS(overallsurvival:thelengthoftimefromeitherthedateofdiagnosisorthestartoftreatmentforadiseasethatpatientsdiagnosedwiththediseasearestillalive)27(mOS)gainedwiththeuseofapprovedtargetedtherapiesforcolorectalcancerforfirst,second,andthird-linetreatmentofmCRCinSpainandinFrancerespectively,andshownthattheincrementalcostpermOSgaineddidnotappeartoincreasewithFDAapprovaldate”.28

Thisanalysisdoesnottakeintothewidercostofcancertothehealthcaresystemandthecostofotherformsoftreatment.Evidenceoncostpermonthofvaluegainedshouldbeexamined,evidenceforrecentdrugsindicatethatsomenewoncologydrugsaredeliveringadditionalvalueandatalowercostcomparedtopre-existingproducts.

Page6211-212ff

“Detailedinformationonpricesofnewpharmaceuticalsindifferentcountriesisoftennotavailableastheyresultfromsecretpricenegotiations”Thenegotiationsarenotsecret.Thefinancialtermsarecommercialconfidentialbuttheexistenceofagreementsiscommonlydisclosed.

Page6215-219ff

“ThemainexplanationofferedbyHowardetal.(2015)forthehighpricesisbasedontherolesofhealthinsuranceinmakingpatientsinsensitivetodrugprices(allowingcompaniestoincreasepriceswithoutlosingdemand)andofanchoreffectsofpreviousprices(bywhichapriceincreaseoveraprevioushighpriceistacitlydeemedasnatural,evenifthereferencepointcomesfromother,non-competing,pharmaceuticalproducts).”Theargumentthatpricesensitivityislowerduetotheexistenceofhealthinsuranceisunsubstantiatedasdemonstratedinourresponsetoline1659.Inaddition,theHowardetal.(2015)articleanalysestheUSmarket,whichhasaconsiderablydifferentstructurefromEuropeanmarkets.Thesamplefortheanalysisisthelaunchpriceof58anticancerdrugsapprovedintheUSbetween1995and2013.Thishasseverallimitations.First,thetimespanisverybroad,medicinesandpricingmechanismsin1995areverydifferentfromthosein2017.Second,thesampleissmallandlimitedtoonetherapeuticarea.Third,thefocusisonUSlistprices:netpricesarenotconsidered,northeroleandthemarginstodistributors.Importantly,thesameauthorsalsonotethat“aspressurehasmountedongovernmentstoreigninhealthspending,Europeanhealthsystemshaveadoptedamoreaggressivebargainingstance,backedbyacrediblethreatofnon-coverage”.

27 National Cancer Institute (N.D) NCI Dictionary of Cancer Terms. Available from:

https://www.cancer.gov/publications/dictionaries/cancer-terms?cdrid=65524528 Barron, A. andWilsdon, T. (2016) Challenging perceptions about oncology product pricing in breast

and colorectal cancer. Pharmaceutical Medicine. 30(6): 321-326. Available at:https://link.springer.com/article/10.1007/s40290-016-0167-1

13

CommentsonSection3.1:ThechallengestohealthsystemsPage CommentsPage8,page9270ff

“ItisnowwelldocumentedthatexpenditurewithnewmoleculeshasoutpacedthegrowthofGDPorthegrowthofotherhealthcareexpenditures.”“ExpenditurewithnewmoleculeshasoutpacedthegrowthofGDPorthegrowthofotherhealthcareexpenditure”.TheEXPHOpinionsaysthatitiswelldocumentedthatmedicineshaveoutpacedgrowthinGDP.However,theyhavenotprovidedanyevidencetosupportthisassertion.Asnotedabove,inresponsetolines97-98,formostOECDcountries,pharmaceuticalspendingisnotrisingmorequicklythanotherareasofhealthspending.29

Page8278

“Thegrowthinnewpharmaceuticalsisacompositeofgrowthinnewmoleculesbeingavailableandthepriceincreasescomparedtoprevioustherapeuticalternatives”Asnotedabove(lines97-98)retailpharmaceuticalexpenditurehasnotincreasedinrecentyears.Moreover,pharmaceuticalspendingconcernsbothnewmedicinesandgenericsoncemoleculeslosemarketexclusivity.However,theEXPHOpiniondoesnotincludeanyconsiderationofthecostsavingsfromgenericsandbiosimilars.

Overall,spendingonpharmaceuticalshasnotincreasedunsustainably.Evenifwelookatareaslikeorphanmedicines,theexpectedrevenuegrowthismoderate.Overtimewithgenerics and biosimilars expected to enter themarket, OMP spending is expected toplateau.

OMPspendingasashareofhealthcareinEurope:30

29 OECD(2015)PharmaceuticalSpending.HealthatGlance201530 ScheyC.(2011)EstimatingthebudgetimpactoforphanmedicinesinEurope:2010-2020.Orphanet

JournalofRareDiseases

14

CommentsonSection3.2:ThechallengestoinnovativepaymentmodelsPage CommentsPage8286ff

“Thereislittlesystematicknowledgeonpharmaceuticalmarkets,optimalR&Dlevelsandpricingandmarketingstrategiesbycompanies”Thereisavastliteratureonpharmaceuticalmarkets.ManyofthesereportshavebeencommissionedbytheEuropeanCommissionandtheOECD.31,32TheEXPHshouldreviewthisliteratureandtakeintoaccounttheanalysisundertakenbeforecomingtoconclusions.

Page9288ff

Pharmaceuticalcompanieshavebeenfoundtobehighperformersfortheirinvestors.Theprofitabilityofthepharmaceuticalindustryshouldbecomparedwithotherresearch-intensiveindustriestomakemeaningfulcomparisonsandthisshouldtakeintoaccounttheperformanceofsmallercompanies(particularlygiventheimportancetheOECDplacesontheminvestinginearlierstagesofdevelopment).Forexample,dataillustratesthattheReturnOnEquity(ROE)oftheaerospacesector(ahighlyresearchintensiveindustry)isfargreaterthanthatofthepharmaceuticalindustry.

33

ProfitsinthepharmaceuticalindustryreflectthelevelofrisksandthecomplexityoftheR&Dprocess,whichcharacterisesthisindustry(italsotakesapproximately15yearsfromR&Dtomarketlaunchofoneproduct),butalsootherfactorssuchastheincreasingpressureonpricing.Finally,contrarytomanyotherproductsfromotherindustries,thelifecycleforinnovativepharmaceuticalproductsislimitedintimeduetothefactthatmedicinesgooff-patentandthenhavetocompetewithgenerics,ineffectprovidingabuilt-incostreductionmechanism,incontrasttootherpartsofhealthcare.ThereturnonR&Dhasfallenduringthelastfewyears,from10.1%in2010to3.7%in2016.34Intheirstudy,DeloitteetalalsoexamineBloombergdatatofindthattheaverageindustrycostofcapitalstandsatapproximately8.4%-almost5percentagepointsabovethe2016figurefortheoriginalcohort(ofpharmaceuticalcompaniesthatDeloittehavebeentrackingsince2010).

31 European Commission (2016) Links between Pharmaceutical R&DModels and Access to Affordable

Medicines. Directorate General for Internal Policies. Available from:http://www.europarl.europa.eu/RegData/etudes/STUD/2016/587321/IPOL_STU(2016)587321_EN.pdf

32 OECD(2017)NewHealthTechnologies.Availablefrom:http://www.oecd.org/publications/managing-new-technologies-in-health-care-9789264266438-en.htm

33 Damodaran, A. (2017) Return on Equity by U.S. Sector. [Data Last Accessed 21 July 2017]:http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/roe.html

34 DeloitteCenterforHealthSolution&Globaldata,BalancingtheR&Dequation,measuringthereturnsfrompharmaceuticalinnovation(2016)

15

Page9291ff

“Companies’expenditurebreakdownbycategoryoftenrevealsthatR&Dcostsrepresentasmallersharethanpromotionandmarketingcosts(Mossialos,2017)”Thedraftopinionfailstocapturethebenefitsofmarketingandtheimportanceofprovidingcomprehensiveinformationonsafetyandefficacytocustomerssotheycanbeusedintherightpatients.Asmedicinesbecomeincreasinglyspecialisedandservesmallerpopulations,moretargetedactivitiessuchaspatientempowerment(awarenessandknowledge)andadherencetotherapy,arenecessarytocommercialisethemedicine.Inaddition,thereareavastnumberofprescribersandotherrelevanthealthcareprofessionals,whichjustifiesthefactthatmedicalrepresentativesprovideinformationtohealthcareprofessionals.Nationallegislationandorvoluntarycodesofconductsbyindustrystrictlygoverntheinteractionbetweenindustryanddoctors.Moreover,thecomparisonbetweenR&Dandmarketingexpenditureismeaninglessandoutdated.ThedatarelatedtomarketingoftenreferstoSG&Aspends,whichisfoundinthecompanies’financialstatements.ThesecostsstandforSellingandGeneralandAdministrativeExpensesthatincluderegulatoryandcompliancecosts.Thesearehighforpharmaceuticalcompanies,nexttosalesandmarketing-relatedpractices,aswellassalariesandtheoverallcosttorunapharmaceuticalcompany.Finally,itisimportanttohighlightthatthepharmaceuticalandbiotechnologysectoristhehighestresearch-intensiveindustryworldwide.AccordingtotheEuropeanCommission’sR&DInvestmentScoreboard(2016),35pharmaceuticalsandbiotechnologyrankhighestintermsofR&Dinvestmentworldwide(Fig.3.1,p.55).TheEuropeanCommission’sreportalsonotes“thetop50largecompanieslistedbyR&Dintensity(R&Dtosalesratio)aredominatedbythehightechsectorsofbiotechnology&pharmaceuticals,softwareandtechnologyhardware”(p.8).R&Dintensityforpharmaceuticalsis15%globally,followedbysoftwareandcomputerservices(10.6%)andtechnologyhardware&equipment(8.4%).

Page9295

“Acommon,general,denominationforthesearrangementsisoutcomes-basedmanagedentryagreements(alsoknownasmarketentryagreementsormarketaccessagreements).”TheEXPHdraftopinionusesarangeofdifferentdefinitionsforMEAs,sometimesreferringtooutcomes-basedagreementsandsometimesincludingfinancialagreements.Thiscreatesconfusionsthroughoutthedraftopinion.

35 European Commission webpage [last access 27 November 2017]:

http://iri.jrc.ec.europa.eu/scoreboard16.html

10.1 7.6 7.3 4.8 5.5 4.2 3.7

206184 195 194

181 189 189

160180200220

0

10

20

2010 2011 2012 2013 2014 2015 2016

Returnonlate-stagepor[olio,2010-16-orignalcohortexamined

AbsoluteIRR(%) Numberofassessinlate-stagedevelopment

16

Page9298-300ff

“Theseveralformsandvariantsoftheseagreementsdealwithdifferentaspects,suchashiddenpricediscounts(ofvaluetocompaniesassuchdiscountsbypassinternationalreferencingpracticesusedinmanyhealthsystems),/…/”

Confidential net prices can be also of value for the payers, for instance by allowinglower prices in lower-income markets. Increased transparency and disclosing of netpriceswouldleadtoloweraccesstomedicinesincountriesthattodaygetrebatesdueto their lower income levels/ability topay.Thenegative impactofpriceconvergencehasbeenevidencedbyarangeofstudies.36The intuition isstraightforward,asystemwhere countries reward innovation on the basis of their ability to pay allows lowerincomecountriestoafford innovativemedicines. Ifhigh-incomecountriesrequirethesamepriceas low-incomecountries, low-incomecountrieswillpay theaveragepriceandthiswillmakemedicineslessaffordable.

Simulated savings vs. simulated cost in EU member countries due to a priceconvergencetowardstheEUaverage37

Page10,11340ff

“Unfortunately,neitherthearrangements(price-basedversusclinicaloutcome-based)northeoutcomes(improvementincertaintiesofclinicalbenefit,improvementincostbenefitratio)inmanyofthenewpaymentmodelsbeingusedaremadepublic.ThisunderminestheinternationalpricereferencesysteminEurope,usedbymostcountriesinsomeform”Thisparagraphillustratesoneofthecontradictionsofthisdraftopinion.Indeed,thisacknowledgesthatvalue-basedpricingisabetterpaymentmodelthancost-pluspricinginordertocreateincentivesforthedevelopmentofmedicinesinareaofgreaterneedsforpatients.However,atthesametime,itsupportstransparencyandthereforetheconvergenceofpricesthroughInternationalreferencepricing.Bydoingso,itseemstoignorethatinternationalreferencepricingandconvergenceofpricescanbedetrimentaltopatients’accessduetothefactthatpriceswillnotreflecttheeconomicsituationofeveryEuropeancountriesnotablythosewithalowerabilitytopay.Therefore,itdoesnotmakesensetosaythatMEAswillunderminetheinternationalpricereference,whichisnotanobjectiveperse.Theobjectiveshouldnot

36 De Cock, J. (2013) Access to medicines: can differential pricing be an answer? Presentation to the

EuropeanParliament37 De Cock, J. (2013) Access to medicines: can differential pricing be an answer? Presentation to the

EuropeanParliament

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

-20000

-15000

-10000

-5000

0

5000

10000

15000

20000

DEUDNK IRL ITA FIN NLDAUTBEL MLTLUX CYPSWEPRTGBRFRA SVN EST LVA ESPHUN GR BGR CZE SVK LTUROMPOL

Simulatedchangesinpharmaceuxcalspending(million€)

Simulatedchangesinpharmaceuxcalspending(%pharmaceuxcalspending)

17

betoensureabetteraccesstomedicinesforpatientsandinternationalpricereferenceinEuropeshouldberevisedtobetterfitthatpurpose.

Page11359-361ff

“TheR&Dcostofdevelopinganewpharmaceuticalproductisindependentofhowmanycountriesdecidetouseitandforhowmanyindicationstheproductisadopted”.Expandingamedicinetonewindicationsrequiresadditionalclinicalstudiesfortheseindications,meaningadditionalcosts.Widevariationsintheevidencesupportingtheapprovalofsupplementalindicationsaredocumented.TheimportanceofefficacytrialsfornewindicationshasbeendiscussedinarecentreportreviewingnewFDAapprovals.38

Page12367ff

“Withoutsomereferencelevelfortheaveragepriceacrossindicationsand/orcountries,allowingdifferentialpricingdoesnothavenecessarilythesamesocialwelfareimplications”.Hereagainthedraftopinionadvocatesforthetransparencyoftheaveragepriceacrossindicationsand/orcountries.However,confidentialityofnetpricesisnecessarytomakethesystemofdifferentialpricingwork.Transparencyofnetpriceswouldleadtoaconvergenceofprices,whichcouldbedetrimentaltoinnovationandhinderaccesstomedicinesincountrieswithlowerabilitytopay.

