Finding ways to price pharmaceuticals fairly will be a top priority for the next president and Congress. In tackling this thorny issue, they should use the World Health Organization’s essential medicines list as a starting point for the discussion and the Canadian system for negotiating drug pricing as a guide. By following those tacks, Mylan’s EpiPen could actually play a positive role in restructuring pharmaceutical pricing rather than being the latest scapegoat for how pharmaceutical companies are gouging the American public.

Essential medicines

The WHO launched the concept of essential medicines almost 40 years ago in an attempt to provide developing nations, as well as international organizations like UNICEF and UNHCR, with a minimum list of medications required for a functioning health system. According to the WHO, essential medicines satisfy the priority health care needs of the population and should be available “at all times in adequate amounts, in the appropriate dosage forms, with assured quality and adequate information at the price the individual and community can afford.” (The emphasis is mine.)

Affordability was initially a prerequisite for being included in the essential medicines list. After 2002, medications were included regardless of price, with priority given to those with clear evidence of effectiveness, safety, and cost-effectiveness. The medications in the list tended to become more affordable due to economies of scale and in some cases through advocacy from multilateral global health bodies and non-government organizations.

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Updated every two years, with the next iteration due in the spring of 2017, the current list includes over 445 medications, separated by condition and indication for use. Epinephrine, the drug delivered by Mylan’s outrageously expensive EpiPen, is listed as “essential” for anaphylaxis — but in the vial and syringe form typically used in hospital settings. Mylan had previously committed to the idea of access to essential medicines, at least with its HIV-fighting antiretroviral therapy, but its pricing for the EpiPen and the chemotherapy drug capecitabine have seen several-fold increases in price in the past two years.

It’s up to individual countries to create their own essential medicines list, based largely on the local burden of disease. More than 135 countries have created their own national lists based on local needs and burden of disease. Unfortunately, few developing nations include access to essential medicines as a constitutional right.

In September, UN Secretary-General Ban Ki-moon released a report from the High Level Panel on Access to Medicines that included recommendations around access to crucial medicines in both developing and developed countries. (Dissemination of the report’s recommendations was reportedly hampered by the US government and the pharmaceutical industry.)

Next week, the Lancet, a prominent British medical journal, will publish its report on essential medicines. Like the UN panel, the Lancet is likely to emphasize transparency in pricing and the need for a code of principles around pharmaceutical research and development.

As noted in an earlier Lancet report, the essential medicines list “does not guarantee patient access, [but can] be the first step in the policy process towards assuring access.” Borrowing from the philosophical idea of a “basic minimum,” the US government could begin by identifying a national list of essential medicines that would serve the most crucial health needs of the population, and adding special protections against price surges for these medicines. This list effectively serves as a starting point for prioritizing which medications would most benefit from closer pricing oversight.

The idea of using the essential medicines list as a way to set drug prices in developed countries is not new. In 2004, an editorial by a leader in the essential medicines movement pointed to the benefits of using the list as a way to control prices and evaluate patents for new drugs. However, critics pointed out that this alone could affect research and development for novel pharmaceuticals, perhaps hampering innovation.

The Canadian approach to drug pricing

An entire overhaul of the existing pricing mechanism for pharmaceuticals, which the American electorate has said is a major priority, is likely to take years. One small step forward could be to adopt components of the Canadian drug pricing system. While far from perfect, this system does pay close attention to price.

In Canada, the price of a drug is determined through a multi-tiered process tied to the approval of the drug. It is first evaluated for safety, quality, and efficacy by Health Canada, which is responsible for national public health. Once approved at that level, the Common Drug Review looks at cost-effectiveness based on the price set by the pharmaceutical company and the prices for existing treatment options. In parallel, the Patented Medicine Prices Review Board (PMPRB) compares pricing data from other countries (such as Switzerland and the UK) where the same medication is approved and used. The PMPRB also provides a stopgap function by indicating a maximum price above penalties that will be levied on the company according to the Patent Act.

If the Common Drug Review gives its OK, the pan-Canadian Pharmaceutical Alliance — a separate body that represents the interests of the provincial and federal governments — begins negotiations with the pharmaceutical company around price. Once a single price for a drug is determined, an agreement is made to list the drug on provincial and territorial formularies. Agreements based on intergovernmental coordination allow all provinces (regardless of population size) to benefit from a common pricing system via various provincial legislation such as the Ontario Drug Benefit Act in Ontario. The set price, which can be significantly lower than the list price (what a private insurer or individual would pay out-of-pocket), is often kept confidential.

This isn’t a completely foreign idea for the US health system. It has been used before in emergencies. In 2001, the US government negotiated with Bayer to provide ciprofloxacin at a fixed cost in case of an anthrax outbreak. Due to the volume purchased, Bayer made a profit even though the price was halved and there was competition from Canada.

There is an opportunity to test a new framework for drug pricing in the US. A multi-level system, where approval is tied in with pricing, would be a reasonable option. As well, the creation of a dedicated pharmaceutical negotiations group — similar to the pan-Canadian Pharmaceutical Alliance — would be helpful. It could serve a stopgap function to set pricing limits based on comparative cost-effectiveness data with existing alternatives and prices for the same drug in other industrialized countries.

Auvi-Q, a competitor to the EpiPen at the early stages of the approval process, could be an opportunity to test this model. Roughly 50 million Americans have allergies, so economies of scale — not to mention competition from Mylan’s EpiPen — would help control pricing.

Nov. 9 represents the beginning of a new era, one in which the new president and Congress must begin restructuring a broken pharmaceutical pricing system. They need not start from scratch.

Amitha Kalaichandran, MD, is a pediatrics resident and a Munk Global Journalism Fellow at the University of Toronto.

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  • This a well thought out initial resolution that should embarrass CMS for not proposing before.

    As I have stated, given how Congress has handicapped itself by its singular dependence upon the largesse of funds contributed by Big Pharma’s lobbyists over the public’s interest, we will need to work around the bulwarks Congress has established to protect its benefactor, Big Pharma. Therefore, the incoming president should issue an Executive Action to immediately implement this program as described here. Should Congress attempt to intercede in behalf of Big Pharma, it should be known in advance how this Executive Action would further ramp-up to deflect Big Pharma’s monopolistic abuse of the free market by its outrageous pricing scheme to extract exorbitant profiteering.

    As I have previously proposed, CMS with the US Treasury should build the economic model of market basket of prices and allowable profits from Canada, UK, EU, and Switzerland, from which no price or profit would be higher in the U.S. We cannot afford to be the only nation lacking such meaningful controls to the detriment of our taxpayers.

    Finally, given the issues experienced with the FDA losing key staff lured to Big Pharma, restrictions must be in place to prevent those in CMS and Treasury from being “purchased” to join Big Pharma, or its K Street lobbyist cronies, for a meaningful period of time. We should have learned from the motivation of Congress in pushing through the Medicare Part D Act of 2002, when the key House committee chairperson, Billy Tauzin (R-LA), was quickly rewarded by Big Pharma with a multi-year contract to run PhRMA.

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