Medical treatment has made astonishing advances over the years. But the packaging and delivery of that treatment are often inefficient, ineffective, and consumer unfriendly. This was articulated in an article on innovation in healthcare, published in the Harvard Business Review, way back, in its May 2006 issue.
Highlighting soaring healthcare cost, including ‘out of pocket’ health expenditure, and its impact on public health, the paper recommended innovative solutions for every related aspect of health care. These encompass – healthcare delivery, unleashing the power of technology, and customer-centric business models. Interestingly, despite enormous investment in drug innovation, the access to affordable health care for all, continued over the years.
The consequential scenario was well articulated in another paper on rising consumerism among healthcare consumers, published in the Deloitte Review issue 16, 2015. It noted, the existing business models are increasingly being challenged by all concerned. The aim is to find new sources of value – as expected by patients and deliver them effectively with innovative approaches for better outcomes. This has, initiated a recalibration of the healthcare system, as it were, in many parts of the world, including many -both developed and developing countries, across the globe.
In this article, I shall try to explore this area, especially from the perspective of relevance of innovative business models for affordable access to innovative drugs in the new normal. Let me start with three basic innovation needs in the pharma business that may help chart out a meaningful pathway to attain this goal.
3 innovation areas to make health care better and cheaper:
In pharma industry, people mostly talk about product or treatment innovation. Although, this is of paramount importance to make healthcare more and more effective with time, but may not help save or heal more patients, commensurately.
Going by the ‘health care innovation catalog,’ as charted by the above Harvard Business Reviewarticle, ‘three kinds of innovation can make health care better and cheaper.’ These innovations are primarily related to:
- Use of ‘technology’ to develop new products and treatments or to improve care
- Bringing in innovative changes the ways ‘consumers’ buy and use healthcare.
- Generating new ‘business models’, particularly those that involve the horizontal or vertical integration of separate health care organizations or activities.
As I have deliberated in the past, related to the first two areas, this discourse will deliberate on the third type of innovation to explore the above specified area. Let me hasten to add that several studies published in the later dates, echoed similar approach.
Subsequent studies reinforce the point:
One such example, is the paper titled ‘Innovative Approaches to Increase Access to Medicines in Developing Countries’, published in the Frontiers in Medicine on December 07, 2017. This study also captured: ‘Access to essential medicines is problematic for one third of all persons worldwide. The price of many medicines (i.e., drugs, vaccines, and diagnostics) is unaffordable to the majority of the population in need, especially in least-developed countries, but also increasingly in middle-income countries.’
The paper highlighted, several innovative approaches, based on partnerships, intellectual property, and pricing, can further stimulate innovation, promote healthcare delivery, and reduce global health disparities, significantly. It underscored: ‘No single approach suffices, and therefore stakeholders need to further engage in partnerships promoting knowledge and technology transfer in assuring essential medicines to be manufactured, authorized, and distributed in low- and middle-income countries (LMICs) in an effort of making them available at affordable and acceptable conditions.’
Changing business model concept gaining steam during Covid pandemic:
The issue of affordable access to innovative medicines drew attention of all stakeholders, even the common man, during the Covid pandemic – more than ever before. Several publications raised a flag on this barrier to public health, especially amid a pandemic or epidemic like situation.
One of these papers, titled ‘COVID-19 and the global public health: Tiered pricing of pharmaceutical drugs as a price-reducing policy tool’, was published in the Journal of Generic Medicines, on October 07, 2020. The paper emphasized, COVID-19 has raised serious concerns about affordable and equitable access to critically needed innovative medicines and other health technologies. It pointed out: ‘Patent exclusivities add to the cost of healthcare by allowing supra-competitive prices of protected technologies’, it commented. At the same time, ‘the prices and availability of drugs also depend on certain other factors that are not related to IP protection.’
Here comes the concept of ‘differential pricing’ or ‘tiered pricing’. This is a voluntary price-reducing policy option of the innovator to sell innovative drugs at lower prices in developing countries – compared to developed nations. The study articulated, more and more innovators imbibing this option in the future, could be a way forward to address for the future. Could it be a win-win solution for this critical issue?
Is it a win-win solution to this critical issue?
Since, at least, the last decade, the concept of differential pricing or tiered pricing ‘has received widespread support from industry, policymakers, civil society, and academics as a way to improve access to these life-saving products.’ This was also noted in the paper - ‘A critical analysis of tiered pricing to improve access to medicines in developing countries,’ published in the journal Globalization and Health, on October 12, 2011.
