BENELUXA: First results of multi-country cooperation on medicine price negotiations

Reflection Paper September 2017 The European Public Health Alliance (AISBL) has received funding from the European Union, in the framework of the Health Programme. Sole responsibility for the content displayed within this document lies with EPHA and the Executive Agency is not responsible for any use that may be made of the information contained therein.

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By Yannis Natsis, Policy Manager for Universal Access and Afordable Medicines UNIVERSAL ACCESS AND AFFORDABLE MEDICINES | EPHA 1

BENELUXA: FIRST RESULTS OF MULTI-COUNTRY COOPERATION ON MEDICINE PRICE NEGOTIATIONS

Executive summary In 2015, the Dutch and Belgian Ministers of Health signed a historic declaration of intent to jointly negotiate with the pharmaceutical sector on the price and reimbursement of some medicines. Since then, the cooperation has been joined by and , with several more governments expressing an interest. This intergovernmental cooperation on medicines is unprecedented in Europe. Until now, each national government negotiated with pharmaceutical companies on a bilateral basis.

The European Public Health Alliance (EPHA) has followed this development with great interest. The information asymmetry between the pharmaceutical industry as the vendor and national governments as buyers is assumed to have contributed to the rise in medicine prices to today’s unsustainable levels. As a consequence, access to medicines is no longer only an issue for developing countries. High prices are now also a barrier to accessing medicines for patients and health systems in some of the richest countries in the world. Could the new cooperations between national governments - not only “Beneluxa” but also the Valletta Declaration and other country groupings - go some way to redressing the balance? This paper tells the story so far of this innovative cooperation and summarises the irst results announced by the participating governments. ■

Sovaldi, the wake-up call Europe has evolved over the past three years. The brief history of this voluntary Beneluxa was born after irst discussions took intergovernmental cooperation speaks place between Health Ministers Edith Schippers volumes about the current state of play and () and Maggie De Block () how far the debate on access to medicines in in December 2014. That was almost a year after UNIVERSAL ACCESS AND AFFORDABLE MEDICINES | EPHA 2

the launch, by American manufacturer Gilead, requirements, meaning easier marketing of Sovaldi, a highly efective new treatment authorization and faster time-to-market, to against Hepatitis C. Sovaldi’s price tag made encourage research and development of new headlines around the world and put the issue treatments for rare diseases. of high medicine prices on the agenda of journalists and politicians in Europe. Ministers THE COUNCIL CONCLUSIONS ON of health realised that Sovaldi was only the tip STRENGTHENING THE BALANCE IN THE PHARMACEUTICAL SYSTEMS IN THE EU of the iceberg, and that many more products AND ITS MEMBER STATES agreed in June across therapeutic areas with equally high or 2016, among other initiatives, mandated even higher price tags than Sovaldi were on the European Commission to conduct an evidence-based analysis of the their way. A few months later, in April 2015 the impact of the IP incentives on innovation, two Ministers signed¹ a declaration of intent availability, accessibility and afordability of new medicines and set out a road-map to jointly negotiate with the pharmaceutical for the collaboration among EU countries sector on pricing and reimbursement, starting who wish to jointly tackle the issue of with “orphan” drugs i.e. treatments for rare expensive medicines. diseases. Source: http://www.consilium.europa.eu/en/press/ press-releases/2016/06/17-epsco-conclusions- balance-pharmaceutical-system/ ORPHAN DRUGS: a pharmaceutical product that has been developed speciically to treat a rare medical condition. Manufacturers often receive These products have grabbed Ministers’ incentives - such as patent protections attention as an increasing number of “orphan” and regulatory lexibilities and drugs have become blockbuster products advantages - to encourage development of drugs for rare diseases. with disproportionately high volumes of sales, although they are supposed to be for rare Source: http://www.eurordis.org/sites/default/iles/ diseases, and attract the highest prices on the market. Additionally, the pharmaceutical The fact that orphan medicinal products were industry continues to lobby hard for further identiied as a priority area is no coincidence. incentives and watering down of requirements The groundbreaking² June 2016 EU Health in the name of accelerating access. Today, Ministers’ Council Conclusions³ relect a almost half⁵ of all new medicines approved by suspicion among governments that inancial the U.S. Food and Drug Administration (FDA) and other incentives put in place⁴ by EU or the European Medicines Agency (EMA)⁶ are legislators in the early 2000s, are increasingly presented as orphans. In other words, what was being abused by the pharmaceutical industry. supposed to be the exception, and therefore These incentives mainly take the form of requiring incentivisation, is becoming the longer patent protection and lower evidentiary unintended rule. The so-called “orphanisation”