Page12378-379

“Onlysomecountrieswillhavetheabilitytomanagetheseagreements,andoverseetheresults.Replicationineverycountrywillbechallengingforsmallcountriesduetocostsofsettingandusingmonitoringmechanisms.”ManycountriesmakeuseofMEAs.Indeed,theEXPHreportsdatafromEminetdevelopedfortheEuropeanCommissionwhichshowsthatawiderangeofcountriesuseMEAsfromLithuaniatoMalta.39ThiswouldseemtocontradicttheEXPHconclusions.

Page12380

“Therearecleareconomiesofscaleinthemanagementofentryagreementsfornewpharmaceuticalproducts”Thisisanunsubstantiatedassertion.ManycountriesuseMEAs.Indeed,inmanycountriestheseareagreedattheregionalandevenhospitallevel.MEAsareoftentailoredtotheneedsofindividualcountries.Thismeansthattheco-ordinationcostofagreeingtheseMEAsacrosscountriesandregionsishigh.ItisnotatallclearthatthereareeconomiesofscaleinthemanagementofMEAs.

Page13392-394

“Implicitly,thediscussiontakesasgrantedthathealthtechnologyassessmenttogetherwithathresholdapproachforincrementalcost-effectivenessratio(oravariantofit)istheadequateinstitutionalsetting,allowingfirmstosetpriceswithconsiderablefreedomaslongasthesepricesallowthethresholdtobemet.”

38 Wang Bo, Kesselheim Aaron S. (2015) Characteristics of efficacy evidence supporting approval of

supplementalindicationsforprescriptiondrugsinUnitedStates,2005-1439 The European experience”. EMINet Available at:

http://ec.europa.eu/enterprise/sectors/healthcare/files/docs/mea_report_en.pdf and Espin J et al(2011)“ExperiencesandImpactofEuropeanRisk-SharingSchemesfocusingononcologymedicines”.EMINet Available at:http://ec.europa.eu/enterprise/sectors/healthcare/files/docs/risksharing_oncology_012011_en.pdf

18

TheEXPHassertsthatthereisaconsensusthatthresholdsbasedHTAsystemsarethe“adequateinstitutionalsetting”.Thereisnosuchconsensus.Therearemanystudiesshowingthatcost-effectivenessmethodsarenotappropriatetoappraisethevaluedeliveredbyparticularcategoriesofmedicines(e.g.orphandrugs

40,41,42).Inaddition,theuseofICERthresholdsisalsocontroversial.AsnotedinthesamereferencecitedbytheOECD,“settingthresholdstoohighortoolowcostslives”.

43Theshortcomingsof

strictcost-effectivenessthresholdshaveevenbeenrecognisedbyNICE,whoaretakingpartinaproject,whichaimstoexplorebeyondthesimplistichealth-relatedqualityoflifemeasure.Inaddition,theprojectaimstoexaminemetricsthatcapturetheadditionalbenefitsoftreatmentthatareexcludedfromtheICER-basedapproach,suchasindependence,socialandemotionalwellbeing.

44Studieshavealsofoundthatstrict

ICERthresholdsareinflexibleanddonotaccountforinnovationintechnology,inflation,andincreasedcostsofcapital.

45Manyhealthcaresystemsalsousecost-

effectivenessmethodstoappraiseinnovativemedicinesbutdonothavedefinedthresholds(e.g.France,

46Sweden

47).However,thereisnoevidenceshowingthatprices

arenotconstrainedinthesesystems.ApureICER-basedapproachisnotapplicablefororphanmedicines.Fororphandrugassessment,requirementsforevidencequantityandqualitymustreflectchallengesassociatedwithrarity.Themainchallengeofrarediseasesistheevidentialuncertaintyresultingfromthelimitedinformationonthenaturalhistoryofthediseaseandsmallpatientnumbersinclinicaltrials.Intheabsenceofrobustdata,rarediseaseexpertsshouldinformvalueassessments,includinghealthcareprofessionalsandpatients.Finally,theEXPHdraftopinionclaimsthatthecurrentpricingapproachresultsinvaluebeingcapturedbytheinnovativeindustry.Thisconflictswithavailableevidence.Inbreastcancerpatients,specialtypharmaceuticalsimprovequalityoflife.Inonestudy,estimatescomparingthecostofcancercareandthesocialvalueofsurvivalgainsfromthatcaresuggestthatfrom1990-2000therewasanetsocialsurplusof$1.9trillionintheU.S.alone.48Forbreastcancerspecifically,87percentofthosesurvivalgainswereduetoadvancesintreatment.InseparatestudyontheUSA,Lichtenberg(2014)finds

40 Orphan medicinal products. European Commission website. [Last Accessed 23 June]:

https://ec.europa.eu/health/human-use/orphan-medicines_en41 Orphan Drug Act- relevant excerpts (2013) FDA website [Last Accessed 23 June 2017]:

https://www.fda.gov/forindustry/developingproductsforrarediseasesconditions/howtoapplyfororphanproductdesignation/ucm364750.htm

42 Goldberg, R. (2016)Not at anyprice:How ICER robsMyelomapatients of life andhope.Center forMedicineinthePublicInterest

43 Culyer,A.J.(2015)Cost-effectivenessthresholdsinhealthcare:abookshelfguidetotheirmeaninganduse.CentreforHealthEconomics

44 NICE (2017) NICE to workwith partners on developing newways tomeasure quality of life acrosshealthandsocialcare.PressRelease:13June2017

45 Khan,Z.M.(2015)ArecurrentICERthresholdsoutdated?DoesMCDAofferamoreholisticapproachtoassessingthevalueofinnovativetechnologies?MarketAccessSolutionsLLC

46 Rochaix,L.(2015)IncorporatingCost-EffectivenessAnalysis intoComparative-EffectivenessResearch:The French Experience. Health Affairs blog. [Last Accessed 23 June 2017]:http://healthaffairs.org/blog/2015/04/03/incorporating-cost-effectiveness-analysis-into-comparative-effectiveness-research-the-french-experience-2/

47 Bending,M.W.(2014)Theapplicationofthecost-effectivenessthresholdingivecountries.Mapi48 Lakdawalla, D.N., Sun, E.C, Jena, A.B., Reyes, C.M., Goldman, D.P., and Philipson, T.J. (2010) An

economicevaluationofthewaroncancer.JHealthEconomics

19

thatpharmaceuticalinnovationcanalsobringsavingsandbecosteffective:thevalueofreductionsinworklossdaysandhospitaladmissionsattributabletopharmaceuticalinnovationwasestimatedtobethreetimesaslargeasthecostofnewdrugsconsumedbetween1997-2010.49Confidentialdiscountsasaresultofnegotiationsarecommonandsignificant.50Discountscanrangeupto20%oflistprices.QuintilesIMSdataillustrateslowerpharmaceuticalspendinggrowth,asmeasuredbyinvoicepriceswhichaccountfordiscountsandrebates.51ThisevidencesuggeststhatICERthresholdsdonotdeterminetheinvoicepriceoftreatments.

Page13401-402ff(andPage381076ff)

“Patentprotectionimpliesthattherearenoclosecompetingproducts”.“Aswedonothaveacompetitivemarketfornewpharmaceuticalsduetotheexistenceofpatents(…)”ThereisaperceptionthatIPprotectionstiflescompetition,butthisisnotthecase.IPprotectioncreatesthepreconditionsforcompetition.Byfilingforapatent,apatentholderactuallymakespubliclyavailabletheir‘stateoftheart’whichcreatesaspill-overlearningeffectthatencouragesotherplayerstoexplorethesciencemorefully.Thisenablesfurtherinnovation,leadingtomorechoiceandmorecompetitionduringtheperiodwhereproductshaveadegreeofIPprotection.Withoutthepatentsystem,innovatorswouldhidetheirinnovationpriortolaunch.Thus,IPprotectionenablesinnovationbeyondaspecificcompanyorproduct,allowingcompetitiveconditionstodrivepricesacrosscountriesandtherapyareas:

• In the treatment of Hepatitis C, since the launch of the transformative

therapy Sovaldi in 2014, five other innovative products have beenintroduced.52InFrance,althoughfirsttoenter,Sovaldinowholdslessthan24%marketshare,andaveragelistpriceshavedeclinedby30%.53

• For novel oral anticoagulants in cardiovascular disease, three newmedicines followed the launch of dabigatran in 2008, leading to a pricedecreaseofalmost60%inSpain.54

• Evenwithrarediseases,morechoiceshavefollowedfromIPincentives:inconditions like cystic fibrosis, chronic lymphocytic leukemia andpulmonaryarterialhypertension,theorphandrugprovisionshaveensuredthat there are at least three alternative therapies available where nonepreviouslyexisted.55

Today’sinnovativemedicinesaretomorrow’sgenericsandbiosimilars,alreadyresultinginlowercostoptionsfortreatingconditionslikeheartdiseaseanddepressiontoday.Thiswillextendtoconditionslikecancer,rheumatoidarthritisandotherdiseasesinthenearfuture.

49 Lichtenberg F.R. (2014) The impact of pharmaceutical innovation on disability days and the use of

medicalservicesintheUnitedStates,1997-2010.JHumanCapitalMorgan,S.G.,Vogler,S.andWagner,A.K.Payers’experienceswithconfidentialpharmaceuticalpricediscounts:AsurveyofpublicandstatutoryhealthsystemsinNorthAmerica,Europe,andAustralasia.HealthPolicy

51 QuintilesIMS(2016)OutlookforGlobalMedicinesthrough202152 Maas, Hepatitis C Drug Competition Results in Cost Discounts, Broader Member Access, Health

BusinessDaily(2015)53 DatafromQuintilesIMSMIDAS,analysisbyEFPIA(2017)54 DatafromQuintilesIMSMIDAS,analysisbyEFPIA(2017)55 EMA,Europeanpublicassessmentreports.

20

Page17509ff

“ThepharmaceuticalBenefitsBoardistheentityincharge”Thedraftopinionneedstobeup-to-date.TheSwedishauthorityisnowcalledTLV(PharmaceuticalandDentalBenefitsAgency)andhasthewebsitewww.tlv.se.ThedescriptioninBox2alsoseemstobesomewhatout-dated,anddisregardsthedifferencebetweenretailpharmaceuticalsandpharmaceuticalsforhospitaluse.Negotiationisakeyelementoftheintroductionofinnovativemedicinesforhospitalusetoday(indeed,therearethreepartynegotiationsbetweenTLV,thecompanyandthecountycouncil).

Page19559ff

“Theconfidentialityofpricesbringcountriestoasituationthatisusuallytermedprisoners’dilemma.Individuallyitisoptimaltosignagreementsofpricesthatareconfidentialwhilegloballycountriescouldbebetteroffbykeepingacoordinatedactiononpricedeterminationforpharmaceuticals”Contrarytowhatisstatedintheparagraphabove,manyeconomistshaveshownthatthesystemofdifferentialpricingisthebestfittedforthepharmaceuticalsectorgiventhehighcostsandrisksassociatedwithR&D.Indeed,itwouldnotbeefficientinthelongruntochargepriceatmarginalcostasthiswoulddeterinnovation.Giventhesecircumstances,itispreferabletohaveasystemwherecompaniesareabletofixpricesabovemarginalcosts(thisisallowedbythepatents)andaccordingtotheabilityofcountries’topayfortheproducts(differentialpricing).Thissystemofdifferentialpricingallowscountrieswithlowerabilitytopaytobuyproductsatlowercostscomparedtoasystemofunifiedpricing.Oneoftheconditionstomakethesystemofdifferentialpricingworkistheconfidentialityofnetprices.Transparencyofnetpriceswouldleadtotheconvergenceofprices,whichwoulddeteraccesstoinnovationforthepoorestcountries.Therefore,whileconfidentialityofnetpricesmaynotalwaysbeoptimalforallindividualcountries(assomecountrieswithhigherabilitytopaymaybuymedicinesatahigherprice),itisoptimalonagloballevelasitcreatesincentivesforinnovationwhilefacilitatingaccesstomedicinesforcountrieswithlowerabilitytopay.Forinstance,Dumoulin(2001)56showsthatpricediscriminationincreasesaccessbyafactorofapproximately4–7times(citedbyDanzon&Towse,2003).Thesentence“globallycountriescouldbebetteroffbykeepingacoordinatedactiononpricedeterminationforpharmaceuticals”isnotbackedbyanyevidence.Onthecontrary,economictheoryshowsthatdifferentialpricingisamoreefficientsystemandhashigherwelfareeffectsgloballybecauseitenablesbothstaticanddynamicefficiencies.Staticefficiencylooksatthemostefficientoutcomefromcurrentmedicinesonthemarketwhiledynamicefficiencyalsoconsiderstheimpactofpoliciesonlong-terminvestmentinR&Dandinnovation.Differentialpricingrequiresseveralconditionstowork:confidentialityofnetprices,arevisionofexternalreferencepricingandtheregulationofparalleltrade.Transparencyofnetpriceswillleadtoasituationoffreeridingonbehalfofcountrieswithahigherabilitytopayandalowerelasticityofdemand.However,thiswouldbedetrimentaltothecountrieswithalowerabilitytopay.Thefollowingparagraphexplainsthisindetails:“Ifpricedifferencesareunsustainable,duetoparalleltradeandexternalreferencing,thenmanufacturerswilltendtochargeasinglepricethatisbetweenthedifferentiated

56 Dumoulin, J. (2001). “Global Pricing Strategies for Innovative Essential Drugs.” Int J Biotechnology

3(3/4),338–349.

21

pricesthatwouldhavebeenoffered.Undersuchuniformpricing,consumerswithrelativelyinelasticdemandmayhavesomewhatlowerpricesduetoassociatingwithconsumerswithelasticdemand.Althoughthehighincome,inelasticusersmaytrytojustifythis“aseliminatingcost-shifting”itcouldmoreappropriatelybecalledfreeridingbythehigh-income,priceinelasticconsumers,onthelow-income,priceelasticconsumers”(Danzon&Towse,p.190).57

Page19565-567ff

“(…)preventthecompleteexclusionfromthereimbursementofexpensivemedicineswith(still)uncertainclinicalbenefitandthusgrantaccesstomedicines,sothatthepatient'shopesdonothavetobedisappointed“

Grantingfastaccesstonewmedicinesisnotjustaboutnotdisappointingpatients–thereareoftengood,clinicalreasonstointroducemedicinesbasedonpreliminarydataeventhoughtheremaynotbeevidenceonlong-termbenefitsyet.