Even at that time, the paper said: ‘International tiered pricing has been proposed as an alternative to high prices when separable high- and low-to-middle-income markets exist for a medicine and when the seller exerts significant power over pricing, such as when there is limited or no competition due to patent protection, data exclusivity, or other market-entry barriers.’
Interestingly, despite above findings, tiered pricing has not been a widely followed concept in the old normal to ensure affordable access to life-saving innovative drugs, for all. One of its reasons could possibly be commercial considerations. Company specific business threshold of tiered pricing may not necessarily be able to offer a price that is equitable or affordable for all. That said, there are a few laudable initiatives of some major innovator companies in the past.
Some laudable past initiatives for affordable access to innovative drugs:
Since the beginning of this millennium, one can witness some laudable pricing initiatives for affordable access to critical, innovative drugs to save lives in developing countries and poorer nations. Let me give a few reported examples below:
- Abbott Laboratories – the patent holder of lopinavir and ritonavir had initially announced a tiered price of $650 in 2001 for African countries and 16 non-African least developed countries. In 2002, the Company reduced the price to $500 for these countries and in August 2009 dropped it to $440 – slightly below the lowest generic price.
- In 2001, Novartis offered “at-cost” tiered price of $2.40 per adult treatment course for artemether-lumefantrine FDC to WHO for developing countries After 5 years when a generic version of the same was available, Novartis decreased its tiered price to $1.80, thereafter to $1.50.
- Eli Lilly’s two key DR-TB drugs, capreomycin and cycloserine were not widely available from other suppliers even after it went off patent. In 2002, Lilly transferred the drug manufacturing technology to several generic drug companies in TB-endemic countries. Eli Lilly’s tiered price has consistently remained below the generic prices for these drugs.
More examples of voluntary licensing during Covid pandemic:
Gilead signed non-exclusive voluntary licensing agreements with generic pharmaceutical manufacturers based in Egypt, India and Pakistan to manufacture remdesivir for distribution in 127 countries that face significant obstacles to healthcare access.
Notably, the licenses are royalty-free until the World Health Organization declares the end of the Public Health Emergency of International Concern regarding COVID-19, or until a pharmaceutical product other than remdesivir or a vaccine is approved to treat or prevent COVID-19, whichever is earlier.
On May 11, 2021, several media reports revealed that ‘US pharma giant Eli Lilly has issued royalty-free, non-exclusive voluntary licenses to three Indian drug makers – Cipla, Sun Pharmaceuticals and Lupin – to manufacture and distribute Baricitinib, which is being used to treat Covid-19.
As announced on October 27, 2021, the global drug major MSD and Medicines Patent Pool (MPP) entered into a voluntary licensing agreement to facilitate affordable global access for molnupiravir, an investigational oral COVID-19 antiviral medicine. This agreement will help create broad access for molnupiravir use in 105 low- and middle-income countries (LMICs) including India following appropriate regulatory approvals. The Indian companies, reportedly, include, Sun Pharma, Cipla, Dr Reddy’s, Emcure Pharma and Hetero Labs.
On November 16, 2021, Pfizer Press Release stated: Pfizer and MPP has signed a voluntary license agreement for Pfizer’s COVID-19 oral antiviral treatment candidate PF-07321332, which is administered in combination with low dose ritonavir (PF-07321332; ritonavir). Under the terms of the license agreement, qualified generic medicine manufacturers worldwide that are granted sub-licenses, will be able to supply this combination drug to 95 countries, covering up to approximately 53% of the world’s population.
Covid Pandemic, which apparently, is refusing to vanish anytime soon, makes the issue of making affordable access to critical innovative drugs for all, more intense. Since long, researchers, academicians, practitioners, and the stakeholders involved in addressing this healthcare challenge for the majority of the population have suggested several innovative approaches.
These include, focus on three kinds of innovation simultaneously, and with similar zest, can make health care better and cheaper. One such area is changing pharma business models for critical innovative drugs. The good news is a few pharma players have already charted on this pathway in the past, successfully, by extending royalty-free, voluntary licenses to manufacturers in the developing countries and poorer nations. Some of them even tried to match their tiered pricing with equivalent generic drug prices. But the overall response was rather lukewarm in the old normal. Interestingly, the new normal signals a mindset change in this regard within a larger number of global innovators.
The current trend gives a hope to many that an increasing number of global innovators will sincerely explore – not just one, but all the three areas of innovation for affordable access to innovative drugs. This could possibly reduce, if not eliminate the future need for the grant of compulsory licenses for such drugs, as happened during the peak of Covid pandemic, especially in India.
By: Tapan J. Ray
Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.