1. http://www.deblock.belgium.be/fr/remboursement-des-m%C3%A9dicaments-orphelins-les-pays-bas-et-la- belgique-n%C3%A9gocient-ensemble-avec-le 2. https://www.ip-watch.org/2016/07/05/the-dutch-pharma-policy-a-groundbreaking-presidency/ 3. http://www.consilium.europa.eu/en/press/press-releases/2016/06/17-epsco-conclusions-balance- pharmaceutical-system/ 4. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2000:018:0001:0005:en:PDF 5. https://www.statnews.com/pharmalot/2017/02/10/grassley-orphan-drugs/ 6. http://www.ema.europa.eu/docs/en_GB/document_library/Other/2015/04/WC500185766.pdf Almost half of all new medicines approved by the FDA or the EMA are presented as orphans.

What used to be the exception, and therefore requiring incentivisation, is now becoming the unintended rule. UNIVERSAL ACCESS AND AFFORDABLE MEDICINES | EPHA 3 of the pharmaceutical regulation goes hand wealthy EU country not known for facing in hand with the consolidation of the “niche- serious access to medicines challenges, in buster” pharmaceutical business model. As June 2016. While Beneluxa was evolving a result, the market is being looded with so- other groups of EU member states moved in called orphan drugs at unhealthily high prices, similar ways; Bulgaria and signed¹⁰ straining health systems. At the same time, a cooperation agreement while Southern- the innovative value of these new medicines Mediterranean member states moved in the may be questionable, due to the very limited same direction. evidence required for their approval. Why does this matter? NICHE-BUSTER BUSINESS MODEL: Some initial observations on the “birth” of Drug prescription is combined with Beneluxa: genetic testing to identify patients who might beneit from a particular course of • The proposal was conceived at the highest treatment, developing the possibility for political level due to the realization that more personalised forms of treatment. At the heart of the nichebuster model the pharmaceutical companies’ business lie lucrative incentives introduced to strategies and pricing practices pose a encourage the production of “orphan” drugs. serious threat to the sustainability and survival of their national health systems. Source: http://www.pharmavoice.com/article/2010- It was not born of pressure from public 09-nichebusters-vs-blockbusters opinion in these relatively wealthy countries where access to new medicines has not From BE-NE to BENELUXA historically been a challenge. That said, it The announcement of the partnership between is noteworthy that the rationing of the most the Netherlands and Belgium was a historic expensive treatments has also become step. It signaled that even the wealthiest EU reality in the richer countries; member states felt they needed to increase • There is a notable contrast between their bargaining power in price negotiations Beneluxa countries, which at present with drug manufacturers. The Dutch-Belgian face relatively minor access to medicines plan foresees four areas of collaboration⁷: challenges, and other EU countries where a) joint horizon scanning, fully-ledged access to medicines crises b) joint Health Technology Assessments (HTA), have been around for years. c) exchange of strategic information, • It is possible for other countries to join the d) joint price negotiations (though not joint group; procurement). • The four areas of collaboration are broad and far-reaching; Luxembourg joined⁸ in September 2015 • Whilst the cooperation prioritises orphan followed by the addition of Austria⁹, another products due to their paralysing prices, the

7. http://www.beneluxa.org/en/collaboration 8. http://www.deblock.belgium.be/fr/grand-duchy-luxemburg-joins-belgium-netherlands-initiative-orphan-drugs 9. http://www.chronicle.lu/categoriesluxembourgpolitics/item/17622-austria-joins-benelux-countries- collaboration-to-lower-orphan-drugs-prices 10. http://www.nineoclock.ro/romania-and-bulgaria-agreement-on-the-patients-access-to-medicines/ UNIVERSAL ACCESS AND AFFORDABLE MEDICINES | EPHA 4