Page19570-572ff

“MEAs(a)provideaccesstomedicineswithuncertainclinicalbenefitand-atalaterstage-itisdifficulttoargueagainstpatientswhytheyarenotreimbursedanymore(dynamicconsistencyproblem)”ThisisamoregeneralissuethanjustrelatingtoMEAs–healthcaresystemsshouldasamatterofgoodpracticemonitortheeffectofdifferenttherapiesonpatientsandreassessinsituationswhenthepatientisnotrespondingtotreatment.So,thisargumentcannotbeholdagainstMEAsingeneral.

Page20569ff

“Theseagreementsmayalsobringdisadvantages,withthefollowingonesbeinglistedintheexistingliterature:MEAs(a)provideaccesstomedicineswithuncertainclinicalbenefits(…)”ThedraftopinioncitesdifferentdrawbacksforMEAs.However,inthislist,someaffirmationsdonotcorrespondtodrawbacksbutrathertoconditionsforasuccessfulimplementationofoutcomes-basedMEAs.Forinstance,thedraftopinionsaysthatMEAsareassociatedwithadditionalcostsforimplementation,especiallywhentheyarebasedontheclinicaloutcomesdata,andthatthisrequiresawell-functioningITsupport.ThedraftopinionusesthetermMEAsasagenerictermtodescribeallMEAsandalsoasatermtoreferto“outcomes-basedMEAs”.Moreover,thetopicrelatedtotheITinfrastructureneededtosupportoutcomes-basedMEAscouldhavebeenfurtherdevelopedinthedraftopinion.

Page20574ff

“MEAsunderminethecurrentsystemofinternationalpricecomparison(ExternalPriceReferencingEPR)sinceMEAsusuallycontainconfidentialinformationondiscounts,whileEPRisonlyreferencedtolistpricessincethediscountedconfidentialpricesarenotknown”.Therealproblemisthatexternalpricereferencingpreventsdifferentialpricing,thatistosaythepossibilityforpricestobesetaccordingtothecharacteristicsandtheabilitytopayofacountry.Externalreferencepricingandtransparencyofnetpricespushforaconvergenceofprices,whichcandeteraccesstomedicinesinsomecountries,especiallythosewithalowerabilitytopay.Confidentialityofnetpricesisimportantto

57 PatriciaM.Danzon&AdrianTowse.DifferentialPricingforPharmaceuticals:ReconcilingAccess,R&D

andPatents.InInternationalJournalofHealthcareFinanceandEconomics,3,183-205,2003.

22

enabledifferentialpricing.Oneareaofconcerninexternalreferencepricingdiscussionsisthefailuretocompare“likewithlike”.Thecurrentexternalreferencesystemisflawedinaworldofdrugswithmultipleindications.ItisnotgoodpracticetoexpectthepriceofavialincountryA,wheremanyindicationsareapproved,tobecomparabletothepricesincountryB,whereonly1indicationmaybeapproved.ConfidentialMEAshelptonormalizetheissuesofcomparabilityofconditionsbetweentwocountrieswherethebreadthofindicationsand/orpatientsmaynotbeequivalent.

Page20ff(Areasofinnovation)588-623ff

“Anotheroneisthatcurrentincentivesrewardcompaniestodevelopmainlymedicinesoflittleadvantageratherthandevelopingsuperiormedicinesaslongashavinganewproductbringswithittheimplicitpromiseofhighprice.Only1in10drugsbroughttothemarketisconsideredatrueinnovationandimportanttherapeuticgaindefinedbyclinicaladvantagesforpatients.Viceversa9in10drugshavenooronlymarginalclinicaladvantagesforpatients[…]”.Itisnotclearwhytheseparagraphsarehere.Thevariousclaimsaboutthelackofrealinnovationhavenothingtodowithinnovativepaymentmodels(oratleastthedraftopiniondoesnotmakesuchalink).Moreover,therearemanycategorisationsofwhetherproductsareinnovative.Thereismuchwiderliteraturethatthedraftopinioncoulddrawupon.RoughlyfouroutofeveryfivenewcancermedicineslicensedintheUSandEUbetween2003-2013,andevaluatedbyEnglish,FrenchandAustralianHTAagencies,demonstratedsomeevidenceofanoverallsurvival,qualityoflife,orsafetybenefitoveralternativetreatments.58Therefore,forthemostpart,innovationintheoncologydrugmarketappearstobebringingrealvaluetopatientsandsociety.ByMay2017,theEuropeanCommissionhadgranted1,868orphandesignations,and133OrphanMedicinalProducts(OMPs)hadobtainedmarketingauthorisationacrosstheEUsincetheimplementationoftheEURegulationonOrphanMedicinalProducts(OMP).59Inaddition,long-lastingtransformativeeffectsoftreatmentssuchascellandgenetherapiesarelikelytoprovidehopetopatientswhohavenotreatmenttodayandtoreduceongoingcostsofpatientsupportandmanagementofchroniccomorbidities,therebyoffsettinghigherlifetimecosts.

Page20589ff

“Additionaltothehighergrowthofmedicinesexpenditurerelativetoincomegrowthandoverallhealthexpendituregrowth,otherconcernsarepresent”Asnotedabove,lines97-98,recentdatafromtheOECDshowsthatretailpharmaceuticalspendingpercapitaismorecontainedthangrowthinotherpartsofthehealthcaresystem(2009-2015).60Theshareoftotalhealthexpenditureattributedtomedicineshasremainedbroadlyconsistentoverthelastfifteenyears,thoughwithyear-to-yearvariabilityinsomecountries.

Page20585ff

“However,they(MEAs)areadministrativelycomplexandmaybedifficulttonegotiateandtheireffectivenesshasyettobeevaluated.Moreover,theyaredesignedtoaddresstheissueofuncertaintyaboutthevalueoftheeffectivenessofthedrugandnotthe(high)pricetagortherisingpharmaceuticalexpenditure”.

58 Salas-VegaS., Iliopoulos,O. andMossialos, E. (2016)AssessmentofOverall Survival,Qualityof Life,

andSafetyBenefitsAssociatedwithNewCancerMedicines.JAMAOncology59 AnalysisofdatafromtheEMAwebsite60 OECD,HealthatGlance,2017.

23

MEAscanalsobeusedbygovernmentsandpayerstoaddressbudgetuncertaintythroughfinancialagreements(e.g.price-volume)oroutcomes-basedagreements(e.g.paymentperresults).Therefore,MEAscanbeanappropriatetooltomanagepharmaceuticalexpenditure.

Page20590-591

“The(lackof)developmentofmedicinesforsmallgroups,whichmayraisefairnessissues,isoneconcern”.ThedraftopinionhereseemstosuggestthatthereisalackofR&Donorphanmedicines.However,elsewhereinthedraftopinion,thecurrentpatentandmarketexclusivityrulesareregardedasaproblemasitencourage“orphanisation”.

Page21608-610

“Newpaymentmodelsthatrewardanynewdrugirrespectiveofthetherapeuticvaluetheybringcan,infact,bedetrimentaltothesocialvalueofR&Deffortscomparedwithalternativediscoveries”.Itisunclearwhichnewpaymentsmodelsarereferredtohere.Itwouldhavebeenbeneficialifthedraftopinionelaboratedmoreonwhichinnovativepaymentmodelsarebestatoptimizingtheseobjectives,ratherthanmakinggeneralstatements.

Page23671-674ff

“Aselementssuchefficacyandsafetyaremeasuredalongtheway,adifferentproblememerges–theuseofproductsthathaveanefficacylevelthatundernormalconditionswouldnotleadthemtobeapproved”.Itisuncleariftheterm“approved”herereferstoMarketingAuthorisation(bytheEMA/Commission)orreimbursement(byanationalauthority).EfficacyisnormallyassessedbytheEMA,eitherfullyatthetimeofMarketingAuthorisationorthroughPost-authorisationefficacystudies.

Page24685ff

“ThereisanelementofexerciseofmarketpowerpresentinthehighpricesaskedthatisnotaddressedbyMEAsbydesign”Thissentenceisunclear.ThedraftopiniondoesnotindicatewhichpricesandkindsofMEAsitisreferringto.MEAsareconcludedbythemanufacturerandthepayerwhoalsobenefitfromsomemarketpowerduetothefactthattheyrepresentallthepatientsfromtheircountries.Thereferencetohighpricesisnotbackedupbyanyevidence.

Page24680-684ff

“FromaliteratureperspectivethereseemstobeageneralagreementthatMEAscan,undercertainconditions,helptoaddresspost-licencinguncertaintyandenablepatientearlyaccesstoinnovativetreatments.Ingeneral,MEAsofferflexibilityindealingwithnewandoftenexpensivetechnologies,whicharecharacterisedbysignificantlevelsofuncertaintyabouttheireffects”.MEAscontainarangeoftools,whichofferflexibilityforpayersandcompaniestosolvecertainissuesregardingtheuncertaintyofclinicaloutcomes,andthebudgetimpactrelatedtotheintroductionofnewinnovations.DifferenttypesofMEAscanbebestsuitablefordifferentsituations(e.g.dependingonproducttype,diseaseareaandpatientpopulation),andthereisthereforeno“onesizefitsall”.FurthermoreMEAsshouldnotbeconsideredthegeneralruleforaccess,butanoptionwhencertainissuescannotberesolvedthroughthenormalP&Rprocess.

Page25 “Opportunitiesidentifiedrangefromuseofadditionalinformationonreal-use

24

708-713ff characteristicsofnewproducts(rankinghighinhealthcarepayerperspective)tofasteraccess(rankinghighinpatients’perspective)andtopublicimagebenefits(rankinghighincompanies’perspective).Fromthese,ithasbecomeclearovertimethatinformationobtainedissmallerthanexpected,andopportunitiesrelatedtoitwerehardtomaterialize”.ManyoftheopportunitiesofferedbyMEAs,especiallyconcerningthecollectionofinformationontherealworldperformanceofmedicines,couldbefurtherdevelopedtothebenefitofmanystakeholders,includingforthepurposesofR&Dandtheimprovementofhealthcarequalityandefficiency.ThisdoesnotmeanthatMEAshavefailedtodeliveruptothispoint,butthatallstakeholdersarestilllearninghowtobestsetupthesesystems.

Page25728–764ff

OnHealthSystemPerformance(section3.2.2)Healthsystemperformanceshouldnotonlybeassessedfromtheperspectiveofuseofpharmaceuticals,butinaholisticperspectivetakingintoaccountallproductsandservicesandorganizationalaspectsofthehealthcaresystem.Medicinesconstituteanelementofacarepathwayincombinationwithotherproductsandservices(includingdiagnostics),andwherethedeliveryofcare,theroleofhealthcareprofessionalsandfactorssuchasfollow-upservicesandpatientadherenceareimportantforthefinaloutcomeofthetreatment.Itisimportantthatallelementsofahealthsystemareassessedandimprovedinordertocutwasteandinefficiencies,andimproveoutcomes.

Page26738ff

“Theacceptedassociationbetweenvalueandpriceshasledtoapracticeofindication-slicingtosecurehigherprices,asonceapricesetforanindication,typicallythemorecost-effectivetocommandalargerprice,anumbrellaextensionofpricesisbeneficialtomanufacturersandnon(…)”Contrarytowhatisarguedinthestatementabove,thepurposeofindication-basedpricingistoreflectbettertheclinicalvalueprovidedbyamedicineacrossindications.Indications-basedpricingseemsmoreadequatethatasinglepriceforamedicineforallindicationstoaddresstheaccesschallengescausedbytheincreaseduseofmedicinesinmultipleindicationsandincombinations.Indeed,todaythepriceofcombiningmoleculesforagivenpatientisusuallysetatthelevelofthesumofthepricesoftherespectivemonotherapies,irrespectiveoftheaddedclinicalbenefitprovidedbythespecificcombination.Whenbothmedicinesinthecombinationcomefromthesamemanufacturer,currenttoolssuchasMEAsmayallowfortailoredpricingapproaches.Whenproductsfrommultiplemanufacturersarecombinedhowever,anti-trustlawsandcurrentpricingandreimbursementsystemshampertheabilitytonegotiateonthebasisoftheclinicalprofileofthecombination.Asaconsequence,patientaccesstotheseinnovativecombinationtherapiesmaybedelayedornotgrantedatall.

Page26758ff

“Theimpactofmedicinesonhealthcarecostsoccursthroughthreemainchannels:prices,quantities(consumptionlevel)andcostoff-set(whenspendingmoreinpharmaceuticalproductsimpliesspendinglessinothertypesofcare.Thedifficultiesofthecurrentpaymentmodelstohealthsystemsperformancebecameapparentwiththefirstcaseofahighvolume–highpricedrug(sovaldi)whichwasapre-announcementofforthcomingdrugsaskingforaveryhighpriceandnotrestrictedtoasmallnumberofpatients.”ItisunclearwhatismeantbySovaldibeingapre-announcementofforthcomingdrugs.Thisassertionisnotsupportedbyanyevidenceinthedraftopinion.

25

CommentsonSection3.3:PropertiesforpaymentmodelsofinnovativemedicinesPage CommentsPage27776–789ff

“AfirstconsiderationisthatnewpaymentmodelsshouldimplicitlydirectR&Deffortstodevelopmentofbreakthroughproductsthatcanbeconsidereddisruptiveinnovation,andnotjustincrementalinnovation”.Onetypeofdisruptiveinnovationwhichisnotdiscussedverymuchinthedraftopinionistheshiftfromtreatmentstocuresornear-curesthate.g.canbeseeninnewcell-andgenetherapiesforarangeofdiseasesandconditions(e.g.hemophiliaandleukemia).Movingfromapatternofregulartreatmentsdispersedoveralongtime(maybetheentirelifetimeofapatient)toasingular,high-costinterventionrequiresnewwaystopayforhealthcareproductsandservices.Thisshouldhavebeendiscussedmoreinthedraftopinion,andexamplesgivenofgoodpracticesandinnovativemodelswhichcansupporttheintroductionofthesetypesofinnovations.TheEXPHconcludes“insum,newpaymentmodelsneedtorewardmoreinnovateanddisruptiveproductsthanincrementalones”.Thissuggeststhatincrementalinnovationisnotvaluable.Inreality,incrementalinnovationishighlyvaluableintermsofimprovingefficacyofproducts,improvingadministrationthatimprovesadherence,providingcompetitioninthemarketandcreatingthefoundationforthenextbreakthroughinnovation.Notallinnovationcanbedisruptive,anditwouldbeamistaketoneglecttheso-called“incrementalinnovation”asthisishowmosthealthcareproductsandservicesnormallyevolveandtheincentivesforinnovationmustrewardalsothesetypesofinnovation.

