Report: EU Member Cooperation Is Key to Containing Prescription Drug Costs

Regular price reevaluations can lower drug prices in individual European countries, but the only way to ensure significant price cuts is through EU-wide collaboration, according to a new report.

The report ultimately concludes, however, that a lack of political will among the member states is likely to doom such grand efforts — at least in the short term — and proposes smaller steps that individual countries can adopt to curb prices.

European Commission officials commissioned the report from a consortium of EU think tanks and universities in 2014 in response to rising drug prices and the expectation that a wave of next-generation drugs would drive prices up further.

Most of the drug pricing models considered for the report were variations on one of two pricing schemes, each with its own set of strengths and weaknesses. The first is the most widely used method in the EU — external price referencing (EPR) — and involves countries basing the price for a drug in part on what other countries have paid for it. The second is known as differential pricing, in which each country pays a different price depending on access and circumstances.

The report favors EPR, due to its widespread use throughout the EU. It notes that only three EU member-states don’t use EPR to set at least some drug prices and recommends four options for improving prices via EPR changes: establishment of a centralized database of prices, the use of discounts across the EU, regular price monitoring and coordinated efforts to constantly revise the EPR formula.

The report also noted that such a system could lead drugmakers to exploit it by releasing the drug first in wealthier countries to ensure higher prices across the EU.

The second major option the report looks at — differential pricing — was found to have its own shortcomings. Political resistance over the inevitable pricing disparity between wealthy EU countries and poorer ones and parallel trade among the nations that would likely lead to people shipping drugs across borders rather than pay the in-country price are two points of contention.

The researchers created a pricing simulator to test the effectiveness of a differential pricing model and ran it through six pricing scenarios. They concluded that such a model would show varying degrees of cost savings, but would ultimately be a “second-best policy option.”

Given the challenges associated with either system on a large scale, countries can lower prices by conducting regular price evaluations while the matter is studied further. It also recommended that countries adjust prices via a reference country’s purchasing power parity, rather than by relying on nominal exchange rates.

Read the report here: — Cameron Ayers

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