collaboration is not limited to them. pharmaceutical sector. At irst, industry voices tried to dismiss the cooperation, claiming that How did the pharmaceutical industries react? governments would never manage to set aside Drug companies are used to negotiating diferences to collaborate on such a sensitive bilaterally with national governments. topic. As time progressed, they continued This puts them in a favourable position, to play down the impact, highlighting the having a panoramic overview of each of limited scope of the exercise and claiming the 28 EU member states’ pharmaceutical that it would not change the overall modus policies, purchasing power and willingness operandi. Over the past two years, pharma to pay. In contrast, their customers – the sector representatives have made clear that national governments - due to market they prefer to negotiate on a bilateral basis, fragmentation and the shroud of secrecy that implying that this sort of multilateral regional covers pharmaceutical decision-making, are cooperation would never take of, and hinting prevented from knowing what is happening in that the best deals are made in the dark. their neighbouring countries. …and then this happened This information asymmetry is favoured by On 23 May 2017, what has been happening the industry, who are able to game the system behind the BENELUXA scenes was revealed. and ofer each government a “tailored” Belgium¹¹ and the Netherlands¹² announced deal. The arrangement has been enabled that an agreement had not been reached by governments through national legislation for the cystic ibrosis (CF) drug Orkambi due which guarantees and consolidates this to the excessive price asked by Vertex, its conidentiality through secrecy clauses and American manufacturer. Orkambi is indicated non-disclosure agreements. Presumably each for the treatment of a speciic form of CF, a rare government is assured that they are getting inherited disease with severe efects on the a preferential deal. The negotiating leverage lungs and the digestive system. a country might have – depending on its purchasing power, market size and GDP - The two governments essentially told Vertex is undercut and gives the seller the upper that Orkambi is not cost-efective as their HTA hand in the negotiations. Whilst this might agencies concluded that, while it ofers some work to the advantage of a big country with improvement on the existing standard of care, the purchasing power of Germany or France, the additional beneits for some patients do smaller and poorer countries are most afected not justify the excessive asking price. The by this power imbalance. price set by Vertex is seen as unsustainable and unacceptable by both countries. News of governments uniting to pursue better deals sent shockwaves through the According to ZIN, the Dutch HTA body, the

11. http://deblock.belgium.be/fr/n%C3%A9gociations-sur-le-prix-d%E2%80%99un-m%C3%A9dicament- contre-la-mucoviscidose-arr%C3%AAt%C3%A9es 12. https://www.rijksoverheid.nl/ministeries/ministerie-van-volksgezondheid-welzijn-en-sport/ nieuws/2017/05/23/prijsonderhandelingen-geneesmiddel-voor-cystische-ibrose-beeindigd Throughout the past two years, pharma representatives have made it clear that they prefer to negotiate on a bilateral basis, while implying that this sort of multilateral regional cooperation would never take of, hinting that the best deals are made in the dark. UNIVERSAL ACCESS AND AFFORDABLE MEDICINES | EPHA 6

drug was worth about 82 percent less than based rejection of Vertex’s ofer. Vertex’s asking price. Hence, until Vertex makes a fairer ofer, the governments have The cooperation has already demonstrated decided not to reimburse the product. The some important advantages and key lessons: Ministers highlighted their resource constraints • Flexible: It is not mandatory for all countries and the fact that a decision to reimburse a very within a regional collaboration such as expensive drug would require cuts elsewhere Beneluxa to move together at all times. In in the health system. Even if Orkambi had been this case, it was only the Netherlands and deemed to be cost-efective, it would not mean Belgium which joined forces. Additionally, that it would be afordable or inexpensive. not all participating countries need to collaborate altogether across all four areas The exact price discussed was not revealed of collaboration (listed above) at all times but in a letter¹³ to the Dutch Parliament, State either; Secretary for Health, Welfare and Sport Martin • Surmountable obstacles: Collaboration van Rijn elaborated on the decision. He added is possible, responsibility is shared and that that the budget impact for the 750 Dutch symbolism is strong when two or more patients (500 in Belgium) would be between health systems manage to work together EUR84-125 million with an approximate cost and overcome their diferences (ranging per treatment of EUR170.000 per year. The from language barriers to diferent working two Ministers invited Vertex to return to the methods and priorities); negotiating table with a reasonable ofer. Until • Groundbreaking: This irst attempt is then, the CF patients in both countries are undoubtedly a learning process for all victims of Vertex’s aggressive pricing strategy. involved. Over the past two years, there have been several other pilots but only What does this irst pilot tell us? Orkambi made it over the inish line. Above all, that the governments have Negotiations are already underway demonstrated their serious commitment and regarding other products with various belief in this new way of working. Whilst it manufacturers; has not yet led to an agreement in the case • Role of HTA reinforced: The importance of of Orkambi, there is reason for optimism that the HTA process is once again highlighted it will yield better results for patients and as a gatekeeper for the system and as an health systems in the near future. The ball is enabler of genuine therapeutic advance. now clearly in the court of Vertex, which has The respective agencies of the Netherlands been denied market access, with patients left and Belgium reached a common conclusion without the drug because of the company’s as to the limited added therapeutic value price setting policies. of the product. The Orkambi decision illustrates HTA’s role as a tool to rationalise Payers and governments across Europe are and not ration pharmaceutical expenditure; empowered by the solid, public and evidence- • Clearer signals, better value, increasing

