Q&A: Why the World Health Organization plans a fair pricing model for drugs

Over the next year, the World Health Organization wants to develop a fair pricing model for pharmaceuticals. Toward that end, the agency plans to convene governments, patient groups, and drug makers to fashion the notion into something realistic. The trick is to find the right balance between access to affordable medicines and enticing companies to develop new and improved medicines, while also ensuring lower-cost generics remain available. We spoke with Suzanne Hill, the WHO Director of Essential Medicines and Health Products, about how the agency hopes to get this done. This is an edited version of our conversation.

Pharmalot: So how did this come about?

Hill: We’ve been thinking about this for a while because it’s clear the problem with prices of medicines is now a global issue, not just mostly for low- and middle-income countries, as in the past. We’ve seen examples with medicines for hepatitis C and cancer. It’s happening with orphan drugs. And then there’s the issue of what happens when a product goes off patent and taken over by a single supplier, but the price is manipulated. This happened in the US with [Martin] Shkreli [who caused outrage by purchasing an older life-saving medicine and quickly raising the price by more than 5,000 percent to $750 a tablet].

We’ve talked to member states over the past 18 months and seen increasing frustration with the failure of the market to manage prices. At the same time, we also have problems where products [that] are clearly essential disappear because there is a lack of commercial viability, so manufacturers have a lack of interest. And there are reports of shortages in the US, South Africa, and Europe. So we want to try to understand — what can be done to manage prices and ensure innovation for industry, but also maintain supplies for medicines that are disappearing.

Pharmalot: This seems rather lofty or at least complicated. How is this supposed to get done?

Hill: We want to get evidence together that looks at the price drivers — how manufacturers set prices and what we know and don’t know about that. And we need to understand the questions surrounding R&D costs. We also want to understand the strategies that countries, payers, and health systems are using to manage prices and which ones may be effective and which aren’t. We also want to understand the return on investment that manufacturers need to ensure that supplies of medicines are continued.

Pharmalot: And what will you do with all that info?

Hill: We plan a series of technical pieces to initiate a broader conversation among all the stakeholders. We think we will probably need to have conversations with patients about their expectations. We’d like to come up with policies and new ways of thinking about price, so we can have fair prices and a sustainable health system. … We hope to get some papers together for draft review by late this year and would like to convene a larger forum early next year for a broader discussion.

Some of this might sound like we’re revisiting the discussions around the cost of R&D or patents, but we’re trying to steer clear of things investigated before. We want to look at this in ways that people haven’t already and move the agenda at least a little to start changing pricing models.

Pharmalot: What about drug makers? They can’t be forced.

Hill: Well, there’s one set of question for the US, such as whether there should be legislation to control prices. But a global perspective would be really important to understand the market structure. We also have to start thinking about whether the innovative industry can sustain the current model. Remember that in other countries, even when you do regulate prices, they can still be unaffordable. Look at the UK, you have that problem even with NICE [the National Institute for Health and Care Excellence, which is the cost-effectiveness watchdog]. France is looking at changing its system for new products coming through. There will be different solutions for different systems.

Pharmalot: Such as?

Hill: If there is R&D through public funding, perhaps there shouldn’t be a full commercialization process. I think the question we need to ask is who then pays and what price do we pay if a medicine is publicly funded? A biotech may do some commercialization, but sometimes the early stuff is done entirely by an academic institution, and then a company charges whatever it likes. Or if the NIH has contributed to development, maybe that’s part of the consideration for setting a price. Maybe we need to work out ways to control the final commercialization price. Or maybe we can’t charge a fully commercial price for a product that has been publicly developed.

There’s also tiered pricing (in which prices vary from country to country based on affordability). Some multinational drug makers are looking at this, but the question is whether you make it operational fully across the globe and work out the best way for setting the top tier. That’s the kind of discussion we need to have and we need more transparency around this. The US is, generally, a high-priced market. But is it safe to say it covers costs for other parts of the world? Is it fair? Is it sustainable? Maybe it’s not.