Regulators and payers have raised major concerns over recent spikes in drug prices. Unjustified high drug prices (see Valeant case) have triggered not only political comments from U.S. presidential candidates in the previous U.S. elections (see Hillary Clinton’s statement) but also a broader discussion on how drug prices can be regulated and whether the European drug pricing model (reference pricing) should be adopted.
In this article, I will discuss the differences between U.S. and E.U. drug prices based on the case of CNS drugs. Prices have been drawn from various sources including reported Wholesale Acquisition (WAC) prices as well as from a number of journal articles.
The following indications will be analysed: Multiple Sclerosis, Neuropathic Pain and Parkinson’s Disease. These disorders account for ~50% of the global CNS market (excl. psychiatric disorders such as depression, schizophrenia anxiety or eating disorders).
Multiple Sclerosis (MS)
Disease Description: MS is a neurodegenerative disorder in which the insulating covers of the nerve cells in the brain and spinal cord are damaged causing a range of symptoms (mental, muscle, ophthalmic).
MS market: is highly crowded by various drugs that are prescribed based on disease progression. First line therapies include beta interferons (Avonex, Rebif, Extavia and Betaseron) which are injectables, Copaxone which is also an injectable and finally Aubagio, Tecfidera and Gilenya (Gilenya has been approved as first-line therapy in the U.S. but as second-line therapy in the E.U.) which are oral therapies. First-line therapies account for approx. 80% of the USD 22 bn. MS market.
Neuropathic Pain
Disease Description: Neuropathic pain is a chronic pain disorder in which nerve fibers have been damaged sending the wrong signals to the somatosensory system. There are 3 types of neuropathic pain: painful diabetic neuropathy, postherpetic neuralgia and trigeminal neuralgia.
Neuropathic Pain Market: Painful diabetic neuropathy accounts for 90% of the overall neuropathic pain market which is estimated at USD 2.5 bn.
Parkinson’s Disease
Disease Description: PD is neurological disorder that affects the region of the brain responsible for movement. PD slowly progresses from Stage I (mild symptoms) to Stage V (aggressive symptoms), which are generally broken down to two major patient categories: early stage patients and advanced stage patients.
Parkinson’s Disease Market: The global PD market is estimated at USD 3.5 bn. with the advanced stage segment holding a share of ~70%.
Across all 3 CNS indications, U.S. pharmaceutical prices are approximately x 4.4 greater than EU5 prices. This is one of the main reasons that most pharmaceutical and biotech companies target FDA approval first; A company can argue to European authorities that this is the drug price approved in the U.S. and thus it should be considered as a basis for receiving a high price in European countries as well.
Are such high prices in the U.S. justified? It depends on what the U.S. market economy is trying to achieve. High drug prices is one of the incentives for U.S. biotech companies to continue innovate and for VCs to continue invest in U.S. biotech companies. In fact, the amount of VC funding that U.S. biotech firms receive is triple compared to what European biotech companies receive.
Therefore, the question is shaped as follows: how can U.S. drug prices be regulated without causing a VC funding crisis but also without resulting in a disruption of the biotech stock market?
Reblogged this on The Digit@l Pillbox – Life Sciences Industry Trends and commented:
Extremely insightful – a must read
Very Interesting, thanks. Could you please share with the readers which are the 5 EU countries considered? With Many thanks. Dean
Thank you very much for your comment.
EU5 refers to the 5 largest European markets: Germany, France, Italy, Spain and the U.K.
It would be interesting to see how you have calculated the prices and what data you have used. I am sure that if you compare net prices ( net of all discounts) the differences won’t be as great as you show. Also different health systems and pricing controls in Europe means that an EU5 average is meaningless, perhaps better to provide the price range.
Dear Anthony,
Thank you very much for your comment.
Prices are wholesale acquisition prices. I did a lot of web research to find these prices. I will write another article on how to search drug prices and to make a meaningful country to country comparison. In this post, some of the prices I have calculated on my own (e.g. converting retail prices to wholesale based on average pharmacy margins). But the overall concept remains the same; U.S. drug prices are significantly higher than E.U. especially in expensive therapeutic categories such as CNS and Oncology.
If I were to take deductions such as rebates into account it wouldn’t make much difference. In fact, rebates and “claw backs” in the E.U. are higher than those in the U.S. (especially in France and Italy). The average refers to the weighted average based on population rather than a mean i.e. In any case price differences between the EU5 countries are immaterial when benchmarked against U.S. prices.
Best,
Demetris
It will also be important to point out where the drugs are developed and manufactured. Please indicate in your article that the US is the biggest developer of drugs in the world and that it is also the biggest drug market in the world. It would also be helpful if you would determine why the cost of drugs are higher in the US? Could it be because government reimbursement caps keep prices low in countries such as the EU where socialized medicine is practiced? And that drug companies attempt to make up for these low prices by charging more in the US? Could it also be that the drug companies have to make up for their development costs and the only way to do that is to charge more in countries that can pay more? What do you think socialized medicine in the US will do to drug development and innovation? What other factors are responsible for the higher prices in the US? This type of information would make your upcoming report very valuable.
Dear Jane,
Thank you very much for your comment.
For sure the US pharmaceutical market is the biggest in the world. Also most of drug innovation comes from the US and that is why VCs invest more intensively in the US rather than other countries.
My next article will be focused on examining where drug discovery takes place and where innovation is sourced from.
Earlier you wrote, I will write another article on how to search drug prices and to make a meaningful country to country comparison. Have you published this? Can you pls post a link to that article. Thanks
how about cancer?