13. https://www.rijksoverheid.nl/binaries/rijksoverheid/documenten/kamerstukken/2017/05/23/kamerbrief- over-prijsonderhandelingen-orkambi/kamerbrief-over-prijsonderhandelingen-orkambi.pdf UNIVERSAL ACCESS AND AFFORDABLE MEDICINES | EPHA 7

access: The primary objective of the These cooperation initiatives should not be Beneluxa collaboration is not lower prices construed as an attack on the pharmaceutical per se, but meaningful and afordable sector. On the contrary, the industry also has innovation for the beneit of all patients, much to gain from streamlining negotiations by tackling the power asymmetry between and economies of scale. Nevertheless, the governments and the industries. Via this pharmaceutical sector is certainly cautious new cooperation, governments send towards these initiatives which challenge the clearer signals on their requirements for status quo. There is a concern that companies real added therapeutic value and possibly might attempt to slow down or “boycott” these reshape the market through their joint initiatives, so as not to set a new precedent. horizon scanning and HTA work. Governments might wish to respond by making the Beneluxa route the only available option Into new territory - a new market called for reimbursement of a company’s products or BENELUXA? for some clusters of products. Whilst the irst foray is promising, it may still DRUG PRICING SCENARIOS be too early to say if this will become the PROJECT: A project initiated by the new normal for the negotiation of drug prices Belgian Healthcare Knowledge Centre with the pharmaceutical industries in Europe. (KCE) and Zorginstituut Nederland (Dutch Health Care Institute, ZIN) to It remains to be seen how vulnerable this explore new drug development and intergovernmental collaboration might be to pricing models. changes in the national political landscape. Source: https://kce.fgov.be/sites/default/iles/ What is certain however is that the Orkambi atoms/iles/KCE_271_Drug__Pricing_Report_0. case ofers a glimpse of what the future could pdf look like. More and more countries are seeking FAIR MEDICINE INITIATIVE: An to work together. initiative from the Fair Medicines Foundation to develop new pharmaceuticals in a transparent manner, VALLETTA DECLARATION: An and provide everyone with access to agreement between , , safe, afordable and efective medication. , , , and Ireland to enhance cooperation and Source: http://www.fairmedicine.eu/ jointly negotiate with the pharmaceutical industry on drug pricing. Next steps: A ifth area of joint work? Source: https://www.euractiv.com/section/health- Governments could consider adding the consumers/news/southern-eu-states-present- elaboration of alternative drug development uniied-front-in-drug-talks/ models as a ifth area of cooperation. To this The Valletta Declaration¹⁴ was signed in May end, countries would pool resources and 2017 by a group of six Southern-Mediterranean expertise and learn from initiatives already EU countries keen to follow in the footsteps of undertaken such as the Drug Pricing Scenarios Beneluxa. Project¹⁵, the Fair Medicine Initiative¹⁶ and the

14. https://www.euractiv.com/section/health-consumers/news/southern-eu-states-present-uniied-front-in- drug-talks/ 15. https://kce.fgov.be/sites/default/iles/atoms/iles/KCE_271_Drug__Pricing_Report_1.pdf 16. http://www.fairmedicine.eu/ UNIVERSAL ACCESS AND AFFORDABLE MEDICINES | EPHA 8

Fair Pricing Forum¹⁷. their leverage in the negotiations with the drug manufacturers. To this end, they organize Such an exercise would explore the feasibility themselves better by joining forces to increase and test the beneits of possible new models of their negotiating and purchasing power. This is funding for medical research and development exactly what Beneluxa and others such as the (R&D) which are not built on patent-based Valletta Declaration group of countries seek monopolies and exclusivities. to achieve: sending new signals to the market and resetting the balance of power. ■ In the face of today’s unjustiiably and unsustainably high prices of medicines, national decision-makers understand they must show a more united front and reinforce

17. www.fairpricingforum2017.nl European Public Health Alliance (EPHA) AISBL Rue de Trèves 49-51, 1040 Brussels (B) • +32 02 230 30 56 • www.epha.org • [email protected] @EPHA_EU • Transparency Register Number: 18941013532-08