Page28798-802

“Paymentshouldbemadeforproductsthatareworthwhile.Inthisassessment,thevalue-basedhealthcareapproachprovidesamethodologytomeasurementofresultsthatmattertopatientsthatshouldpursued.Notethatidentificationofrelevantdimensionsofbenefitsandthedefinitionofmeasurementapproachesdonotforceaparticularmechanismforpricedeterminationtobeadopted”.EFPIAsupportstheconceptofvalue-basedhealthcaremodelsasthemostappropriatewaytodesignhealthcaredeliveryandrewardinnovationwiththefocusondeliveringthebestpossiblehealthoutcomesforpatients.However,itisimportanttoadoptavalue-basedapproachonthehealthcaresystemasawhole,notjustformedicines,asallpartsandelementsofthesystemmustfunctionincoordinationinordertodelivertheseresults.Thishasalsobeensupportedbymanyacademicsandpolicymakersalike.61

Page28809–

“Takingtheprinciplethatpaymentmodelsneedtoberelatedto“outcomesthatmatter”forpatients,itfollowsthatnogeneralpricingrulecanbesetex-ante.The

61 OfficeofFairTrading.ThePharmaceuticalPriceRegulationScheme.AnOFTMarketStudy.London:OFT,

2007. Available at http://www.oft.gov.uk/shared_oft/reports/comp_policy/oft885.pdf (accessed27/03/2007)

26

815ff

paymentmodelmustthenestablishaprocedurethatwillleadtoaprice.Suchproceduremayinvolvesophisticatedmethodstodefine“whatmatters”forpatientsandwhichpayersarewillingtopayfor,andmayinvolvepriceadjustmentsovertime,asinformationaboutthetruevalueoftheproductisrevealed”.Makingthesemodelsworkatscalerequiresmorealignmentupfrontonwhichoutcomesthatshouldbemeasuredacrossthehealthcaresystemsfordifferentdiseasesandconditions,asthesemetricswouldnotonlybeimportantforpaymentmodelsbutalsoforoutcomesresearch,identificationofbestpracticeandoptimizationofpatientpathways.Theimplementationofstandardsforoutcomesmeasurement,suchastheInternationalConsortiumForHealthOutcomesMeasurement(ICHOM)standardsets,shouldthereforebeencouraged.

Page28803ff

“AnotherprincipletoconsideristhatnewpaymentmodelsshouldnotbebasedonpayingforR&Dincurred.Paymentmodelsthataresolelybasedoncostsincurredprovideanincentivetocompaniestoinflatecostsasawaytosecurehigherpayments.A“costplus”approachtopricingwouldnotrespecttheprincipleaboveofprovidingincentivesfornewproductswithhighbenefitstopatients.Asitwillbearguedbelow,costtransparencyisimportantthoughnotasawaytobuildthepricethatrewardsinnovation”.Weagreewiththedraftopinionthatthe“costplus”approachwillnotcreateincentivesfornewinnovationsandwillbeinefficient.

Page28809-815ff

“Takingtheprinciplethatpaymentmodelsneedtoberelatedto“outcomesthatmatter”forpatients,itfollowsthatnogeneralpricingrulecanbesetex-ante.Thepaymentmodelmustthenestablishaprocedurethatwillleadtoaprice.Suchproceduremayinvolvesophisticatedmethodstodefine“whatmatters”forpatientsandwhichpayersarewillingtopayfor,andmayinvolvepriceadjustmentsovertime,asinformationaboutthetruevalueoftheproductisrevealed.Theuseofcontractsforpaymentmayreplaceasimplepriceannouncement.”Theindustrywouldagreewiththisconclusionandthatifproductsareabletoshowgreatervaluetopatientsandsociety,thenthepricepaidshouldbeadjustedtoreflectthisvalue.However,inEuropeanmarketspricesoftenareadjusteddownwardsandrarelyisitpossibletoputpricesup.Forexample,mandatorypricedecreasesarecommon.ThisiswellillustratedbyasurveyconductedbyOBIG(AustrianMinistryofHealth)andtheWHOEuropeanRegionalOffice,whichdocumentedallofthepolicyinterventionsrelatedtomedicinesmadebythehealthauthoritiesovertheperiod2010-15in32Europeancountries.62Ofthe557measuresreportedthevastmajorityconsistedofausterityinterventionstocutpricesofmedicines,tolimitlevelsofreimbursement,increaselevelsofpatientco-pays,orintroducenewformsofexternalreferencepricingwithotherEUcountriesthatmaybeusedtoenforcefurtherpricereductionsinthefuture.Indeed,itcanbearguedthatthenumberofadhocpricereductionsinsomemarketsincreasesthepressureonpriceswhenaproductfirstentersthemarket.

Page29843-857

“Onepopularthemeinthediscussiononaccesstonewpharmaceuticalproductsisthecalltodropthe“silomentality”.”WesupporttheEXPHsdiscussiononbreakingdownsilosacrosselementsofthehealth

62 Vogler, S., Zimmermann,N.andde Joncheere,K. (2016)Policy interventions related tomedicines:

SurveyofmeasurestakeninEuropeancountries2010-2015.HealthPolicy

27

carebudgetandtheirviewthatthiswouldincreaseefficiency.Spendingonpreventionormedicinesshouldnotonlybeviewedasacostbutalsoasanopportunitytosavemoneyinotherpartsofthehealthcaresystem.Currentbudgetingpracticesareoftentooshort-term,nottakingintoaccountfuturebenefits.ThisisasignificantissueandonethattheEXPHhasnotgivenenoughconsiderationtoo.Thiscouldleadtodifferentpaymentmechanismsthatallowspendingtoreflectevidencethatfuturecostsareoffset.However,theEXPHconcludes:“thesearguments,however,donotcallforaparticularsystemofpricedeterminationfornewpharmaceuticalproducts”.Thisappearstobeamissedopportunityforausefuldiscussiononinnovativepaymentmodels.

Page30862-870

“Theuseofgenericsandbiosimilarsisoftenregardedasacontributingelementtolowerthefinancialpressureonhealthcarepayers.Inthatlineofargument,theyopenbudgetspacetopaythenewinnovativeproducts.Alltheseareasforpublicpolicyinterventionshavemeritthoughtheyarguablydonotaddressthefundamentaltensiononthepricingofnewpharmaceuticalproductsbetweenaccessandinnovationincentives”TheEXPHdraftopinionhasassertedthatthereisatensioninthecurrentpricingmodelsbecausethesystemisunsustainable.Thisdoesnotappearconsistentwiththeevidence.However,theythenarguethatpoliciesthatcanimprovesustainability(genericsandbiosimilars)donotaddressthefundamentaltension.ItwouldappearthatdifferentauthorsoftheEXPHdraftopinionhaveverydifferentunderstandingsoftheproblemtheyaretryingtosolve.Thesecontradictionsmeanthatthepolicyrecommendationsareofteninconsistentandillogical.

Page31875-876

“Thisbringscompetitiontothemarket,andlowersthepriceofdrugs”.Theauthorsassertthatcompetitiononlyappliesafterpatentexpiry.Howeverthereiscompetitionalsointheon-patentsegment.Forinstance,intheHepatitisCmarket,competitorstothefirst-on-marketdrug(Sovaldi)havesignificantlydrivendownprices.Asnew,competingtreatmentsenteredthemarket,netpricesofHepatitisCdrugsdecreasedsignificantlyintheUSandinEurope,andthewidelydiscussedhighpricesofthesetreatmentsisestimatedtobe50%lowerin2016afternegotiatedrebates.63Forinstance,inFrancethepriceofSovaldidroppedfrom€41,000eurostolessthan€28,700eurosinApril2017.64

63 QuintilesIMS(2017)MedicinesUseandSpending intheU.S.:aReviewof2016andOutlookto2021 64 IP Watch website [last access 27 November 2017]: https://www.ip-watch.org/2017/03/31/france-

reaches-agreement-gilead-drop-prices-hepatitis-c-treatment/

28

Direct-actingAntiviralDrugsforHCVintheUS65

Drug FDA-ApprovedIndication

Daklinza-daclatasvir Genotypes1-6

Epclusa-sofosbuvir/velpatasvir(Gilead) Genotypes1,4

Harvoni-sofosbuvir/ledipasvir(Gilead) Genotypes1,4,5,6

Olysio-simeprevir(Janssen) Genotypes1,4

Sovaldi-sofosbuvir(Gilead) Genotypes1,4

Technivie-ombitasvir/paritaprevir/ritonavir(Abbvie) Genotypes4

ViekiraPak,ViekiraXR-dasabuvir/ombitasvir/paritaprevir/ritonavir(Abbvie) Genotypes1

Szepatier-elbasvir/grazoprevir(Merck) Genotypes1,4

Page31880

Anotherintertemporaleffectisassociatedwithtoomuchcurrentuseofproductsleadingtoantimicrobialresistance,resultinginhighertreatmentscostsforfuturegenerations.Theauthorssuggestthattwotypesofintertemporaleffectsareimportant.Thefirstoneisthattoday’spatientspayforinnovationthatfuturepatientsalsoreceive.Thisistruebutgivenon-goinginnovationinthepharmaceuticalindustry,thisshouldnotbeseenasaproblembutratherasagainforsociety.Theyalsohighlightanti-microbialresistance(AMR)andoveruse.Thisisalsotruebutisaveryspecificproblem,andhardlyrelevantforotherclassesofpharmaceuticals.ThereisaconsiderableamountofworkbeingundertakenonAMRandthisshouldbeperhapslefttootherexperts.Thepaperdoesnotacknowledgethetremendousscientific

66andregulatory

67challenges

facingantibioticdevelopers,norindustry’spartnerships68andongoingworktobothcall

attentiontoAMRanddevelopnewmedicinestocombatit.69Industryappreciatesthe

urgentneedforasustainablebusinessmodelforthesecriticalmedicines,withoutwhichanyinterventionstodevelopnewmedicineswillbelimited.

70,71,72

65 The Medical Letter (2016) In Brief: Hepatitis B Reactivation with Direct-Acting Antiviral Drugs for

HepatitisC.(24October2016)[LastAccessed15June2017]:https://secure.medicalletter.org/w1506b66 Silver,L.(2011)Challengesofantibacterialdiscovery.ClinicalMicrobiologyReviews67 Gupta,S.andNayak,R.(2014)DryAntibioticpipeline:Regulatorybottlenecksandregulatoryreform.

JournalofPharmacologyandPharmacotherapeutics68 IFPMA(2017)NewAlliancetoDriveandmeasureindustryprogresstocurbantimicrobialresistance69 Review on Antimicrobial Resistancewebsite. Declaration by the Pharmaceutical, Biotechnology and

Diagnostics Industries on Combating Antimicrobial Resistance. [Last Accessed 28 July 2017]https://amr-review.org/industry-declaration.html

70 O’Neill, J. (2015)SecuringNewDrugs for FutureGenerations: The Pipeline of Antibiotics.WellcomeTrust71 OECD,WHO,FAO,andOIE (2017).Tacklingantimicrobial resistance:EnsuringsustainableR&D.Note

preparedforthe2017G2072 EUOneHealthActionPlanagainstAMR(2017)

29

Despitetheenormoustechnicalchallengesand“noincentivesforprivatecapital,”therewere34antibioticsandinfectionpreventingvaccinesinourglobalpipelinelastyear,withindustryspendingaround$6billiononR&Donanti-infectivetreatmentalone.

73

Moreover,industrycontributesaspartoflocal,regional,andglobalpartnershipstocombatAMR,includingthroughtheInnovativeMedicinesInitiativeandasemphasisedbythemostrecentG20Leaders’DeclarationinGermany.

74

Page31895-896

“Thetraditionalpaymentmodelbasedondefiningasinglepriceperunitofdrug,linearpricemodel,hasonlyoneinstrumenttoachievetheseveralobjectives”TheEXPHdraftopinioninthissectionappearstoarguethatmedicineshaveasinglelinearprice.Inreality,MEAcommonlymeanthatthepriceofaproductdiffersifthevolumechanges,orvariesbyindicationorpatientpopulationorbasedonnewevidenceandinformationabouttheproduct.Itisnotalinearsystemtoday.Othersectionsofthedraftopinion,perhapswrittenbyotherauthorsrecognisedthis.

Page32902ff

“Althoughintellectualpropertyprotectionhasbeenthecornerstonetofosterinnovationbyprivatecompanies,inmedicinesaswellasacrosstheeconomyitcanbequestionedwhetheritcanorshouldbereplacedorcomplementedbyotherwaystorewardinnovationinthehealthcarefield(say,prizesfordiscoveries,followedbyaimmediategenericsstrategy)The“internationalprizeinitiative(fordiscovery)”isanideatobeconsidered,inparticularintheareaoftreatmentswheretherearenoincentivestoR&D,e.g.Antimicrobialresistance.However,intellectualpropertyandmarketincentivesremainasimportantasever.IPprovisionshavecreatedthepreconditionsforasustainedcommitmenttoinnovationoverthelasttwodecades.Withover7,000productscurrentlyunderdevelopment,weareseeingthefruitsofthateffortandofastableincentivesframework75.Farfromdiminishing,theroleofIPandmarketincentivesthereforeremainsasimportantasevertofosterinnovationincludinginunmetmedicalneeds.ThecompetitionforR&Dinfrastructureandskillsisincreasinglyglobal,requiringcountriestoadjusttoremainattractiveforinvestment.ChinaandseveralotheremergingmarketsaredeliberatelyinvestingtocreatetherightincentivestoattractglobalR&Dfundingandtocreatecompetitive,world-classinnovationleaders.In2005,investigatorssitesinvolvedinpivotaltrialsoutsideoftheUSandEuropeaccountedforlessthan10%ofallsites;thesharehasnowgrownto28%by2011,testamenttoqualityofclinicalresearchandtestingnowbeingconductedinemergingmarketsandtheincreasingimportanceofthesemarketsininvestmentdecisions76.WhileEuropehasmanystrengths,inencouragingbiotechinvestmentandtheformationofSmallandMediumsizedEnterprises,therealityisthatthegapwithothermarketsisnarrowing,withcentreslikeSingaporeandShanghaiincreasinglyseenasmoreattractivethanEuropeforinvestment.Inthatcontext,itisimportantthatEuroperemainsattheforefrontofglobalstandardsfortheuseofincentivestodrivesociallyproductiveinnovation.

73 Pisani,E.(2016)Steppinguptotheplateonantimicrobialresistance.OECDInsights74 Berlin Declaration of the G20 Health Ministers. [Last Accessed 21 July 2017]:

https://www.bundesgesundheitsministerium.de/fileadmin/Dateien/3_Downloads/G/G20-Gesundheitsministertreffen/G20_Health_Ministers_Declaration_engl.pdf

75 HealthAdvancesanalysis;AdisR&DInsightDatabase.76 EMA. Clinical trials submitted in marketing-authorisation applications to EMA. Overview of patient

recruitmentandthegeographicallocationofinvestigatorsites(accessed2017).

