Where was differential pricing at the WHO Fair Pricing Forum?

Access to pricey prescription drugs has become a topic of focused attention for the World Health Organization, governments of middle- and lower-income countries, nongovernmental aid organizations, patient activists, and others. Many of these gathered at this month’s Fair Pricing Forum in Johannesburg, South Africa, which was sponsored by the WHO.

The invitation-only meeting, which was closed to the media, provided a venue for representatives of governments and nongovernmental organizations, academics, experts, and leaders from the pharmaceutical industry to address concerns about fair pricing and access to pharmaceuticals, especially in middle- and low-income countries.

I had the good fortune to serve as a panel member in one of the sessions and to participate in the discussions.

Having attended the first Fair Pricing Forum two years ago in Amsterdam, where the discussions were constructive, I was surprised that positions at this meeting were polarized and often emotional. Organized patient protests outside the venue added to the urgency of coming to some resolutions for what is proving to be a complex socioeconomic issue.

The affordability of medications by people who need them was the central theme of the discussions, with health as a fundamental human right being a strong underlying principle. Through that lens, high drug prices are seen as abusive, a belief fed by feelings that the industry is hiding behind high R&D costs and the need for innovation as excuses for high drug prices.

Calls for transparency

The complexity of the economics of drug development and lack of transparency about drug prices and R&D investments is infuriating many stakeholders. That sentiment is being fueled by the claims of some academics — backed by calculations — that the actual manufacturing costs for many drugs can be quite low. As a result, governments are calling for transparency while nongovernmental organizations are calling for delinking R&D from drug development, meaning governments commission R&D with grants, while payments are separated from manufacturing, which is paid on a cost basis. Patient organizations are taking a different tack and seeking to force compulsory licensing for oncology drugs, much as was done for HIV/AIDS drugs 20 years ago. A report commissioned by the WHO on these issues was discussed at a WHO Executive Council meeting earlier this year.

The pharmaceutical industry has been hesitant to provide detailed information on R&D costs and has generally been ineffective in addressing the underlying concerns regarding transparency. It must do a better job showing that the typical calculations on profitability are flawed because they do not incorporate the risk of failure and related investments for unsuccessful drug candidates. In a sense, that can be compared to a return on investment calculation for a winning lottery ticket.

Although the Twitter-based world does not have much patience for complex explanations that require more than 280 characters, ignoring this issue is merely adding to frustration and fueling activism toward solutions such as compulsory licensing. That would resolve little and, if it comes to pass, should be seen as a failure of all involved who are seeking to reach a workable solution for patients.

Differential pricing as a collaborative solution

The first two days of the forum felt divisive and polarized rather than collaborative. Monologue was more pervasive than dialogue. That fortunately changed on the third day as a substantial amount of time was devoted to giving the audience opportunities to comment. This shift suggested to me that the largest elements missing from the issue of drug pricing are a basis of trust between industry, governments, and patient organizations and a belief that a joint resolution of the challenges is feasible.

Finding common ground among stakeholders is an essential ingredient toward reaching patient solutions for high cost drugs. I was surprised that differential pricing — allowing prices to vary in different countries based on affordability levels — had been omitted from the formal agenda for the meeting.

During the WHO-World Trade Organization dialogue in Hosbjor, Norway, almost 20 years ago, differential pricing took center stage. It was ultimately a large contributor toward access to HIV/AIDS drugs in middle- and low-income countries. Pharmaceutical companies are generally in favor of differential pricing, but there is a risk that products from countries where a drug has a lower price could be diverted to those where it is priced higher. In addition, many governments take advantage of lower prices in other countries through price reference laws that limit local prices based on prices in other countries.

The ability to reduce prices for lower-income countries without being punished through product diversion and price referencing by higher-income countries is instrumental in providing access to drugs at affordable prices. Nongovernmental organizations and patient advocacy groups tend to favor differential pricing, although some would prefer the more blunt compulsory licensing option.

At the Fair Pricing Forum in Johannesburg, it was clear there is a basis for common ground in pursuing differential pricing options. But such solutions must be pursued in close collaboration between middle- and lower-income countries, higher-income countries, the pharmaceutical industry, and patient organizations. Although higher-income countries were poorly represented at the forum, their acceptance of lower prices in poorer countries, which is essential for the success of differential pricing, should not be opportunistically used to create local budget savings.

Leaving any of these groups out of the equation might make for an easier conversation, but it will also result in total failure of the initiative.

Ed Schoonveld is the managing principal and leader of the value and access practice at ZS Associates, a global professional services firm, and the author of “The Price of Global Health” (Routledge 2017).