Key Takeaways
- Companies that try to increase European drug prices to compensate for lower revenues in response to US policy to lower drug prices will face resistance from payers in the region.
- A most favored nations drug policy could ultimately mean more risk-sharing agreements in France if companies try to increase prices in that market.
- EU member states could turn to collaborative action, for example on procurement, if companies were to try to increase their prices to offset lower US prices.
Pharmaceutical companies in France could see more risk-sharing agreements and the threat of greater drug price transparency if they try to offset the financial impact of a US most favored nations (MFN) policy with higher medicine prices, said Alexandre Regniault, vice president of the industry association, France Biotech.
Risk sharing agreements are struck between the company and the payer and aim to reduce the risk for the payer of covering a costly therapy that may not work as well as predicted. For example, such an agreement may see companies gather additional data on outcomes and agree to pay rebates if the results fall below expectations.
A MFN policy could also result in European payers rejecting increased prices designed to compensate for lower US prices, warned Regniault, who is also a partner at the law firm Simmons and Simmons.
Regniault comments come in response to US President Trump’s 12 May executive order, intended to kick start plans for an MFN policy that would lower Medicaid drug prices by linking them to those in other markets with lower prices (see also HHS Negotiating With Manufacturers On Most Favored Nation Drug Pricing).
In a later development on 20 May, the US Department of Health and Human Services told pharmaceutical companies that its goal would be an MFN price that is the lowest price in an OECD country with a GDP per capita of at least 60% of that of the US.
In Europe, these markets could include countries such as Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Lithuania, Luxembourg, the Netherlands, Norway, Slovenia, Spain, Sweden, Switzerland, and the UK (see also HHS Intensifies Pressure On Pharma With MFN Pricing Benchmark).
France would likely be a target market for price referencing given that French drug prices tend to be low in comparison with those in other European markets, noted Regniault, who is based in Paris.
Higher Prices?
Lower US prices resulting from an MFN policy could put companies under pressure to increase drug prices in other markets. Nevertheless, as Regniault points out, such a strategy would not be simple in European countries where companies are not free to set their prices as they can in the US.
Instead, prices are determined locally at a national state level, in line with each member state’s own pricing and reimbursement regulations. In France, for example, prices are negotiated between companies and the drug pricing authority, CEPS, following a health technology assessment.
“EU member states have always wanted to keep this area under their own control. I cannot see how a US decree could have any direct legal effect on the systems in force for drug pricing in Europe,” commented Regniault.
He added that financial constraints on public health systems would make it “difficult” for the member states “to accommodate a general increase in the price of prescription medicines.”
There is also a risk that any price increases in European markets could lead to access issues if they are unsustainable for payers. Such a situation could force them to cut funding for medicines, although reimbursement mechanisms “are framed by national laws and cannot be implemented overnight,” Regniault said.
Transparency And New Pricing Agreements
The details of any MFN policy remain to be seen, for example, it is unclear whether US authorities will try to access net prices negotiated abroad, rather than a publicly available gross list price.
In France, for example, contractual terms between a company and CEPS remain confidential and only a list price is published, said Regniault. Other terms, including net pricing and rebates are confidential.
Nevertheless, if pricing pressures intensify, increased transparency could be up for discussion. In France, for example, there is some speculation that authorities could use the threat of greater price transparency as a tool to compel companies to keep prices down.
“Pricing negotiations could become tougher in France and Europe against a background of lower US prices. Ultimately, companies could be tempted not to launch certain products if the pricing negotiation positions are too far apart to reach agreement,” commented Regniault.
However, he added that a more “positive” outcome could be the adoption of new types of pricing models designed to maintain affordability. “A likely ‘shaking effect’ of this US policy would be to accelerate the development of new pricing arrangements, “he said.
France, for example, could see a greater uptake of risk-sharing agreements. CEPS has expressed concern about this style of agreement and so far has entered into only a limited number of risk-sharing deals. “Although they have been discussed for quite some time, they have faced resistance and have not developed as much or as fast as one might have anticipated a few years ago,” Regniault explained.
A push for higher European prices could also lead to a stronger emphasis on joint action within the EU, for example, via joint procurement of more collaborative health technology assessments.
This is the fifth in a series of articles looking at the potential impact of the US MFN drug pricing policy on European pharmaceutical markets. See also US ‘Most Favored Nation’ Pricing Could be Game Changer for Drug Access In Germany, US Most Favored Nations Policy: Higher Drug Spending In Germany Is ‘Difficult To Imagine’, Could EU Collective Procurement Counter US Most Favored Nation Policy? and US ‘Most Favored Nations’ Drug Pricing Policy Will Jeopardize Innovation In Europe