30

WeagreewiththeEXPHthatpricesshouldnotbethesinglewaytorewardinnovation.However,thisisunrelatedtotheneedforastableIPsystemthatencouragesinnovatorstoinvestincostlyandriskyinvestmentprogrammes.

Page32915ff

“Pharmaceuticalcompanieshaveprovedtobequiteadaptabletotheeconomicenvironmenttheyface.Theyhaveadjustedtothenewincentivestodeveloporphandrugs.Somemayarguetheyadjustedtoomuch,asmanydrugsarenowpresentedinitiallyasindicatedforafewnumberofpatientsinwhichtheyarehighlyeffective(andthuscommandahighprice),benefitingfromorphandrugs’specialtreatment.Later,expansiononindicationstouseoftheproductbringsscaletoactivity”.Rarediseasesareserious,oftenchronicandprogressivediseases.77Theorphanmedicinesdesignationhassuccessfullyencouragedinvestorstoenablethedevelopmentofessentialtherapiesforpatientsinneed.Thissuccessresidesinthefactthatthelegislationhascreatedanecosystem,whichincludesdesignations,interactionswithregulators,andsomeprotectionofrevenuethroughmarketexclusivityrightsregardlessofthepatentornewchemicalentitystatus.Evenso,thecostoforphanmedicinesaccountsforasmallshareoftheoverallprescriptionmedicine(in2015,IMPsaccountedforsome4%oftotalmedicinecostacrosstheEU5),78andisexpectedtoremainsustainable.79,80

Intermsofprices,evidencedemonstratesthatthemediancostofmorethan70orphandrugsapprovedbytheEuropeanMedicinesAgencyupto2014,wasGBP30,000perannum.Thestudyshowsthat24%ofallorphandrugsconsideredhadanannualcostlessthanGBP10,000,whileonly18%hadanannualcostofmorethanGBP100,000.81Orphandrugswithmorethanoneindicationarenotcommon.

Ananalysis of the93orphandesignatedmedicineswithmarketing authorisationasofSeptember 2016, found that following initial marketing authorisation:82 Only 11% oforphanmedicinesexpandedlicensetoincludeanewindication(newdisease),only16%oforphanmedicinesexpandedlicensewithininitialindication.Furthermore,thebenefitsof orphan designation do not apply to the non-orphan indication. If medicines withorphan and non-orphan indications wish to retain an OMP designation, they will becommercialisedunderdifferenttradenamesandhaveseparatemarketingauthorisation.

Orphandrugregulationsupportsthedevelopmentofmedicinesinareasofgreatunmetneed.IntheEU,theEMACommitteeonOrphanMedicinalProductsonlyapprovesorphandesignationtomedicinesindicatedforarareandseriousconditionforwhichtherearenoexistingtreatmentoptions,orwheretheproductbringsasignificantbenefitoverexistingoptions.83

77 Orphanet website. [Last Accessed 12 July 2017]: http://www.orpha.net/consor/cgi-

bin/Education_AboutRareDiseases.php?lng=EN78 IMSInstituteDataSeptember201579 ScheyC.(2011)EstimatingthebudgetimpactoforphanmedicinesinEurope:2010-2020.Orphanet

JournalofRareDiseases80 Hutchings,A.,Schey,C.,Dutton,R.,Achana,F.andAntonov,K.(2014)Estimatingthebudgetimpactof

orphandrugsinSwedenandFrance2013–2020.OrphanetJournalofRareDiseases81 OnakpoyaI.J.,Spencer,E.A.,Thompson,M.J.andHeneghan,C.J.(2015)Effectiveness,safetyandcosts

oforphandrugs:anevidencebasedreview.BMJOpen82 DolananalysisofEMAstatistics 83 Giannuzzi, V., Conte, R., Landi, A., Ottomano, S.A., Bonifazi, D., Baiardi, P., Bonifazi, F. and Ceci, A.

(2017)Orphanmedicinalproducts inEuropeandUnitedStates tocoverneedsofpatientswith rarediseases:anincreasedcommoneffortistobeforeseen.OrphanetJournalofRareDiseases

31

Page32922-928

“Companiesareabletosetattentionofpayersintothelogicofpayingevermoreundertheapproachthatanypricethatguaranteesthatcost-effectivenessisbelowapre-definedthresholdisfair”Inthisargument,theEXPHclaimsthatbysettingathresholdinthecost-effectivenesssystem,payershavebeeninvitedtopayhigherprices.Theindustrydoesnotsupportartificialrigidthresholdsandhasarguedagainstthem.Wherecountriesusethresholds,theHTAprocessisaninputintothepricenegotiationprocess,andthereforedoesnotdetermineprices.Moreover,ifwelookatICERforproductsthatgothroughasystemwithathresholdyoufindarangeofproductsaboveandbelowthethreshold.TheargumentadvancedbytheEXPHdoesnotmakesense.

Page33929-933

“ThefocusonincentivestoR&Dinvestment(andthushigherpricesforbetter,morevaluableinnovation)shouldnotleadautomaticallytothehighestpricepossibleaschosenbycompanies.Theapproachofuncheckedpricingbehaviourforproductsunderpatent(meaningnotbeingassessesasexerciseofmarketpowerbycompetitionauthorities),commoninmostindustries,breaksdownhere”Pricesarenotchosenbycompaniesbutbasedonacomplexvalueassessmentprocessandthenaprocessofnegotiation.Thisprocessinvolvescompetitionbetweencompanieswithcompetingproducts.

Page33933-938

“Thelimitonveryhighpricesforinnovativeproductsinotherindustriesresultsfromsensitivityofconsumers’demandtoprice–atveryhighpricessome,ormany,consumerswillstopusingtheserviceorconsumingtheproduct.Inhealthcare,theexistenceofhealthinsuranceprotection(publicorprivate)eliminates,ordecreasesconsiderably,theroleofdemandsensitivitytoprice(atthegainofthevalueofinsuranceprotection).”Thepanelarguesthatbecausepatientsarecoveredbynationalhealthinsuranceschemes,andhencearenotresponsibleforpayingthepriceofthemedicines,thisreducesthepricesensitivityofthemarket,contributingtohigherprices.Onthecontrary:first,patientsasconsumerswouldbeinaweakpositiontonegotiatepriceinacontextofalife-savingmedicine(notwithstandingthatthiswouldbeunethical).Second,delegatingthenegotiationtoapayerdefactoincreasesthenegotiationpowerintworespects:a)monopolizingthenegotiationpowertoasingleagentrepresentingmultipleconsumers,b)makingtheprocurementmoreobjectivesincethepayerisnotaffectedbytherespectivedisease/healthsituationandcanmakeaneutraljudgmentaboutvalue.Third,payershavedevelopedasophisticatedvalueassessment,whichwouldnotbepossibleforpatients.Inconclusion,patientsmaybelessprice-sensitiveintermsofhealthresourceusebecauseoftheinsurancesystem;however,intoday’senvironmentthepriceisdeterminedbythepayerwhoismuchmorepowerfulthantheindividualpatient.

Page33946-948

“Oneexampleoftheimportanceofadequatelyframingthepricedeterminationprocessisgivenbytherulethatifaproductmeetsacertaincriterion(acertainthresholdforincrementalcost-effectiveness)thenitmustbeapprovedforreimbursement”Thisrepeatstheargumentsetoutin922-928.Inadditiontothecriticismwehavesetout,itisalsonotthecasethatproductsadjudgedtobecosteffectiveareautomaticallyreimbursed.Sovaldiisagoodexampleofthat.Indeed,whiletheproductwasconsidered

32

tobecosteffective,thereweresignificantdelaysintheeffectivereimbursement.

Page33953-955

“Thedirectimplicationisthatdefiningpaymentmodelsforhigh-costinnovativemedicinesisanissueofhealthsystemdesign,notanissueoffindingaparticularcontractforpricesofaparticulardrug”Weagreethathealthsystemdesignisimportantandthereneedstobeaframeworkforcontractthatbringsbenefitstopatients,thehealthcaresystemandinnovation.Toalargedegreethisalreadyexistsinmanymarkets.MEAshavebeenusedextensivelybyarangeofcountries.OthercountriesarechangingtheregulatoryrulestoallowMEAstobeusedinthefuture(theirvaluewasalsorecognisedbytheOECD).84Forexample,inFrance,pharmaceuticalpricingreliesonanex-anteevaluationofthemedicalvalueofdrugs.Pricesarenegotiatedonthebasisofanindustry-widecontractbetweendrugmanufacturersandtheHealthProductsPricingCommittee(ComitéEconomiquedesProduitsdeSanté).TogethertheCommitteeandthedrugcompaniessignanumberofcontractualagreements,whichgivethenationalhealthsystemavarietyofflexiblemeanstomonitorpricesanddruguse,alsoensuringthatpublicresourcesareproperlyallocated.85Confidentialclausesareessentialforthesetoworkeffectively.

Page34967-970

“The“uncertaintymotive”forusingMEAsshould,statisticallyleadtosomeproductsbeingdelists.”ThedefinitionofdelistingusedbytheEXPHisunclear.TheconditionsrequiredinMEAsvariesfromagreementtoagreement.Insomecases,thisrestrictstheusetoparticularpatientpopulationsandinsomecasesaffectsthepriceofthemedicines.ItisunclearwhydelistingisasimportantasEXPHconcludesit.

Page34980-981

“Somehealthsystems,theonesnotbasedonasingle(ormajor)healthcarepayer,faceanadditionalissueofcoordinationacrosspayers,whichcaneventuallybeaccusedofcollusionifinformationaboutpaymentmodelsandvaluesissharedandalignmentofmodelsiscoordinated.”Thisanalysisisconfusing.Wheretherearemultiplepayerstheycanconcludetheirownagreements.Indeed,thisisexactlywhatweobservewithsickfundsinGermanyorhospitals.Equally,payersoftenworktogetherasinjointnegotiationandinsharinginformation.TheEXPHraisesanimportantissueofpotentialcollusion.Thisisnotconsistentwiththeirrecommendationonjointnegotiationinotherpartsofthedraftopinion.Itistruethatinnovativepaymentmechanismsrequireimportantchangesinthelegalandinstitutionalsettingsofhealthsystems.However,thisisanationalcompetenceanditisunclearwhytheEXPHisadvisingDGSantéonthisissue.

84 OECD(2017)NewHealthTechnologies:ManagingAccess,valueandsustainability85 Carlson,J.J.Gries,K.S.,Yeung,K.,Sullivan,S.D.,GarrisonandL.P.(2014)CurrentStatusandTrendsin

Performance-Based Risk-Sharing Arrangements between Healthcare Payers and Medical ProductManufacturers.AppliedHealthEconomicsandHealthPolicy

33

CommentsonSection3.4:TheinstrumentsPage CommentsPage361019ff

“Thecombinationofexistingproductsmayhaveextravaluetopatients(fromconvenienceorfromanincreaseintreatmentcompliance,forexample).Costsofproductiondonotchangeconsiderablybysettingajointproductandasindividualproducts’pricesarealreadyrewardinginnovation,havingahigherpriceforthebundleofproductsisameretransferofvaluetocompanies”Combinationtherapiesarenotthe“sumoftwoormoreinnovativeproducts”.Bringingacombinationtherapytothemarketimpliesresearchcoststodemonstratetheirbenefitsandsafetyforpatients.Ingeneral,EMAsaysthat“sponsorsmustshowdatatosupportthepharmacologicalandmedicalrationaleforthecombination.Todoso,sponsorsmustestablishtheevidencebaseforthecontributionofallactivesubstancesincludedinthecombinationtothedesiredtherapeuticeffectanddemonstrateapositivebenefit-riskbalanceforthecombination.”86Inaddition,thisstatementassumesthatthepriceofamedicineshouldsomehowbelinkedtothecostandnottothevaluedelivered.Ifcombinationproductsaretobedeveloped,thepriceshouldreflectthevaluetheydeliver.

Page371062ff

“Monopolypricinghasthesamerelativepricestructureastheoneselectedbyaregulatoryentitybutgoesforhigherprices”Thestatementignoresthatpricesofpharmaceuticalsarenottheresultofamonopolisticdecisionbuttheresultofnegotiationsbetweenthemanufacturerandthemonopsonistpurchaser.Thisisonlynotedbelowinthedraftopinion(1080-1081:“Theautomaticruleoftheincrementalcost-effectivenessratio(ICER)where“costs”aresetbythepricesaskedtothepayergivesbargainingpowertoGovernments”)butfailstoconsiderthatallthesingle-payersystems,regardlessoftherulestocontrolprices,arecharacterizedbymonopsonisticpurchasingpower.

Page371070-1071

“ButtheuseofRWDhasitsownshortcomings”.Themeaningofthisstatementisunclear.Thisobservationshouldhavebeenexpandedupon.

Page381085ff

“ThejustificationofhighpricesbasedonthehighunderlyingR&Dcostsisoftenunchecked(asnoneorverylittleinformationisreleasedbycompaniesonthecostsofR&D,whichincludeopportunitycostsofinvestmentandfailedattemptstoobtaintheinnovation).”MedicinesprovidegreatvaluetosocietyandthisvalueisnotmeasuredsolelybyR&Dcosts,butratherintermsofsocietalbenefits.AssessingtheoverallcostofR&Dinvestmentinanindustry(withmanydiversebusinessmodelstherein)isnotlikelytoproduceinformationthatisapplicabletoinformpricedecision.Moreover,payersunderstandthatthecostsofdevelopmentaresignificantandcannotbedirectlyassociatedtoindividualproducts.Thisexplainswhywehaveprogressivelymovedawayfromcost-basedapproachesoverthelastthirtyyears.

86 Raps website [last access 24 November 2017]: http://www.raps.org/Regulatory-

Focus/News/2017/04/03/27253/EMA-Adopts-Updated-Guideline-on-Fixed-Dose-Combination-Drugs/

34

Page381089ff

ThepharmaceuticalindustryallegesthathighpricesareunavoidablegiventheexpenseofR&DtobringnewmedicinestothemarketThepriceofamedicineisbasedonthevalueitbringstopatients,healthcaresystemsandsociety.Itprovidestheappropriateincentiveforcompaniestoinvestinnewtherapydevelopment.Pharmaceuticalcompaniestakealookatanumberoffactorswhenpricingdrugsincludingthelevelofinnovation,theavailabilityofothermedicinestotreatthesamecondition,thelevelofaddedbenefitsoverexistingtreatments,inducedchangestothecarepathwaylikereductionsinhospitalisationortheneedforsurgeryorotherprocedures.Allthesefactorsaretakenintoaccountbycompaniesinsettingaprice,thatisthensubjecttorigorousvalue-assessmentsandnegotiationswithhealthcaresystems.

