The Big Cost Drug Challenge

Medical aid benefits vary, but even the most comprehensive plans only cover up to 75 per cent of the R3.5-million cost at present. Even for those with good insurance, it’s simply out of reach for most South Africans.

Transparent pricing

Pharmaceutical companies often use the high cost of research and development (R&D) to justify prices, and different studies place the cost of bringing a new drug to market as between $600-million and $2.6-billion.

Some representatives of big pharma go further: J Michael Pearson, Valeant Pharmaceuticals CEO, told MSNBC that “his company’s responsibility is to its shareholders, not the customers who rely on his drugs to live.”

Globally, civil society organisations have called for fair pricing and the “delinkage” of R&D costs and progress is being made.

“In May, after a heated debate, the World Health Assembly approved a resolution to support greater disclosure around medicine prices,” says Salome Meyer, independent cancer activist and manager of Cancer Alliance’s Access to Medicine campaign. “Although the final text contained a watered-down provision relating to R&D costs, it’s a step in the right direction.”

Dr Jacques Snyman, clinical pharmacologist and CEO of Medical Specialist Holdings, explains that “pharmaceutical companies need to recover R&D costs from the biggest markets, USA and Europe. International reference pricing determines the cost at which products must be sold. Different jurisdictions can negotiate discounts, but these are never published.”

Dr Snyman says that South Africa’s single exit price (SEP) mechanism prevents organisations from negotiating their own discounts on these new drugs. It seems that internationally, few have the clout to influence costs anyway. For example, Merck cut the price of Keytruda in half for its Chinese launch, but that’s the exception, not the rule.

Risk sharing

Dr Ernst Marais, COO of ICON Oncology, says that health economics classify immunotherapies as cost-effective because of the high success rate. “But, in our context, they’re still unaffordable,” he explains. “If medical schemes priced them into their premiums, members would face huge increases, making scheme membership itself unaffordable. “The most progressive approach is Pay for Performance,” says Dr Marais. “This sees pharmaceutical companies absorbing some of the risk as they’re only paid if patients respond positively to the medication.”

This is having great success in Italy and elsewhere. “However, in South Africa,” says Dr Marais, “our current regulations prohibit this risk sharing. Many stakeholders are keen to implement this model because outcomes will improve while costs decrease, but it needs a determination from the Department of Health.”

Dr Snyman agrees that risk sharing is the best way to increase access to drugs. “Pharmaceutical companies and funders (patient/medical aid/state) must share the risk,” he says. “We must redesign the funding of medicines to be beneficial to all parties, taking into account the success of the treatment. We need to test a drug’s efficacy for treating other cancers so that each drug benefits more patients, which will bring down the costs.”