The price of life-saving drugs is an emotive issue. It tests our belief in the free market. In the Indian context, it has linked two seemingly separate jurisdictions: patenting and pharmaceutical pricing. Both may be clubbed together as rewarding healthcare innovation and making it accessible for the benefit of society.
All countries face this challenge, and all of them negotiate it in their own ways. A drug developer is entitled to exclusive access to a market on the basis of patents and other intellectual property rights. Such exclusivity is a reward for the investment of time, resources and effort, without which modern healthcare innovation would sputter to a halt. No one really disagrees up to this point. It starts becoming murky when a price has to be put on the product of that innovation.
The pricing decision involves two steps: a clinical assessment of the drug’s safety and efficacy via available clinical trial data; and an economic assessment of the impact on the budgets at a given price and usage level. The emphasis is always on evidence, and on how applicable the evidence is to real-world patient settings. But although evidence is the bedrock of such decisions, cultural perceptions tweak the process to often unrecognisable degrees. It is fascinating to see the different ways in which various cultures negotiate this seemingly scientific process of value assessment and pricing. It reveals a little about their aspirations and how they justify things to the national psyche. It may even reveal the Indian national perception of itself to curious outsiders.
The British have taken the most scientifically correct position, and seem determined to maintain their global leadership in value-based pricing. The National Institute for Health and Clinical Excellence requires clinical trial data that indicate the improved health-related quality of life for a patient. Such improvement is juxtaposed against the anticipated additional cost to the healthcare system. Recommendations on the price and level of usage are then drawn up, leaving local-level health units moderate freedom to negotiate their own contracts with healthcare companies. When all is said and done, it is still a one-to-one contract and a gentleman’s agreement.
The French, on the other hand, devoutly believe that money should not be a consideration in the decision to fund a drug on state health insurance. They rank each new drug on the basis of the level of therapeutic progress it provides compared to others on the market. Clinical effectiveness and budget impact are used to determine prices, with cost-effectiveness having no current focus. But they live in the same world and must eventually consider the issue of cost. This is done at a more local level, with opaque price-volume agreements and other risk-sharing schemes.
The Germans, with their clichéd distaste for needless misinterpretation of rules, have evolved a clean framework that maps new drugs against the “efficiency frontier” of currently available drugs. They recognise that components of evidence required to make a thoroughly scientific judgement are lacking, and waste no more time in trying to conjure it. This seems a “wait and watch” approach, since they are usually quick to incorporate new evidence when it becomes available. The system works well for them, but does not challenge the boundaries of research.
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The fact that such stark social differences emerge from the same inherent scientific method and the same clinical trial data shows how important cultural mediation is in this entire process of pricing life-saving healthcare innovations. So it is reasonable to expect disbelief on part of the West when the Indian Patent Office, which has nothing to do with medical evaluation, proposes a price for a certain drug! But there is no fundamental disconnect here. It is merely a question of understanding each other’s context and the manner in which we communicate our national aspirations.
In Europe the bulk of the population is covered under a state-sponsored healthcare system, funded primarily through taxes. Hence the payer (entity or person who pays for a medicine) is a single body such as the UK’s National Health Service. In India, state-sponsored healthcare is widespread but largely inadequate, and hence the “payer” is partly the state and partly the patient. No single body can determine a drug’s price for the entire country in such a multi-payer healthcare system. Thus, the lever of price control stems from the patent office.
However, Western pharmaceutical companies still have a valid point. In a globalised world, parallel trade of pharmaceuticals means that a lower-priced product for India will easily find its way to other countries. They would not only lose out on a growing Indian market, but further subsidise their own products in their core home markets. Unchecked, such losses can truly derail an already stressed out R&D innovation model.
They can make the drug widely accessible at low prices, hoping that large volume sales will satisfy their revenue aspiration for the Indian market. The risk is that in the absence of enforceable legal rules around price containment within India, they will jeopardise their home markets abroad. Else they can make the drug available at a high price so that even low volume sales cater to their revenue expectations. The flaw in this approach is that the bulk of Indian patients will not be able to afford the drug, and the complicated patient-access schemes that they devise on the basis of affordability will not work because the capability to fully implement such mechanisms does not exist.
Indian policy makers must understand that a jingoistic approach is unrealistic if India itself is to develop as a global power on the basis of its scientific ability. We must invest in the systems that enable us to work with Western models, while constantly tweaking them to our unique needs.
The writer is a London-based consultant