Page391101ff

“KnowledgeofR&Dcostswouldhelptoscrutinizetheextentofexerciseofmarketpower.Asimplehypotheticalexampleillustratestherelevanceofthiselement.”Theexampleprovidedisoversimplifyingtherealityandnotcapturinganyofthecomplexitiesofthepharmaceuticalbusinessmodel.Initssimplicity,theonlypointmadebytheexample(revenuesshouldbecomparedtoR&Dcosts)isagainwrong:thepriceofamedicineisjustifiedbythevaluedelivered(whichisassessedbypayers)andcannotbelinkedtotheR&Dcosts.Moreover,therevenue/costcomparisonmadeinthedraftopinionisconceptuallywrong:R&DcostsareborneinthepastandrevenuesareaccruedinthefutureANDevensuchasimplisticcalculationshouldrecognisetheneedofdiscountingcashflows.

Page391123-1124

“Thereareseveralclaimsthatpricesettingshouldbemoretransparentandshouldnotbelefttoindustryalone.”

The price of a medicine should reflect its value as well as other economic, cultural,institutionalandepidemiologicalspecificitiesofacountry.Confidentialityofnetpricesisa way to ensure that medicines deliver value for money based on the individualcharacteristicsofeachcountry.

Moreover,theuniformpriceoutcomeisnotdesirable:notallcountriesshouldpaythesame price as the poorer countries. An effective negotiation process enables eachgovernmentandpharmaceuticalcompanytomatchprice,valueandabilitytopayonaproduct-by-product basis. Factors that guidemarkets formedicinesdiffer greatly fromonenationtothenextandevenwithinnations. Thefollowingfactorsshouldbetakenintoaccount:

• healthcarepriorities

• healthcarefinancingandthedeficitsandrevenuesinhealthbudgets

• the population covered (rural vs. urban, younger vs. older, chronic vs.ambulatorycare,etc.)

• treatmentpathways

• theevaluationoftechnologies(methodsandendpoints,comparators,etc.)

Pricecomparisonsbythirdpartiesusingpubliclyavailabledatawilllikelyyieldinaccurateconclusionsaseachhealthcaremarket isuniqueinthepricingitmakesavailableinthepublicdomain.Reasonsforthismight includethefactthatsomereportedpricesmightbeinclusiveoflocaltaxesand/ordistributioncoststhatareuniquetoaspecificcountryandnotcontrolledbythemanufacturer,whileothercountriesreportedpricesmightnot

35

includesome/anyoftheseelements.

Price disclosure and reference pricing also have the potential to reduceor slowdownpatientaccesstonewmedicines.

Oneexampleisaccesstothebreastcancermedicine,Trastuzumab,wherelowerincomecountries had an access delay of more than 4600 days (Latvia) compared to higher-income countries like Austria with 34 days.87 Those differences in access to oncologymedicines have been confirmed by Glynn (2013) over a 12- year time horizon with anearly40-monthdifferencebetweenthosecountrieswithfastestandslowestaccess.88

Averagelaunchdelaysforin-patentoncologydrugs:2001-2013

In addition, it may lead to higher prices as shown by Glynn (2013).89While for sometypes of markets price transparency can lead to more competition and subsequentlylowerprices,inothertypesofmarketsasisthecaseformedicinesitcanleadtohigherpricesforsomecountrieswhichmaybeunaffordable.90

Insomecases,forceddisclosureofnetpriceandreferencepricingmayleadtoagreaternumberofproductsnotbeinglaunchedincertainmarkets.Ifpricesaredriventoolowin a keymarket, companiesmay not be able to sell their products at the value thoseproducts offer patients and the health system (this is the case of Korean companies,whichareunabletoselltheirproductsabroad,ormaynotopttoselltherebecausetheycannotgainsufficientreturnon investment (ROI)becausetheyhavetoreferencetheirhomecountryprice,whichistoolowforothermarkets).

Page401152ff

“Moreelaboratedpaymentstructures,liketwo-parttariffs,ismentionedinJonssonetal.(2016)“Atwo-parttariff,includingpricevolumeagreementsanddifferentpricesfordifferentusesiscommoninmanymarketscharacterizedbylargeinvestments(forinstance,transport,energyandtelecoms)andcouldpotentiallyimprovethesituation”.”Inpractice,medicinesarepricedusingnon-linearpricing.TheuseofMEAsintroducespaymentsbasedonvolumeandtakingintoaccountevidenceonoutcomes.ItisunclearwhetherelaboratepaymentstructuresenvisagedbytheEXPHareimplementableinpractice.Forexample,thementionedtwo-parttariffwouldrequirethatthepriceofa

87 Ades,F.,Senterre,C.,Zardavas,D.,deAzambuja,E.,Popescu,R.,Parent,F.andPiccart,M.(2014)An

exploratory analysis of the factors leading todelays in cancer drug reimbursement in the EuropeanUnion:thetrastuzumabcase.EuropeanJCancer

88 Glynn,D.(2013)ExternalReferencePricing.EuropeEconomics89 Ibid.90 Glynn,D.(2015)Thecasefortransparencyinpricing.CompetitionLaw

0

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medicineineachmarketconsistsofafixedpart(i.e.asortof“accessfee”)andavariablepart(linkedtothenumberofpatients).Thecalculationofthefixedpartwouldrequiretoomanyassumptionsandtoomuchcoordinationacrossdifferentcountries,makingitunfeasible.91

Page411172ff

“Wheneverneglectedareascanbedetectedandbeconsensualontheopportunitytohaveinnovation,usingavailableinstruments(softones,asjointhorizonscanningdiscussions,orhard,aspriceorrewardcommitments)canbeimproveinnovationvalue.”Thereshouldbemoreargumentstosupportthisstatement.Forinstance,itisunclearhowjointhorizonscanningdiscussionscansupportresearchinneglectedareas.

Page421198ff

“Amajorissuetobeexplicitlyrecognizedisthatexerciseofmarketpower(meaningthatpricesarewellaboveabenchmarkof“fairreturn”oninvestment,includingR&Dinvestment)ispresentanditisaresultofthecurrentinstitutionalframework.Somerelevantproposalswillnotsolvetheissue.”Theauthorshavenotshownthatreturnsexcessivelyhighordefinedwhattheymeanbyfairreturns.Inaddition,ifvalueisnotrewarded,incentivesforR&Dofnewmedicineswillbelimited.Anyassessmentofthereturnsofthesuccessfulinnovatorneedstotakeintoaccountallthefailedinvestmentsandthatfirstinclassproductsarefacingcompetitionfromsecondandthirdinclassproductsmuchmorerapidlythaninthepast,withtheresultthatreturnstoaninnovativemedicinecanbeveryshortlived.Thereisalsoapointaboutwhodetermineswhat‘fair’is?Andisit"fair"todetermineReturnonInvestment(ROI)foronespecificindustry,butletotherindustriesremainopentomarketforces?Somewouldarguethisistheoppositeoffair-itisdiscriminatory,creatinganartificialmarket.

Page421212ff

“Value-basedpricingdoesnotmeanthatprovidingpricesignals(economicincentives)totruetherapeuticaddedvalueequatestopricesallowingcompaniestocaptureallpossiblesurplus.”Theauthorshavenotshownthat,underthecurrentpricingstructure,theindustryiscapturingallpossiblesurpluses.Onthecontrary,underthecurrentpricingrulesofEuropeanpayers,mostofthevalueisdeliveredtothepatientsandthehealthcaresystem.Thereisalargeamountofliteratureshowingthattheindustryisonlyrewardedwithasmallshareofconsumerbenefit.

Page431215ff

“Manyreferencestoexcessiveprices,butnoreferencetoindicatehowthisismeasuredoreventowhichproductswetalkingabout?”Thereisnoevidenceforthisassertion.

Page431227ff

“Payingmoreforhighervaluedrugsprovidesanincentiveforinvestmentinsuchdrugscomparedwithlowerpricedrugs.Thetargetleftbehindwilllikelytobeaffordability,andconsequentlyaccesstothenewpharmaceuticaldiscoveries”.Thedraftopinioncontainsmanystatementsimplyingthatsustainabilityconsiderations

91 Towse, A., Pistollato, M., Mestre-Ferrandiz, J., Khan, Z., Kaura, S., & Garrison, L. (2015). European

UnionPharmaceuticalMarkets:ACaseforDifferentialPricing?.InternationalJournaloftheEconomicsofBusiness,22(2),263-275.

37

arenotconsideredwithinvalue-basedpricing,whichisnotcorrect.Indeed,toaddressexistinginequalitiesinpatientaccesstomedicines,pharmaceuticalcompaniesarealreadydifferentiatingthepriceofamedicineaccordingtoanumberofcriteria,suchas:

• Levelofthecountry’sGDPpercapita• Thepopulation’shealthneedsandlocaldiseaseburden• Availabilityofalternativetreatments• Governmentpricingregulationsandhealtheconomicevaluations• Economicconditionsofpatientsandpayers• Society’shealthresourcepriorities

Companiesareconsideringthetotalcostofcarewithamedicineversusthestandardofcare.Attentionisalsobeingpaidtothepotentialtotalbudgetimpact,basedontheprevalenceofthediseaseinthepopulation.

Page431241ff

“Underarulethatsaysthataproductisacceptedtocoveragebyahealthcarepayeraslongasitmeetsathresholdfor(incremental)cost-effectiveness,thepowertosetpricesiswithcompanyandthe“demand”decisionisbasicallyan“allornothingdecision”Thedraftopinionpresentsthethresholdasaproblemthatcompany’sabuse.Thisisnotaproblemofagiventhresholdbutaproblemofthevalueassessment.Ifagivenmedicineisatorbelowathresholdthisshouldbetakenintoaccountindeterminingiftheproductsrepresentvalueformoney.Thethresholditselfisdefinedbythehealthsystemorthepayer.

Page441266ff

“Sincebargainingisaboutdivisionofvaluegenerated,itisalsonecessarytoknow,atleasttothebargainingsides,thecostsofobtainingandproducingthenewproduct.”Asalreadyargued,itisunfeasibleforcompaniestocalculatethecostofanewproduct.Thiswouldalsorequiredefiningaruletoattributetheshareofindirectcoststoeachsingleproductinacompany’spipelineandportfolio.

Page451281ff

“Theuseofmandatorylicensing(withroyaltiesforpatentusebeingdeterminedbyjudicialdecision)isanotherwaytoleveragenegotiationpowerstopayers”Therehavebeenveryfewcasesofgovernmentsissuingcompulsorylicenseshistoricallyandglobally;mostincidenceswereinconnectiontoHIV/AIDSintheearly2000s.EncouragingcompulsorylicensingunderminestheincentivesysteminamannerthatisdisruptiveandextremeandthereforethreatensfutureinvestmentinmedicalR&D.Itisnotaneffectivesolutiontoaddresshealthcarechallenges.Policyoptionssuchas“lastresortmechanisms”donotservepatientaccessinthelongterm,butwouldresultinincreasedunpredictabilitywithsignificantimplicationsforinnovationinmedicines.Companieshaveincentivetocreateaccess,andhaveusedavarietyofapproachestoimproveaccessfordifferentcountries.DanzonandTowse(2003)notethat“intheabsenceofclearcriteriatodefinewhichdrugsandcountries/populationsshouldbeeligible,thecompulsorylicensingapproachisatriskofunderminingthefunctionofpatentsoverbroadmarketsandtherapeuticcategories.Thisapproachmayseemtooffercheapdrugstoneedypeopleintheshortrun,butattheriskofunderminingincentivestodevelopnewdrugsinthelongerrun.”92Inaddition,this

92 Danzon,P.M.andTowse,A. (2003)DifferentialPricing forPharmaceuticals:ReconcilingAccess,R&D

andPatents.InternationalJournalofHealthCareFinanceandEconomics

38

initiativecouldcreatefuturedisincentivestolaunchinginnovativedrugsincountriesthathaveexhibitedapropensitytoresorttocompulsorylicensing(CL).Ratherthanuseoflastresortmethods,workinginpartnershiphasimprovedaccess.Thebiopharmaceuticalindustryisworkingwithgovernmentstopromotesustainableandaffordableaccesstohealthcare,whilesecuringthefutureofmedicalinnovation.

Page501411ff

“Animportantaspectisthatpricecannotbethesingleconsideration,asensuringcompetitionandavailabilityofsupplyisimportant.[…]”WesharetheviewoftheEXPHthatpricecannotbethesingleconsideration.Unfortunately,thedraftopinionfocusesonlyontechnicalcriteriasuchassupplyetc.anddoesnottakeintoaccountthelackofinterchangeability(exceptforidenticalmedicines),patients’needs,physiciansfreedomtoprescribeetc.,inshort,theclinicalperspectivewhenprocuringmedicines.

Page511432-1474ff

3.4.7AdaptivepathwaysItisunclearwhythissectionisinthedraftopinionatall,sinceitdoesnotmakeanylinktoinnovativepaymentmodels.Theconceptofadaptivepathwaysiscomplexandwouldmeritamuchmoreexpandedexplanation,andmanyofthestatementsmadeinthissectionfeelsimplifiedormisconstrued.

Page511435-1437ff

“Criticshavecalledfora“paradigmshift”,thatwouldallowsomeproductstobeapprovedonthebasisofpreliminarydata,allowingtheirbenefitsandharmstobemonitoredamongthoseusingthemusingwhathasbeentermed“realworlddata”.

Adaptivepathwaysdonotentailmarketingofproductsthatareunsafe–thedrugswouldstillhavetoundergoclinicaltrialstoconfirmtheirsafetyforuse.

Page511448-1449ff

“Therearecircumstanceswhereaneedforspecialmeasuresisclear,buttheyarequiteexceptional”.

Whatisthebasisforthisstatement?Whichexceptionalcircumstancesarereferredto?

Page521460ff

Adaptivepathways“[…]intheabsenceofrandomizationitwillbeverydifficulttodeterminewhetheranyevents(beneficialoradverse)areduetothedrugortoothercharacteristicsofthesubject.”“Theuseofsuchexpeditedapproachescouldseesignificantnumbersofproductsbroughttomarketdespitebeingunsafe,ineffective,orboth”.WeagreethatRandomizedControlledTrials(RCT)arethegoldstandard.However,insomecircumstances,e.g.life-threateningdiseases,itwouldbeunethicaltoputpatientsonaplacebo.93,94Intermsofefficacy,moreflexiblepricingandreimbursementschemescouldovercometheriskofuncertainty.

93 Evans,S.R.(2010).Fundamentalsofclinicaltrialdesign.Journalofexperimentalstroke&translational

medicine,3(1),19.

