The French philosopher Pascal calculated that it
was better to believe in God than to disbelieve. After offering the country a
€2.88 billion cap on drug spending, it looks like European pharma is taking
that view with regard to Greece. Reflector reports.
The European pharma industry looks like it is accepting Pascal’s Wager in
Greece. It was Blaise Pascal, the seventeenth-century French philosopher and
mathematician, who calculated that it was a better bet to believe in God than
to disbelieve. His reasoning was that if a deity existed and there was an
afterlife, believers would be duly rewarded (and non-believers duly punished).
And if not, nothing, in any case, was lost.
In Greece, where the situation for the pharmaceutical industry has been
going from bad to worse for years now, the latest attempt at damage limitation
appears to be based on a similar calculation to Pascal’s. If the deal now being
finalised between industry and government works, then the industry stands to
gain some benefit. And it doesn’t work, then the situation will be not be any
more damaging than it is at present.
The essence of the projected deal is now well known. A framework agreement
will commit companies to pay back any sales made that drive reimbursement above
€2.88 billion for 2012. In return, the Greek government will commit to paying
companies the full amount of outstanding debts of hospitals and insurance
companies, and will avoid any relapse into arrears.
Sceptics have been quick to point to flaws in the logic. Above all, they
allege that industry has set a trap for itself by agreeing to any cap on
government spending on reimbursement. The most outspoken critics claim that
this is tantamount to industry capitulation. To collude in setting a cap is
accepting a principle that flies in the face of the spirit of the market and
the interests of patients, they say. Worse, it is offering a concession in
order to obtain repayment of an outstanding debt — something that is due to the
industry by right. They depict industry as kneeling meekly before the
executioner, rather than battling heroically, even if the odds are
overwhelmingly against it, for freedom and justice.
The more knowledgeable among the critics have identified what they see as
another, more subtle, flaw in the deal. They have observed that the €2.88
billion reimbursement cap that the industry is advancing as a noble concession
in the common interest is, in fact, no more and no less than the control
already imposed on the government — and hence on the industry —by far more
powerful forces. The drug-spending cap is just one of the many conditions that
the Greek government has been subjected to in the context of the much broader
negotiations on international bail-outs to save its economy from the ignominy
of bankruptcy – and to spare the European economy the massive disruption that
would be caused by Greece dropping out of the eurozone. In other words, the
drug industry is — to put it politely — turning a necessity into a virtue,
claiming merit for something over which it had, in reality, no choice.
The sceptics may not be altogether wrong. But at the same time, they may be
overlooking the smaller print in the deal that the industry and the Greek
government are working on. It could be argued that some the terms in the draft
come close to offering the nearest thing to heaven on earth that drug
manufacturers are likely to encounter this side of paradise.
For a start, the Greek government is committing itself to saving industry
elsewhere in Europe from the perils of reference pricing. For years the
industry has railed against the use of comparisons with Greece — with its
notoriously low prices —in national pricing decisions in richer countries. Over
recent months, as the Greek crisis has dragged prices down still lower, these
complaints by companies have crescendoed in chorus. Now, if the deal goes
through, Greece will formally request drug pricing authorities in other
countries to exclude Greece from the basket that they may use for reference pricing.
At a stroke, this could end a practice that has caused deep grief right across
the European industry, and might put a smile on the faces of pharmaceutical
executives from Berlin to Barcelona, and from Lisbon to London. This is a move
which could set a precedent that might be applied in other low-price markets
too — mitigating the downward pressure on European drug prices that comes from
a vicious spiral of referencing to the lowest level.
That’s not all! The Greek government will also act to put a legal limit on
parallel exports. This would be not merely a revolution in national policy, but
a complete reversal of one of the fundamental tenets of the European Union.
Free movement of goods — the principle on which parallel trade is based — has
been one of the central dogmas since the European Economic Community was set up
more than 50 years ago. The rigid adherence of the EU institutions to this
principle has been a constant bone of contention for drug manufacturers, since
time and again middlemen have exploited free movement of goods to make a profit
out of buying medicines cheap (in Greece or Portugal, for instance) and selling
them dear (in Germany or the UK, for instance) — with a consequent erosion of
profit for the manufacturers.
Greece is now preparing to commit itself to overturning decades of standard
practice, by introducing national regulations that will prohibit export of all
medicines subject to price control. This could be valuable in itself. It could,
conceivably, also set another precedent, in other markets where extreme
conditions have resulted in abnormally low prices and have promoted arbitrage.
Taken together, the reference-price exclusion clause and the parallel export
ban could represent the first real cracks in the dam of EU orthodoxy that has
prevented any account being taken of European economic realities in the setting
of national prices.
However, as Eddie Cochrane famously intoned, there are three steps to
heaven — and the drug industry and the Greek government are currently only at
the first of those steps. A deal is on the table, but has not yet been signed —
still less implemented.
Apologists for the deal believe that it is the best that can be obtained
from the present chaos. They accept that the figure of €2.88 billion coincides
with the target imposed by the international financial community. But they
assert that the industry is still making a meaningful offer, by agreeing to
clear rules on how any over-run will be met by industry. Without the agreement,
the availability of the €2.88 billion envelope would be in jeopardy, and the
operation of the associated clawback would itself be at risk of incoherence.
With the agreement in place, the cap and the clawback can be run in a
transparent manner, with clear rules on exactly which company owes what amount
for which period. This should help to overcome the obstacle that was described by
one executive close to the negotiation as “the big gap between what is law and
what is practice in Greece”.
The suggestion that the industry is being led like a lamb to the slaughter
is similarly challenged by advocates of the government-industry pact. Far from
surrendering freedom, the industry claims that it is achieving in Greece what
has been the norm in many countries for years: the possibility of sitting down
with the authorities to discuss how to balance the rival claims of economy and
innovation.
Everywhere in the EU there are spending constraints, irrespective
of whether countries are subject to bail-out conditions, and there is a long
tradition of industry and government conferring to work out together —through
negotiation, and with clear rules of the game – how to assure access to
innovative products in the face of healthcare budgetary limitations. In this
case, industry believes it has won valuable compensation — in the shape of the
reference pricing and parallel exporting clauses — for its readiness to show
understanding to a government in severe funding difficulties.
Belief is, of course, at the heart of this exercise. Which brings us back
to Blaise Pascal. If the Greek government signs up to the terms, and manages to
do what it promises to do, then the pious commitments of the industry could
lead to some celestial bliss. If, however, the government does not sign up, or
signs up and does not honour its own commitments, the industry may be no worse
off than if it had never entered into the negotiations.
Πηγή: PharmExecBlog