KNOWLEDGE PORTAL
on innovation and access to medicines
INSTITUTIONS
V1.0 researched and written by Elise Erickson, edited by Suerie Moon, last updated June 2018
INTRODUCTION
The literature regarding pricing institutions is thin.* Most of the literature looks at a specific aspect or function of an institution, rather than discussing the developments, achievements, organization or characterization of the institution as a whole and its impact on prices.
SEARCH TERMS
National pricing commission; specific institutions e.g. PBAC, CDR, NICE and pricing
SYNTHESIS OF THE LITERATURE
Specialized institutions to manage medicines pricing have been established in some countries and regions, and several papers analyze these. For example, Adesina, Wirtz, and Dratler (2013) examined the impact of the creation of Mexico’s commission for price negotiation on antiretroviral (ARV) prices, and found ARV prices dropped by 38% on average after the first round of negotiations, but noted that this reduction cannot be credited fully to the commission. Also, Mexico continued to pay an average of six times more than similar countries for ARVs despite the commission. The authors suggest that forecasting and procurement process inefficiencies might have negatively impacted the negotiation process for the commission.
Gómez-Dantés et al. (2012) described Mexico’s Coordinating Commission for Negotiating the Price of Medicines and other Health Inputs (CCPNM), an agency created in 2008 for price negotiations for patented drugs on Mexico’s essential medicines list. The authors note the agency’s success in price negotiations, but also highlight major limitations such as: absence of appropriate indicators to mark the commission’s performance, coordination with other institutions, and sustainability concerns (political will, insufficient staff).
Australia’s Pharmaceutical Benefits Advisory Committee (PBAC) has been widely studied. Recently, Vitry and Shute (2018) described the funding and pricing policies for high-cost medicines listed by Australia’s Pharmaceutical Benefits Scheme (PBS). Turkstra et al. (2017) found that a medicine’s expected financial impact to the government is negatively associated with a PBAC recommendation. Others point more explicitly to PBAC’s limitations. For instance, Carter, Vogan, and Afzali (2016) highlighted PBAC’s use of ICER (incremental cost-effectiveness ratio) thresholds for decision-making, and the absence of community values considered in cost-effectiveness evaluations as two major limitations. Langley (2017) examined version 5.0 of the Guidelines for Preparing Submissions to PBAC, arguing that the guidelines do not meet scientific standards and discussing how the guidelines could be altered to reflect standard scientific practice. Lu et al. (2008) examined the balance between limited resources and community needs with regards to high-cost medicines in Australia, illustrating their concerns with rheumatoid arthritis.
Pricing institutions do not exist in a vacuum; rather, they can be impacted by other sectors such as trade. For instance, Harvey et al. (2004) discussed how the Australian-United States Free Trade Agreement (AUSFTA) had the potential to undermine Australia’s Pharmaceutical Benefits Scheme (PBS), thereby increasing the cost of medicines for Australian consumers, or delaying the entry of generics.
RESEARCH GAPS
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Research on pricing institutions in low and middle-income countries
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Further research on the effectiveness of a pricing/procurement agency, such as impact on price or availability (similar to Adesina, Wirtz, and Dratler (2013) and Gómez-Dantés et al. (2012)), with particular emphasis on lessons learned
CITED PAPERS WITH ABSTRACTS
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Abbott, Frederick. 2016. “Excessive Pharmaceutical Prices and Competition Law: Doctrinal Development to Protect Public Health.” UC Irvine Law Review 6 (3): 281."Abstract: Public health budgets and individual patients around the world struggle with high prices for pharmaceutical products. Difficulties are not limited to low income countries. Prices for newly introduced therapies to treat hepatitis C, cancer, joint disease and other medical conditions have entered the stratosphere. In the United States, state pharmaceutical acquisition budgets are at the breaking point -- or have passed it -- and treatment is effectively rationed. Competition/antitrust law has rarely been used to address “excessive pricing” of pharmaceutical products. This is a worldwide phenomenon. In the United States, the federal courts have refused to apply excessive pricing as an antitrust doctrine, either with respect to pharmaceutical products or more generally. Courts in some other countries have been more receptive to considering the doctrine, but application in specific cases has been sporadic, including with respect to pharmaceuticals. This remains a paradox of sorts. Competition law experts acknowledge that one of the principal objectives of competition policy is to protect consumers against the charging of excessive prices. The currently preferred alternative is to address the “structural problems” that allow the charging of excessive prices. That is, “fixing the market” so that the underlying defect by which excessive prices are enabled is remedied. There is a fundamental problem with the “fixing the market” approach when addressing products protected by legislatively authorized market exclusivity mechanisms such as patents and regulatory marketing exclusivity. That is, mechanical aspects of the market are not broken in the conventional antitrust sense. Rather, the market has been designed without adequate control mechanisms or “limiters” that act to constrain exploitive behavior. Political institutions, such as legislatures, that might step in are constrained by political economy (e.g., lobbying), and do not respond as they should. Competition law and policy should develop robust doctrine to address excessive pricing in markets lacking adequate control mechanisms. This article will focus specifically on the pharmaceutical sector because of its unique structure and social importance. This focus is not intended to exclude the possibility that development of excessive pricing doctrine would be useful in other contexts. This article is divided into two parts. The first addresses competition policy and why it is appropriate to develop the doctrine of excessive pricing to address distortions in the pharmaceutical sector. The second addresses the technical aspect of how courts or administrative authorities may determine when prices are excessive, and potential remedies. The policy prescription of this article is twofold: first, the United States should incorporate excessive pricing doctrine in its antitrust arsenal, and; second, other countries should maintain the status quo with respect to multilateral competition rules that allow them flexibility to develop and refine doctrine, including excessive pricing doctrine, that is best suited to their circumstances and interests. Link: https://scholarship.law.uci.edu/ucilr/vol6/iss3/3/