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Insummary,usingRCTastheonlycriterionforpricingandreimbursementriskspreventingpatientsfromaccessandmaybeunethicalundercertaincircumstances.Healthsystemsshouldallowformoreflexibleapproaches,whichinturnrequireclosercollaborationamongallstakeholders.

94 Eichler,H.G.,Baird,L.G.,Barker,R.,Bloechl-Daum,B.,Børlum-Kristensen,F.,Brown,J.,...&Garner,S.

(2015).Fromadaptivelicensingtoadaptivepathways:deliveringaflexiblelife-spanapproachtobringnewdrugstopatients.ClinicalPharmacology&Therapeutics,97(3),234-246.

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CommentsonSection3.5:BasicprinciplesfornewpaymentmodelsPage CommentsPage541531ff

“Thus,nosinglemodelofpaymentcanbereportedas“thesolution”toachieveallintendedobjectives(financial,sustainabilityofhealthsystems,accessofpatientstoinnovationandensuringconditionsforinnovationthatmatterstotakeplace)WeagreewiththeEXPHthatthereisnosinglesolution.Countrieshaveverydifferenthealthcaresystemsanduseverydifferentapproachestoassess,negotiateandfundinnovativepharmaceuticalproducts.Everysystemhasprosandcons.However,someofthesolutionssuggestedinthedraftopinionmaycauseabigthreattoinnovationsuchascompulsorylicensing.

Page541537-1539

“Currentprice-settingmodelsareinsertedintoaninstitutionalframeworkthatisbenevolentwithmarketpowerexercise,exacerbatedbyfinancialprotectionsystems(healthinsurance)thatreducetheprice-sensitivityofdemand.”ItisabitunclearwhattheEXPHintendstosayinthissection.Thepharmaceuticalmustcomplywithcompetitionlaw,asitisthecaseforeveryothersector.Assuch,theindustryhasbeenexaminedinthePharmaceuticalSectorInquiry.95Regardingpricesensitivity,werefertoourresponseonlines215and1659.

Page541540-1546

“Thereportingofcostinformationtoregulatorybodies,evenifkeptascommercialsecrets,willactasanimplicitdeterrentonveryhighmargins.”TheEXPHarguesthatreportingofcostinformationwouldactasadeterrent.However,itdoesnotsetoutwhatcostinformationwouldberequired.Thecostofdevelopingamedicineincludesthecostofsuccessfulmoleculesandthecostoffailedpotentialcompetitorproducts,whichisnotknowntoanymanufacturer.Thecostofdevelopingamedicineisaglobalcost,andthereisasetmethodologyforattributingthistoindividualcountries.Theproblemofcosttransparencyiswellknown.

Page551547-1549

“Ontheotherhand,competition,whenfeasible,takesplacesometimesbywayof"secret"pricediscounts.Suchpricecompetitionelementshouldnotbediscarded,andadvisesagainstfullpostingofallprices.”InthissectiontheEXPHappearstoacceptthebenefitsofcompetition,whichweagreewith.Thisisfacilitatedbyconfidentialagreements,knownbetweenthepurchaserandtheselleroftheproduct.Thesearecommerciallyconfidentialratherthansecret.Commercialconfidentialcontractsoccurinmanyotherindustriesandcommercialnegotiations.

Page551555-1557

“Still,underthecurrentandforeseeableconditionsofpharmaceuticalmarkets,greaterpricetransparencycanbebeneficialtotheperformanceofthehealthcaresector,includingtherateofinnovation.”Thedraftopinionarguesthatgreaterpricetransparencywouldnecessarilybebeneficial.However,thisassertionignorestheliteratureonthenegativeimpactoftransparencyof

95 http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/

41

pricingandpriceconvergenceinthepharmaceuticalsector,notablyintermsofaccesstomedicinesinlow-incomecountries96.Forinstance,Glynn(2015)concludesthatinthepharmaceuticalsector,transparency,inparticularEuropeanReferencePricingharmspatients.97Pricetransparencyislikelytobeharmfultocountrieswithlowerthanaveragehealthcarespending.SolidaritybetweenMemberstates,whichencouragesequalaccesstomedicinesforpatientsinallcountries,hasnotbeenrecognizedinthisdraftopinion.Ensuringtheconfidentialityofnetpricesallowspricestobenegotiatedandadaptedbasedonanindividualcountry’shealthandeconomicneeds,whichisakeycriterionforvalue-basedpricing.Inthecontextofexternalreferencepricing(wheregovernmentssetapriceforamedicinebasedonitspriceinothercountries)andparalleltrade(whereamedicineisboughtinonecountrywiththesoleobjectiveofexportingtoanothercountrytosellatahigherprice),confidentialnetpricesallowcompaniestoadaptthepriceofamedicinetoacountry’sspecificeconomicandhealthcareenvironment.Inthiscase,governmentscangetan‘optimal’pricearrangement,tailoredtothecountry’sneeds.Increasingthetransparencyofnetpricesputsatriskthesharedobjectiveofensuringthatpatientsacrosscountriesgetrapidaccesstothelatest,effectiveandlifesavingmedicines.Forinstance,ifthenetpriceisknownbywholesalers,theywillbetemptedtomovemedicinestocountrieswheretheycangetahigherprice,whichcouldleadtoshortages.Overall,thePanelunderstatesthenegativeeffectsofpricetransparency.Increasedtransparencyanddisclosingofnetpriceswouldleadtoloweraccesstomedicinesincountriesthattodaygetrebatesduetotheirlowerincomelevels/abilitytopay.

Page551558-1560

“Useofhealthtechnologyassessmentandeconomicevaluationworksasnecessarybutnotsufficientconditions.Itlimitstoohighprices,butdoesnotadvocatelowerthanthresholdprices”.TheEXPHtakesarathersimplisticinterpretationofHTA.First,manyHTAsbodiesdonotapplyathreshold,manyfocusonrelativeeffectivenessratherthancost-effectiveness.Wheretheydoapplycost-effectivenesstheydonotapplyathreshold.Secondly,HTAbodiesarenottheretodetermineprices.Relativeeffectivenessassessmentsareacontributiontothepricenegotiationprocess.Third,eveninmarketswherethethresholdisimportant,weseearangeofoutcomeswithproductsnearthethresholdandwithproductspricedsignificantlybelowthethreshold.Fourth,thereareproductsthatareassessedasbelowthethresholdbutarestillnotreimbursed.

Page551563ff

“Apossiblecourseofactionisthatfirmssubmitanestimateofthecoststheyincurredanditsbreakdown(R&D,marketingandproductionscosts)aspartoftheHTAassessment”.Thispropositionseemstobeincontradictionwithotherpartsofthedraftopinion,whichrecognisethatacostplusapproachwouldbedetrimentaltoinnovationandthereforeinappropriate.Askingcompaniestosubmitanestimateofthecoststheyincurredandtheirbreakdownwouldlikelyresultinacost-plusapproach.Thisapproachfailstodistinguishstaticanddynamicexpenditure,thelatterprovidingthenecessaryfundingforfutureinnovation.Seealsoresponsetolines1540-1546.

96 De Cock, J. (2013) Access to medicines: can differential pricing be an answer? Presentation to the

EuropeanParliament97 Glynn,D.(2015)Thecasefortransparencyinpricing.CompetitionLaw

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Page56Section3.5.2

“Thepatentsystemisoutofbalance:intheEuropeanUnionontopofthelengthyprotectionperiod,additionalmarketexclusivity,dataexclusivityandeventuallysupplementaryprotectioncertificates(SPC)isgrantedtomarketauthorizationholdersanddelaysprice-loweringgenericcompetition”Thedraftopinionprovidesnoevidenceforsuchablanketstatement.ItalsoseemsthatthisconclusioncomesfromHealthActionInternationalandnotfromtheEXPH,whichisverysurprisingandputsintoquestiontheworkingmethodsofthepanel.Boththissectionandthefollowing(“ChangingtherulesinR&Dfunding”)seemmostlybasedonpolicymessagesfromonestakeholder.TheEXPHdraftopiniondoesnotprovideanyevidencefortheseassertions.ItcitesHealthActionInternational’sconcerns.Evidenceontheroleofintellectualpropertyandtheneedfordifferentincentivesregimesshouldbeincluded.Inparticular,thereisalargeliteratureonthebenefitsofthepatentsystemandtheneedforparticularformsofincentives.

Indeed,thepharmaceuticalindustryhasbeensubjecttoadetailedSectorInquiry.On8July 2009, the European Commission published the conclusions of its 18-monthpharmaceuticalsector,whichlookedindetailatcompetition.98ThisdoesnotsupporttheEXPHrecommendations.

Effective and predictable intellectual property systems have been identified as one ofthekeyprinciplesforcreatingandnurturinginnovationecosystems.Thiswasreinforcedthrough the recent B20 Health Initiative, launched inMay 201799, which built on theInternational Chamber of Commerce (ICC) “Principles for Policy Makers” paper forcreatingandnurturinginnovationecosystemsforhigh-techindustries.100

Companieshaveanincentivetocreateaccess,andhaveusedavarietyofapproachestoimprove access for different countries. Danzon and Towse (2003) note that “in theabsence of clear criteria to define which drugs and countries/ populations should beeligible, the compulsory licensing approach is at risk of undermining the function ofpatents over broad markets and therapeutic categories. This approach may seem tooffer cheap drugs to needy people in the short run, but at the risk of underminingincentivestodevelopnewdrugsinthelongerrun.”101

Industryisworkinginpartnershipwithotherstakeholderstoimproveaccess.Thebiopharmaceuticalindustryisworkingwithgovernmentstopromotesustainableandaffordableaccesstohealthcare,whilstsecuringthefutureofmedicalinnovation.

Page57Section3.5.3

Section3.5.3ChangingtherulesinR&DfundingThenumberofmedicinesthatfailevenlateinthedevelopmentprocessillustratestheriskthattheBiopharmaceuticalindustrytakeson.Payers&NGOsonlyseePharmaceuticalsuccesses,buttheytypicallyhavelimitedunderstandingofthedevelopmentrisks.PublicfundingofR&Disthereforenotarealisticalternativetothecommercialdevelopmentmodel.

98 http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/99 B20HealthInitiative(2017)SteppingUpGlobalHealth:TowardsResilient,ResponsibleandResponsive

HealthSystems100 ICC Policy Principles Paper (2015) Creating and Nurturing Innovation Ecosystems for High-TechIndustries101 Danzon,P.M.andTowse,A. (2003)DifferentialPricing forPharmaceuticals:ReconcilingAccess,R&D

andPatents.InternationalJournalofHealthCareFinanceandEconomics

43

Page571603-1605

“ThereisgrowingconsensusthatalternativemodelstofinanceR&Dforactuallyneededdrugs(ratherthanme-toodrugs)”TheEXPHmentionsagrowingconsensuswithoutprovidinganyevidenceonthis.Theyalsodistinguishbetweenactuallyneededdrugsand‘me-toos’.Inreality,significanteffortsarealreadybeingputintodiseasesthattargetunmetneed.R&Discorrelatedwiththerapeuticareasthathavethegreatestsocietalimpacts.102• Thepharmaceuticalindustrywantstobeabletodevelopmedicinestomeetunmet

medicalneedswherevertheyoccur.However,thereturnoninvestmentonR&Dfordiseasesdisproportionatelyaffectingthedevelopingworldisoftennotviableunlessthescientificandfinancialrisksareshared.

• The industry is increasingly working in collaborative Product DevelopmentPartnerships (PDPs) with other stakeholders to tackle a range of needs.103 Anexample is the Project Data Sphere initiative.104 Typically, this model involvescompaniesprovidingtechnologytheyhaveinvestedin,aswellastheirdevelopmentand distribution expertise, to the partnership. Public sector partners help funddevelopmentcostsandcanimprovetheaccessofpatientstomedicinesandvaccinesbyfinancingimplementationprogrammes105.

• A number of these PDPs such as the Medicines for Malaria Venture (MMV), theMalariaVaccine Initiative (MVI), theDrugs forNeglectedDiseases Initiative (DNDi),and theTBAlliancehave transformed thepipelineofR&Dprojects fordiseasesofthe developing world. Research programmes are overseen by joint steeringcommittees with representatives from all the partners.106 Under the terms of theagreements, where sales opportunities exist, priority must always be given totreatmentsforneglectedtropicaldiseasesintheleastdevelopedcountries.

• ThePDPapproachisworking.AreportfromPolicyCurespublishedinFebruary2016showedthat485productswereinthepipelineforproductstofightdiseasesofthedevelopingworld107thevastmajoritybeingdevelopedinpartnerships.

Theindustryhasmadeatremendouscontributiontodiseases,whichdisproportionatelyimpactlesserresourceseconomies(includingneglecteddiseaseanddiseasessuchasrare,underservedconditions).108TheninthG-FINDERsurveyreportshowsthatindustryisthethirdlargestcontributorintoresearchanddevelopment(R&D)ofnewproductsforneglecteddiseases(15%)aftertheUSNIH(40%)andtheBill&MelindaGatesFoundation(17%)109

102 Catalá-Lopez,García-Altés,A. Álvarez-Martín,E.,Gènova-Maleras,R.andMorant-Ginestar,C.(2010)

DevelopmentofnewmedicinalproductsintheEuropeanUnion.A.T.Kearneyanalysis103 Reddy, D. and Spigelman,M. (2014) Product Development Partnerships: an innovative approach to

tacklingneglecteddiseases.DevPolicyBlog. [Accessed20 June2017]: http://devpolicy.org/product-development-partnerships-an-innovative-approach-to-tackling-neglected-diseases-20140528/

104 Project Data Sphere. CEO Roundtable, Press Release 8 April 2014. [Last Accessed 21 July 2017]:https://www.projectdatasphere.org/projectdatasphere/html/resources/PDF/PDS_PRESS_RELEASET

105 Moran,M. (2005) A Breakthrough in R&D forNeglectedDiseases: NewWays toGet theDrugsWeNeed.PLoSONE

106 Topal,C. (2014)An InterviewwithRobert Lin: TheValueofProductDevelopmentPartnerships.TheNationalBureauofAsianResearch

107 Policy Cures Research wesbite. Neglected Diseases. [Last Accessed 23 June 2017]:http://pipeline.policycures.org/

108 PolicyCuresResearch.(2016)NinthG-FINDER2016NeglectedDiseaseResearchandDevelopment:APivotalMomentinGlobalHealth

109 Ibid.

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Page571607-1617

“ThedelinkageofR&Dfromsalesisdemanded”TheEXPHdraftopinionreferstoprizemodelsanddelinkagewithoutanyreferencetothelargeliteratureonthisissue.Theproposal,whichtheycorrectlycitefromsomeNGOshasbeendiscussedformanyyears.TheyrefertoDNDi(drugsforNeglectedDiseasePartnerships)DevelopmentPartnershipsasapotentialmodel(Gerlinger2017).However,thenumberofproductsdevelopedthroughthesepartnershipshasbeenlimited.Thedraftopinionalsofailstoaccountfortheothermanychallenges(e.g.limitedinfrastructure)toensuringpatientaccesstohealthcareandmedicinesinlow-incomesettings.Theprizemodel’sproposaliscontradictedbytheearliertextonthenatureofinnovation.Online792,theEXPHconcludes“disruptiveinnovationismostlyunpredictableinitseffects,itisnotfeasibletodefineex-anteapaymentmodelgeneralenoughthatcanbeoptimalinallfuturecontingencies”.Asinnovationisunpredictableaprizemodelwouldnotbepossible.

