Pharmaeconomics: the future?

The increasing cost of new innovative medicines is debated by payers and healthcare professional all over the European Union. How to optimize the pharmaceutical purchasing budget and get as much value for money is the objective of public buying organizations and private insurance companies. One way of doing this is to implement Pharmaeconomics or cost-benefit evaluations of new and existing drugs.

The UK government has structured the National Institute for Health and Clinical Excellence (NICE) - an organization that evaluates the value for money in newly approved medicines and line extensions. The National Health Service (NHS) is legally obligated to provide funding and resources to the hospitals purchasing budget in England & Wales, if a drug is recommended by NICE. If a treatment is not recommended it means for the time being it should not be prescribed routinely by NHS doctors. When a Pharma company is introducing a new drug a positive recommendation by NICE can be crucial.

I believe that every Pharma stakeholder must get use to cost-benefit evaluations of newly approved and existing drugs, and if the value for money is “to low” the product will not be reimbursed or recommended. But this can induce a bad trend in Pharma. The industry has to deliver ROI of pipeline investment and if a marketed product is not reimbursed/recommended, the market potential is decreased and hereby the future earnings. This will increase the prices and for that reason more products will exceed the NICE threshold of £30.000 a year for “good-quality life gained”. If NICE do not increases the threshold, I think future approved drugs will have a difficult time gaining recommendation – the companies could be trapped between delivering ROI (increase prices due to costly development and a longer approval process) and get recommendation (decrease prices to meet NICE threshold). Pharma could hereby be fenced in by this pricing schism.

Pharmaeconomic evaluations are already an integrated part of getting a new drug approved and get reimbursement/recommendation. Many countries are taking pharmaeconomics into account, but the extent to which differs. The Netherlands, the UK, Sweden, Estonia, Latvia and Lithuania have specific guidelines for conducting pharmaeconomic analyses[1] and I think it’s only a matter of time before more will follow. To answer my question in the headline: Yes, pharmaeconomics is the future and many companies do already build the approval on cost-benefit analysis. But if an organization like NICE do not implement some flexibility in the evaluation, it could induce the mentioned bad trend – and that would be non-beneficial for companies, patients and payers.

[1] http://ppri.oebig.at/index.aspx?Navigation=r20-