Sophisticated Purchasing of Pharmaceuticals: Learning From Other Countries

“The authors [Emanuel EJ et al. in a JAMA Internal Medicine Special Communication also published today] suggest that the United States should learn from its peers, from other developed nations that have created publicly accountable institutions for health technology assessment and drug price determination and that have reaped a return in the form of prices that are lower and better aligned with clinical value than drug prices in the United States.

[..] Payers in the United States (governmental programs, self-insured employers, insurers, pharmacy benefit managers) conduct their own implicit health technology assessments but usually without the transparency or evidence focus of the peer nations studied by Emanuel et al. [i.e., Australia, France, Germany, Norway, Switzerland, and the United Kingdom] [..] A review of coverage policies from the largest 17 private payers in the United States reported that only 15% of 4811 coverage policies had cited the same study evaluating a specific drug for a specific indication. US payers should be required to conduct their assessments in a transparent manner, with public proceedings and published findings, and give a clear evidence-based rationale for formulary exclusions and prior authorization requirements. Patient advocacy organizations and professional societies should have an opportunity to review and comment. Mandated transparency would push US payers toward standardizing their methods, as is occurring in Europe.

[..] There are 2 problems with the prevalent strategy for price negotiations in the United States. First, the interests of the payers are only imperfectly aligned with those of patients, employers, and taxpayers. Rebates are negotiated in strict confidence as are coverage and prior authorization decisions. Payers often favor high-price and high-rebate drugs over therapeutically similar low-price and low-rebate drugs because payers can retain a significant share of the rebates rather than pass them through to the patients, employers, and governmental programs.

Second, the method used by US payers to move from health technology assessment to price discounts imposes huge transaction costs on the system. Payers have numerous employees who create administrative restrictions on the ability of physicians to prescribe. These administrative access barriers are supplemented with onerous financial access barriers, including coinsurance and deductibles. In their turn, pharmaceutical firms have numerous employees who interact with physicians and who support patients, and thereby enhance sales revenues. Payers then further tighten administrative restrictions and increase cost sharing, leading the pharmaceutical industry to further increase its expenditures on marketing and patient support.

[..] One of the most admirable features of other developed nations, although not emphasized in the article by Emanuel and coauthors, is that these countries proceed from value assessment to price discount with much less bureaucratic involvement. The German system, for example, has a single national formulary that covers all drugs authorized by the European Medicines Agency, does not allow insurers to impose prior authorization on patients, and limits consumer cost sharing to a maximum of €10 per prescription (waived for children and patients with chronic illnesses).

The German system of drug assessment and price determination is of particular relevance to the United States because it relies on a system of multiple competing health insurance firms rather than the single public payer found in many other nations. German insurers must cover every innovative drug as soon as authorized by the European Medicines Agency and, in the first year after launch, pay the manufacturer’s full list price. During that first year, the semipublic Joint Federal Committee conducts a clinical assessment of the new drug in comparison to others that treat similar indications. This health technology assessment report is passed on to the association of insurers, which negotiates a price with the manufacturer based on the price of the comparator drug, the incremental benefit of the new drug, and the prices charged in other European nations (although in practice many novel drugs are launched first in Germany). All insurers then pay the same price for the new drug. Manufacturers are not permitted subsequently to increase the price of their drugs without submitting new evidence of clinical benefit and going through a new set of negotiations with the insurer association. The German approach has resulted in substantially lower drug prices than those paid in the United States both by private insurers and Medicare.

[..] Compared with the purchasing structures in the 6 countries described by Emanuel et al., purchasing pharmaceuticals in the United States is fragmented, unsophisticated, opaque, beset with conflicts of interest, and not surprisingly, ineffective. Prices are higher in the United States than in other nations of comparable income. There is no consistent alignment between drug prices and clinical value. Insurance coverage policies are not based on scientific evidence in a consistent and transparent manner. Physicians’ prescriptions are frequently rejected based on financial grounds. High cost sharing burdens many patients with severe illness and adds to already serious failures of prescription adherence.

It does not have to be like this. Other nations are more efficient in their purchasing processes, more effective in their outcomes, and more ethical in how they treat patients with respect to drug pricing. The United States has much to learn.”

Full article, Robinson JC. JAMA 2020.9.28