Transparency & Collaboration Key To Defining A “Fair” Price For Essential Medicines

More public disclosure and information-sharing about drug prices and their R&D costs, is key to determining a fair price for essential medicines, concludes a series of five articles on fair pricing published Monday in the BMJ. The series, supported in part by the World Health Organization, highlights the increased priority drug price transparency is receiving on WHO’s agenda.

The five articles discuss the barriers to information-sharing between private and public sectors about R&D costs, as well as between health systems in different countries, which typically keep data on real drug purchase prices confidential, which have become a central theme on the transparency agenda over the past year.

But the series also explores some new, win-win approaches to pricing that could help make higher-price medicines more affordable while maintaining incentives for the private sector to invest in R&D and manufacturing, according to the study authors.

“Transparency is a key element to determine what is fair, but there is an absence of reliable data on development costs,” Alison Colbert, technical officer in the Essential Medicines and Health Products Department at WHO wrote in an introductory editorial published in the BMJ for the series. The editorial was co-authored by top WHO officials, including the director and assistant-director of the Essential Medicines and Health Products Department at WHO, Suzanne Hill and Mariângela Simão, along with Soumya Swaminathan, chief scientist at the WHO.

The WHO officials add that “ultimately, there is no simple algorithm that will calculate a fair price for each medicine,” but that transparency and collaboration will ensure that the “right data” are available to the “right stakeholders” to help ensure affordable access to essential medicines.

However, before “fair” prices can be set, the global health community must first agree about what a “fair” price means.

“”For too long, governments and other purchasers of medicines have not had clear frameworks for how to assess the fairness of medicines prices, especially when considering pricing within a global market. We know medicines prices have been climbing year after year, but how can we assess when a high price is too high?” asked Suerie Moon, co-director of the Global Health Centre at the Graduate Institute.

Suerie Moon et al. propose hypothetical price ceilings (ie, the maximum that is affordable to the buyer) and fair prices for countries with different affordability thresholds. Prices below the red line indicate hypothetically “fair” prices.

In the first article in the series, Moon and her colleagues from WHO highlight the differences between what matters to sellers’ and buyers’ in defining a “fair price.” The authors note that both groups have a very different set of parameters.  Buyers may consider a drugs overall value to individuals and health systems;  affordability and financial hardship risks; and supply security. Pharmaceutical companies, on the other hand, are concerned with prices that cover the costs of R&D, regulation, manufacturing, and distribution while generating a profit.

Moon and her colleagues propose a framework that combines both buyers’ and sellers’ concerns in defining a range of fair prices for medications, proposing that price ceilings for medicines could be set by consideration of consumers’ concerns while price floors could be set by manufacturers’ priorities. Public intervention should occur in cases where prices fall outside of this range.

“A key concept here is that companies can earn a fair profit, but the profit should not be excessive and should not come at the cost of affordability to patients,” Moon clarified.

Altogether, the series includes five papers that address issues around medicines prices that could be described as “fair” while still incentivizing the pharma industry to invest, entitled as follows:

While generally, high prices are associated with patented medicines, the second and third papers also explore lesser-publicized issues of high pricing for biosimilars, generic medications, as well as the prices of  off-patent drugs which may have too few manufacturers. The fourth paper argues for a radical shift towards alternate business models that reward the pharma industry for innovation, but not through the vehicle of prices, to spur more development in areas of unmet health need.

Finally, the last paper presents how the WHO’s Market Information for Access to Vaccines database has allowed middle-income countries to share market data and negotiate more equitable prices, highlighting an example of a transparency initiative that has helped increase access to essential vaccines.

The series’ authors include researchers from WHO, the Organization for Economic Co-operation and Development (OECD), the Graduate Institute in Geneva, University of KwaZulu-Natal, and Harvard University, among others.

Image Credits: BMJ, Suerie et al. Defining the concept of fair pricing for medicines.