Miracle cure or sticking plaster? The results of negotiations on the prices of medicines
By signing a growing number of price agreements with pharmaceutical companies, the Dutch Minister for Medical Care is helping to control spending on expensive new medicines. The flow of increasingly expensive medicines continues: hundreds of new medicines are expected to come on stream in the coming years. Bigger discounts need to be agreed in order to reduce the risk of spending on medicines crowding out spending on other types of specialist medical care.
Download "Summary of Miracle cure or sticking plaster? The results of negotiations on the prices of medicines"
Price negotiations for medicines
The Netherlands Court of Audit has audited price negotiations on costly pharmaceuticals because the Netherlands are spending more and more on pharmaceuticals and especially on new, costly pharmaceuticals. We have analysed whether or not the negotiations, commissioned by the Minister for Medical Care, lead to cost effective healthcare. The Netherlands Court of Audit noted that these negotiations contribute positively, but at the same time it is limited. This presents a problem, because more and more costly pharmaceuticals will be introduced while hospital budgets will not increase. This could pose a problem for other types of care in hospitals. That's why we recommend the Minister for Medical Care to have cost effective healthcare as his primary goal in all negotiations. If that is not possible, it is also possible to say no, because not all prices are acceptable. Even if that means health insurers will not cover the costs for a certain medicine.
In its audit report entitled Miracle cure or sticking plaster? The results of negotiations on the prices of medicines, the Netherlands Court of Audit seeks to establish whether the price agreements reached with pharmaceutical companies between 2012 and 2018 (32 in total) have helped both to bring about cost-effective care and to control spending on medicines. The audit report was sent to the Dutch House of Representatives on 23 April 2020, the date on which it was published.
Small proportion of aggregate expenditure
Writing in the audit report, we call on the Minister to toughen his stance on price negotiations and decide on the point at which he is prepared to say ‘no’ if a pharmaceutical company does not offer a large enough discount. A tougher stance may result in a medicine not being covered by the basic package of insured care.
The Minister first began negotiating with pharmaceutical companies on the prices of new, expensive medicines in 2012. Before then, healthcare insurers and hospitals were the only parties that negotiated with pharmaceutical companies. No figures are available on the size of the discounts they were able to negotiate. The Minister negotiates only on a small proportion of aggregate expenditure on medicines. Over the years, the reduction in expenditure that the Minister has managed to achieve has risen from just tens of millions of euros to €272 million in 2018. Many of the price discounts are graduated, i.e. they rise in step with the volume of sales.
Spending on expensive medicines increasingly problematic
The Netherlands spends over €6.5 billion per year on medicines. The Minister negotiates on the prices of specific medicines, for example those used for treating chronic hepatitis C, Pompe disease, spinal muscular atrophy (SMA) or cancer. The negotiations involve both medicines that are available from pharmacies (known as ‘out-of-hospital medicines’) and medicines used during the course of hospital treatment (‘known as ‘hospital medicines’). The latter category – where the steepest rise in expenditure has been recorded in recent years – forms the subject of a growing number of price negotiations. Now that the Dutch government has decided that there should be little or no increase in spending on specialist medical care during the period until 2022, we believe that this situation is becoming increasingly problematic.
Results not always cost-effective
We compared the negotiated prices with the prices recommended by the Dutch National Health Care Institute. If the price negotiated for a particular medicine does not exceed the recommended price, this means that treatment with the medicine is cost-effective.
The results of the Minister’s negotiations tend to vary. The Minister does not have a strong negotiating position in relation to medicines such as Orkambi (used for treating cystic fibrosis) or Spinraza (for treating SMA), given that no alternatives are available on the market for the foreseeable future. In three sets of the negotiations, the Minister did not seek to bring the price down to the level recommended by the Dutch National Health Care Institute, thus ruling out the possibility of a cost-effective result. The audit showed that the result of five negotiations was not cost-effective.
As the Minister is accountable for any decision to refund the cost of non-cost-effective care, he is in a position to provide more information to the Dutch parliament.
What are our recommendations?
We urged the Minister for Medical Care and Sport to toughen his negotiating stance. This he can do by making clear that the negotiations should be aimed at reaching a price at which care is cost-effective in any event. Negotiations should also be geared towards ensuring that the level of spending rises at a slower pace than in recent years.
We also recommended that the Minister should give parliament more information about whether the negotiations were successful in terms of achieving the prices recommended by the Dutch National Health Care Institute.
We also urged the Minister to assess, when implementing his strategy on medicines, whether the strategy can improve the Ministry of Health, Welfare and Sport’s negotiating position. We stressed that the Minister should be prepared to turn down a final offer from a pharmaceutical company which he feels is unacceptable. If such an eventuality does indeed materialise, parliament will need to be informed in good time and the Minister will have to explain clearly to society at large why he took this decision.
What audit methods did we use?
We sought to ascertain whether, in its price negotiations with manufacturers, the Ministry of Health, Welfare and Sport succeeded in lowering the price to the level recommended by the Dutch National Health Care Institute. We also sought to establish how much would have been spent on the medicines if the recommended price had been paid for each individual medicine. We looked at all 32 price agreements reached between 2012 and 2018. We made use of both public and confidential data for the purpose of this audit, during which we also interviewed a number of relevant stakeholders. We asked for the opinions of a number of external experts on one specific topic.
Why did we examine these negotiations with pharmaceutical companies?
For the Ministry of Health, Welfare and Sport, the object of the negotiations is a logical consequence of the Minister’s strategy on medicines. This means that, in arriving at an ‘acceptable price’ for each individual medicine, the Minister for Medical Care and Sport should base his decision on a number of factors: not simply the medicine’s cost-effectiveness and the (projected) aggregate level of expenditure on the medicine, but also its availability and affordability for patients and the relative rareness of the disease in question. The nature of this assessment could lead the Minister, for example, to attach less value to the cost-effectiveness of the treatment if the overall level of spending is comparatively low when viewed from a macro perspective.
We hope that this audit will answer the question of whether the price negotiations conducted by the Ministry of Health, Welfare and Sport have helped both to bring about cost-effective care and to control spending on medicines.
The audit report was published on 23 April 2020. The Minister for Medical Care and Sport responded in writing to the audit findings. His response is included in the report.