The most effective pull incentive is competitive markets that reward innovativeproducts. However, it is acknowledged that there are markets where incentives areinsufficientandothermechanismsmayplayarole.Theroleofmodelssuggestedshouldbe more clearly/explicitly limited to the specific scenarios considered (ND, AMR) i.e.where the inherently uniquemarket dynamics of thesemarketsmean that innovativepolicy instruments may have a role to play. For example, there are existing AMC forproductsuchaspneumococcalvaccines.110

Page571618-1620

“Otheralternativesarealsopossible,includingunbundlingphase3indevelopmentofnewproducts,withtrialsbeingperformedbyindependentgroupsandallowingopenaccesstoresults.”Thepharmaceuticalindustrycurrentlyspendsabout$157billionayearonresearchanddevelopment.111ThereisconsiderableriskoffailureatPhaseIII.Forexample,astudyofAlzheimer’sdiseaseclinicaltrialsbetween2002and2012foundthatanestimated72%ofagentsfailedinPhaseI,92%failedinPhaseII,and98%failedPhaseIII.

112

Itisunclearhowindependentresearchwillbefundedandwhowillaccepttheriskthattheyrequire.Finally,thereisnothingtostopindependenttrialsbeingundertakentoday,butthenumberofsuchtrialsisexceedinglysmall.

Page571621-1624

“OtheralternativecoursesofactionarediscussedinVandenbroeketal.(2016),includingwaysofsharingthecostsandreturnsofR&Dinvestmentinnewproducts.TheseoptionsinvolveadifferentapproachtoR&Dpublicfunding,withahigherinvolvementbythepublicsectorintheappropriationofreturnsfromtheR&Ditfunds.”

The public sector plays an important part in funding basic research. Basic research is

110 Cernuschi,T.,Furrer,E.,Schwalbe,N.,Jones,A.,Berndt,E.R.andMcAdams,S.(2011)Advancemarket

commitmentforpneumococcalvaccines:puttingtheoryintopractice.BulletinoftheWHO111 Statistawebsite[lastaccess27November2017]:https://www.statista.com/statistics/309466/global-r-

and-d-expenditure-for-pharmaceuticals/112 Cummings,J.L.,Morstorf,T.andZhong,K.(2014)Alzheimer’sdiseasedrug-developmentpipeline:few

candidates,frequentfailures.Alzheimer'sResearch&Therapy

45

oftenrelevanttoaverybroadrangeoffields,tohaveapplicationovermanyyears,andbeusefulonlywhencombinedwithotherresearchandthereforeitcanbeconsideredapublic good. Owing to the non-appropriable, public good and intangible character ofknowledge, themarketdoesnotprovidesufficient incentives forprivate investment inresearch.

113 For this reason, public funding of basic research is desirable. This is

evidencedbythesuccessoftheInnovativeMedicinesInitiative.114

It isalsonot thecase that research isonlyundertakenwithpublic investment.Privateinvestmentalsotargetsbasicresearch.Forinstance,theU.S.pharmaceuticalindustryisthemajordriverbehindtherecentjumpincorporatebasicresearch,accordingtoNSF’sannualBusinessResearchandDevelopmentandInnovationSurvey(BRDIS),whichtracksthe research activities of 46,000 companies. Pharmaceutical company investment inbasic research soared from$3 billion in 2008 to $8.1 billion in 2014, according to themostrecentNSFdatabybusinesssector.

115

In fact, two decades of reliable analyses by academia and government, based onsponsorship, patent, project, and licensing data, as well as considerations of centralscientificcontributiontoappliedscience,clinicalimprovement,andthedevelopmentofmanufacturing protocols, consistently demonstrate that 67% to 97% of drugdevelopment is conducted by the private sector.

116 In particular, the private sector isfound to be dominant in the drug discovery stage and thechemistry/manufacturing/controls and drug development phases, relative the publicsector.

117

Wherethepublicsectorisdirectlyinvolvedinthedevelopmentofmedicines,thereareexistinglicensingagreementsthatpayaroyaltytotheinstitutionsinvolved.However,itistruethattheuncertaintyandassociatedcostinthelaterphases,ismostlybornbytheprivatesector.Approximately70%ofthecostofbringingaproducttothemarketarisesafterdiscoveryofthecompound,andmostofthisisusuallybornebytheinnovativepharmaceuticalindustry.Onlyoneinfivemedicines,whicharebroughttomarketisprofitable.

118

Page581633ff

“EMAshouldbefullyfundedbypublicfundratherthanbyindustrygenerateduserfeesinordertoendthepotentialriskof“industry’scaptureoftheregulator”Thissectionquestionsthecurrentroleandset-upoftheEMA.Itisveryunclearwhatthissectionisdoinginthedraftopinion,sinceitdoesnotrelatetoinnovativepaymentmodels.Thesectionincludesstatementssuchas“EMAshouldbefullyfundedbypublicfundratherthanbyindustrygenerateduserfees”and“italsoshouldbeclearthatReal

113 OECD website, Public research policy [Last Accessed 12 July 2017]

https://www.oecd.org/sti/outlook/e-outlook/stipolicyprofiles/competencestoinnovate/publicresearchpolicy.htm

114 Innovative Medicines Initiative website. Success Stores. [Last Accessed 25 July 2017]:http://www.imi.europa.eu/content/success-stories

115 Mervis, J. (2017) Data check: U.S. government share of basic research funding falls below 50%.ScienceMag.[LastAccessed23June2017]:http://www.sciencemag.org/news/2017/03/data-check-us-government-share-basic-research-funding-falls-below-50

116 Chakravarthy, R., Cotter, K. and Di Masi, J. (2016), Public- and Private-Sector Contributions to theResearchandDevelopmentoftheMostTransformationalDrugsinthePast25Years:FromTheorytoTherapy,TherapeuticInnovation&RegulatoryScience

117 Ibid.118 Vernon J.A., Golec J.H., and Di Masi J.A. (2010) Drug development costs when financial risk is

measuredusingtheFama-Frenchthree-factormodel.HealthEconomics

46

WorldDataandAdaptivePathwaysposerisk”withoutexplainingorelaboratingonthisanyfurther.OnwhatbasisdotheauthorsconcludethatRealWorldDataposerisks,andinwhatsense?

Thedraftopinioncontainsquiteseriousallegationsaboutthegovernanceoftheregulatoryprocess,theimportanceofincrementalinnovationandtheworkoftheindustry,withoutprovidinganyevidence.TheOpinionappearstosuggestthatbecausetheEMA,isfundedbyindustryfees,itisallowingproductsontothemarketsthatarenotsafeandwithtoolittleclinicalevidence.However,theyhaveprovidednoevidenceofthis.

Indeed,theproposalbeingdevelopedbyEMAaresimilartootherregulatorsacrosstheworld,whoarefundeddifferently.Flexibleapproachestoregulationofmedicinesarewelcomedbypatientgroups,cliniciansandtheindustry.ItappearsthattheEXPHhasbaseditsanalysisonasmallnumberofpapersbyparticularauthors.

TheEXPHclaims“an“orphanisation”strategytoprovideevidenceofhigheffectivenessonaveryshortnumberofselectedtypeofpatientstosupportahighpricetotheproduct”.OrphandesignationisdeterminedbytheEMA,sothedraftopinionimpliesthatthisisbeinggivenoutinconflictwiththerules.Noevidencehasbeenproducedonthis.Thepanelalsoseemstoimplythatbecauseaproductachievesorphanstatusitisfreetosetprices.Thisisalsoincorrect.

Page58Section3.5.5

“Developmethodologiestomeasurethevalueofpharmaceuticals”Measurementofvalueandoutcomesisakeyelementofrealisinginnovativepaymentmodels.Itisthereforeverydisappointingthatthistopichasmeritedonlythreesentencesinthedraftopinion.Thesentence“Theimportantelementisthatidentificationofrelevantoutcomesismadeandthatmeasurementcanbemadeinaclearandeasy-to-understandway”hardlybringsanynewinformationtothereader.Itappearsthatthissectionwasaworkinprogressandwillbecompletedinthenextdraftofthedraftopinion.

Page59(Section3.5.6)1659ff

“Haveanassessmentofexerciseofmarketpowerineachpricenegotiation”&“Thatroleofpricesismuchweakerinhealthcare,asinsuranceprotectingpatientsfromthefinancialhardshipassociatedwithhealthcareneedsalsowithdrawthenaturalbarriertoveryhighpricessetbyprovidersofcare,includingpharmaceuticalcompanies”.While,patientsmaybelessprice-sensitiveduetotheinsurancesystem,intoday’senvironmentthepriceisdeterminedbythepayerwhoismuchmorepowerfulthantheindividualpatient.Indeed,delegatingthenegotiationtoapayerdefactoincreasesitsnegotiationpowerasitrepresentsmultipleconsumers.Payershavedevelopedasophisticatedvalueassessment,whichwouldnotbepossibleforpatients.Mostremarkably,theEXPHarguesforadefinitionofthemeaningoftheabusiveexerciseofmarketpowerinpharmaceuticalmarketswithhelpfromcompetitionauthorities.Thepharmaceuticalmarketisalreadyunderthecompetitionrules.Asreferredtoearlier,therewasapharmaceuticalsectorinquirybytheEuropeanCommission.Thissystemalreadyexistswithpurchasersbeingabletomakecomplaintstothecompetitionauthorities.Thisincludesredresswhenpayershavepaidahigherpriceasaresultofanti-competitiveactivity.

47

Page59Section3.5.7

“Setbetterrewardsforhighertherapeuticaddedvalue”Weagreewiththetitleofthissection.However,thiscurrentlyonlyrepeatstheexecutivesummaryandwenotaccepttheanalysisoftherelationshipofpriceandcurrentcosteffectivenessthresholdsthatisdiscussedelsewhereintheEXPHdraftopinion.Seeourdiscussionregardingcosteffectivenessinresponsetolines392-394(page13).

Page59Section3.5.8

“Movetowardsacquisitionofserviceratherthanproduct”Weagreewiththeaspirationinthissectionbutcurrentlyitonlyrepeatstheexecutivesummaryprovidingnofurtherguidanceonhowthisshouldbedoneorthedegreetowhichthisisaproblemtoday.Again,thiswouldappeartobeaworkinprogresssectionthatshouldbecompletedinthenextversionofthedraftopinion.

Page59Section3.5.9

“Explorenon-linearpaymentsystems,includingbundling,differentiationacrossgeographiesandacrossindications”TheEXPH’sdraftopinionrepeatstheassertionthatforpricedifferentiationtowork,itisnecessarytosetanaveragepricecapoverthedifferentmarketssuchthatallpartiesbenefit.TheEXPHshouldprovideargumentsorsourcestosupportthisposition.Manyindustrieshavepricedifferentiationwithoutanaveragepricebeingset(forinstance,theelectricpowerandtelecommunicationindustriessetdifferentpricesfordifferentconsumersanddifferentcountriesbutdonotrequireanyaveragepricecaptowork119).Thiswouldsuggestsignificantissuesinmanydifferentindustries.

Page60Section3.5.10

“Createdialogueplatforms”DialogueisvaluableandtheEXPHsetsouthowthisinvolvesallstakeholders.Thisshouldbesupported.However,itisunclearwhytherearedifferentstakeholdersindifferentplatforms.Encouragingcollaborativeapproachestoinnovativepaymentmodelswouldbebestundertakenwithallstakeholdersbeingabletoengageactively.Thisshouldalsoinvolvedifferentstakeholdersfromgovernment,includingthosewithahealth,financeandindustrystrategyperspective.However,itshouldalsoberecognisedthattherearemanyon-goingdiscussionsbetweensupranationalorganisations,nationalandregionalgovernments,thirdpartypayersandpatients,clinicalandindustrygroups.Anynewdialogueshouldcarefullydescribetheseon-goinginitiatives,explaintheneedforafurtherprocessandsetouthowtheycanbecoordinatedwiththeseotherprocesses.DialoguesbetweenstakeholdersandspearheadedbytheOECD(PricingReview),WHO(FairPricingForum),EuropeanCommissionandothersareprevalent.

Page60-63

“Finalremarks”ThePanelmakessomestatementsthatweagreewith

• Theyacceptthatpricingtocostswoulddestroytheincentivestoinnovate.• For neglected therapeutic areas, payment models based on new ways of

procuringinnovationareaninterestingalternative• TheuseofHTA(relativeeffectiveness)enableshealthsystemstolearnaboutthe

119 Oseni,M.O.,&Pollitt,M.G.(2017).Theprospectsforsmartenergyprices:observationsfrom50years

of residential pricing for fixed line telecoms and electricity.Renewable and Sustainable EnergyReviews,70,150-160.

48

valueofmedicines• Whenuncertaintyexistsabouttheeffectivenessofnewproducts,MEAswitha

performancecomponentembeddedinthepaymentmodelanduseofrealworldevidencemaybeausefulinstrument

However,theEXPHsuggestsasetofunrelatedrecommendationssuchastherequestforR&Dcosts,theintroductionofacompetitionpolicyreviewofhighpricesaskedbycompanieswiththecooperationofcompetitionauthoritiesandtheideatousemandatorylicensinginextremecasesofpublichealthrisks.Thesepoliciesdomakesenseandtheirnegativeconsequenceswouldbesignificant.Inotherareas,theexpertpanelsetsoutrecommendationsthatalreadyexist.Forexample,“selectoneneglectedareaandlaunchinternationalprizeinitiativewithpatentbeingretainedbythesetofcountriesparticipating”.TherearealreadyAdvancedMarketingCommitmentsforaseriesofproducts.TheEXPHasksforthe“[assessment]ofthevalueofnewproductsofuncertainbenefitusingsoundandtransparenthealthtechnologyevaluationmethods”withoutanydiscussionofcurrentHTAmethods.Thedevelopmentofjointnegotiationproceduresiscurrentlybeingtested.Giventhepoorqualityoftheanalysis,theinconsistenciesofthearguments,andtheincoherenceofthepolicyconclusions,thevalueofthisdraftopinionishighlyquestionable.