Improving healthcare by banning repackaging of medicines

Transcription

1 Improving healthcare by banning repackaging of medicines Presentation to SMI Parallel Trade Conference 8 February 2011 By Dermot Glynn

2 Introduction Europe Economics is an independent economics consultancy ( see ) Our clients in healthcare and pharmaceuticals have included industry (big pharma, others) and Government (Department of Health, European Commission, others).

3 Repackaging Vast majority of parallel traded medicines are repackaged. Reasons include: Language Dosage / pack size differences Methods include New labels / oversticking New boxes New patient information leaflets New logos

4 Effects of repackaging Physical opening of packages Risks of mistakes Sometimes mistakes in original are detected Different presentations to medics and patients Confusion> dosage or compliance errors > adverse health effects Brand erosion/ establishment Markets open for parallel trade

5 Implications for patients Direct effects almost entirely negative Some confusion among patients and medics Some mistakes in package leaflets etc. Some health risks No direct advantages

6 Main indirect effect is facilitating parallel trade Is this a benefit to patients?

7 The parallel trade market million packages a year Vast majority are re-packaged

8 Most traded products have included Lipitor and Cozaar (Cardio) Zyprexia, Risperdal and Effexor (Central Nervous System) Casodex, Zoladex and Armidex (Oncology) Nexium (Gastro-Metabolism) Plavix (reduction of atherothrombic events) Seetide and Symbicort( asthma) Important patented medicines for serious conditions

9 Disadvantages for patients 1: Reduced safety Any interference with original packaging carries some risk of contamination Significant proportion of leaflets in // trade packages were out of date 20 %? Can matter a great deal to patient Increased ease of access for counterfeits Secrecy in supply chain Less clear product identification Incidents in 2007 allowed 30,000 packs to reach patients (MHRA estimate)

10 Disadvantages for patients 2: Less secure supply Periodic stock-outs, despite legislation for continuous supply. Even UK allegedly affected. (Art 81, Directive 2001/83/EC amended in 2004). Product recalls Some directly attributable to // trade; and all are less reliable where supply chain is obscure Delayed introduction to market In lower income countries

11 Disadvantages to patients 3: Reduced innovation Reduced profitability of successful R&D significant impact Inevitably some reduction in incentives to invest

12 Disadvantage for patients 4: Less affordable access Parallel trade inevitably encourages prices to converge Because of patents, price level will converge to optimal level for patent-holder, not to lowest possible cost of production This means poorest will have to pay more = Reduction in affordable access to key medicines within the EU

13 Price convergence in theory With parallel trade: Prices will be approximately the same in each country Prices will be set at most profitable level for the EU market as a whole Without possibility of parallel trade: Suppliers would charge different prices in high and low income Member States

14 Price convergence in practice

15 Effects of price convergence

16 What would be the ideal EU price levels? Assuming: GDP/capita of a country is roughly proportional to price country s health service would wish to pay Population of a country indicates numbers of potential patients

17 Notional demand curve for typical patented medicine would be:

18 Optimal price Calculations show that revenues would be maximised by charging price slightly below 100 on this measure i.e. about the same as to a Member State with average income levels About one third of patients in the EU would have to pay larger fractions of their income, or be denied access

19 Comparison of single price with differentiated pricing

20 Countries most affected EU Member States whose GDP per head is less than half the EU average are: Bulgaria Romania Latvia Poland Slovakia Hungary Estonia Czech Republic Combined population exceeds 100 million

21 EU single market Normal advantages of a single EU market do not apply in this case. Prohibiting both repackaging and re-labelling would reduce the harm to patients and substantially improve access to safe and affordable medicines.

22 Selecting a pricing strategy Alternative possible strategies for pricing in the EU include: A single EU price Different list prices in each Member State A single EU price with negotiated discounts to reflect particular circumstances

23 The most attractive option A single list price plus negotiated discounts The Discounts can be conditional on local circumstances and on (e.g.) whether risk sharing is part of the deal Reduced clarity should help to deter // trade Discounts are a means of charging different prices according to ability and willingness to pay Therefore result in better sales, and better profits

24 Why this would give the best outcome Value of a patented product has nothing to do with costs Value = what customers are willing to pay willingness to pay is a function of wealth or income as well as of the effectiveness of the medicine

25 Affordable access? This must involve differential pricing. For example a life saving medicine would be affordable to: A banker at say 1000 A politician at 100 Someone on UK average wage 15 Someone on UK minimum wage 5 Someone on low wage in Bulgaria 1

26 Recap: Argument has been Parallel trade has serious disadvantages for patients: Reduced safety Repackaging risks Risk of counterfeits Risk security of supply Product recalls Drying out of markets Reduced innovation Reduced access by low income patients And no offsetting advantages No overall price reduction No efficiency gain (quite the reverse) No improvement to EU Single Market

27 How much does this matter in practice? Sales volumes and profits are both one third lower with a single price than with differentiated pricing

28 Would a reduction in // trade matter? Such a reduction would be unambiguously good news for patients Ending repackaging, re-labelling and unnecessary transport > safer medicines Makes life more difficult for counterfeiters, who thrive on obscure rather than transparent market conditions > safer medicines Increases affordable access to medicines by differential pricing Increases profits from research, so improves prospects of further innovation

29 Conclusion Banning repackaging would benefit patients throughout the EU Particularly those in lower income countries