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Heller, Peter S. “The Prospects of Creating ‘Fiscal Space’ for the Health Sector.” Health Policy and Planning 21, no. 2 (March 1, 2006): 75–79. https://doi.org/10.1093/heapol/czj013."Abstract: Not Available Link: https://academic.oup.com/heapol/article/21/2/75/554947
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Lexchin, Joel. 2015. “Drug Pricing in Canada.” In Pharmaceutical Prices in the 21st Century, 25–41. Adis, Cham. https://doi.org/10.1007/978-3-319-12169-7_2."Abstract: Not available Link: https://link.springer.com/chapter/10.1007/978-3-319-12169-7_2
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Love, James. 2012. “Affidavit: Natco Pharma Limited versus Bayer Corporation.” https://www.keionline.org/sites/default/files/aff-jameslove_13Feb2012_as_Filed.pdf."Abstract: Not available Link: https://www.keionline.org/sites/default/files/aff-jameslove_13Feb2012_as_Filed.pdf
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Ottersen, Trygve, Riku Elovainio, David B. Evans, David McCoy, Di Mcintyre, Filip Meheus, Suerie Moon, Gorik Ooms, and John-Arne Røttingen. 2017. “Towards a Coherent Global Framework for Health Financing: Recommendations and Recent Developments.” Health Economics, Policy, and Law 12 (2): 285–96. https://doi.org/10.1017/S1744133116000505."Abstract: The articles in this special issue have demonstrated how unprecedented transitions have come with both challenges and opportunities for health financing. Against the background of these challenges and opportunities, the Working Group on Health Financing at the Chatham House Centre on Global Health Security laid out, in 2014, a set of policy responses encapsulated in 20 recommendations for how to make progress towards a coherent global framework for health financing. These recommendations pertain to domestic financing of national health systems, global public goods for health, external financing for national health systems and the cross-cutting issues of accountability and agreement on a new global framework. Since the Working Group concluded its work, multiple events have reinforced the group’s recommendations. Among these are the agreement on the Addis Ababa Action Agenda, the adoption of the Sustainable Development Goals, the outbreak of Ebola in West Africa and the release of the Panama Papers. These events also represent new stepping stones towards a new global framework. Link: https://www.cambridge.org/core/journals/health-economics-policy-and-law/article/towards-a-coherent-global-framework-for-health-financing-recommendations-and-recent-developments/32B84686FD13D7CB340643D798832095
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Wirtz, Veronika J., Hans V. Hogerzeil, Andrew L. Gray, Maryam Bigdeli, Cornelis P. de Joncheere, Margaret A. Ewen, Martha Gyansa-Lutterodt, et al. 2017. “Essential Medicines for Universal Health Coverage.” The Lancet 389 (10067): 403–76. https://doi.org/10.1016/S0140-6736(16)31599-9."Abstract: Not available Link: https://www.thelancet.com/action/showPdf?pii=S0140-6736%2816%2931599-9
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World Health Organization. n.d. “Essential Medicines.” WHO. http://www.who.int/medicines/services/essmedicines_def/en/.Abstract: Not available Link: http://www.who.int/medicines/services/essmedicines_def/en/
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Xu, Ke, David B Evans, Kei Kawabata, Riadh Zeramdini, Jan Klavus, and Christopher J L Murray. 2003. “Household Catastrophic Health Expenditure: A Multicountry Analysis.” The Lancet 362. http://www.who.int/health_financing/documents/lancet-catastrophic_expenditure.pdf."Abstract: Not available Link: http://www.who.int/health_financing/documents/lancet-catastrophic_expenditure.pdf
* For the purposes of this review, we have established three categories to describe the state of the literature: thin, considerable, and rich.
- Thin: There are relatively few papers and/or there are not many recent papers and/or there are clear gaps
- Considerable: There are several papers and/or there are a handful of recent papers and/or there are some clear gaps
- Rich: There is a wealth of papers on the topic and/or papers continue to be published that address this issue area and/or there are less obvious gaps
Scope: While many of these issues can touch a variety of sectors, this review focuses on medicines. The term medicines is used to cover the category of health technologies, including drugs, biologics (including vaccines), and diagnostic devices.
Disclaimer: The research syntheses aim to provide a concise, comprehensive overview of the current state of research on a specific topic. They seek to cover the main studies in the academic and grey literature, but are not systematic reviews capturing all published studies on a topic. As with any research synthesis, they also reflect the judgments of the researchers. The length and detail vary by topic. Each synthesis will undergo open peer review, and be updated periodically based on feedback received on important missing studies and/or new research. Selected topics focus on national and international-level policies, while recognizing that other determinants of access operate at sub-national level. Work is ongoing on additional topics. We welcome suggestions on the current syntheses and/or on new topics to cover.
