The World Health Organisation's 2018
Technical report: pricing of cancer medicines and its impacts: a comprehensive technical report for the World Health Assembly Resolution 70.12: operative paragraph 2.9 on pricing approaches and their impacts on availability and affordability of medicines for the prevention and treatment of cancer argues
The costs of R and D and production may bear little or no relationship to how pharmaceutical companies set prices of cancer medicines. Instead, pharmaceutical companies set prices according to demand-side factors, with a focus on extracting the payers' maximum willingness or ability to pay for a medicine."
The report states
Scope
1. This report examines pricing approaches adopted by the pharmaceutical industry and authorities
responsible for the pricing of medicines, with a specific focus on medicines for the prevention and
treatment of cancer. The report reviews pricing approaches applied throughout the “value chain” (i.e.,
activities required to bring medicines to patients, from R and D to service delivery), and at different time
points of product life cycle from market launch to the entry of clinically substitutable medicines (that is,
medicines with similar chemical structure and therapeutic effects, so-called “me too” medicines; and
generic and biologically similar medicines).
2. This comprehensive technical report presents evidence relating to the impacts of pricing approaches (or
lack thereof) on the price, availability and affordability of cancer medicines. It examines the possible
relationship between pricing approaches and (a) R and D of cancer medicines, including incentives for
investment in R and D on cancer and in innovation of these measures, as well as possible gaps in
undertaking research and development (that is, a possible shortfall in funding or activities in certain
areas of cancer research); (b) transparency in price and governance; and (c) benefits and unintended
negative consequences that would deviate from the original policy intent. Options that might enhance
the affordability and accessibility of cancer medicines are outlined in paragraphs 41 and 42 below.
Context
3. Cancer is one of the greatest global public health challenges. There are many types of cancer, with
different causes, manifestations and prognoses. The global cancer burden is estimated to have risen to
18.1 million new cases and 9.6 million deaths in 2018. Cancer has broad societal impacts beyond the
negative effects it has on individual health outcomes, including productivity losses for cancer patients
and their family caregivers.
4. Over the past decades, governments have worked with stakeholders to implement a spectrum of
preventative and therapeutic interventions, from vaccination and screening programmes to surgical,
pharmacological, radiological and social interventions for the treatment, rehabilitation and palliation of
people with cancer. These collective efforts in diagnosis and treatment have resulted in great
improvements in survival rates, which nonetheless continue to vary considerably by type of cancer and
geographical region. For example, over 80% of children diagnosed with cancer in high-income
countries will be cured of the disease, in contrast to rates as low as 10% among children diagnosed with
cancer in low- and middle-income countries, which, despite having almost 80% of the burden as
measured by disability-adjusted life years, are estimated to have a less than 5% share of global
resources for combating cancer.
5. Data from multiple sources show that the rate of growth of expenditure on cancer medicines greatly
exceeds the rate of growth of newly diagnosed cancer cases. Increased use of cancer medicines may be
partly responsible for the growing expenditure. However, the growing expenditure may be primarily
due to increases in medicine prices or a shift towards using higher-cost cancer medicines. In addition,
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the rate of growth of expenditure on cancer medicines exceeds the rate of growth of overall health care
expenditure.
6. Existing approaches to managing the prices of cancer medicines have not resulted in outcomes that
meet policy and economic objectives. Stakeholders continue to voice their concerns about the lack of
adequate access to both new and off-patent essential cancer medicines, with high prices cited as a
main contributory factor. Furthermore, overall prices of cancer medicines continue to rise, to the extent
of impairing the capacity of health care systems to provide affordable, population-wide access to
cancer medicines.
7. Access to cancer medicines is linked to systemic factors such as financial resources, insurance coverage,
availability and skill set of the health workforce, health care infrastructure and physical access to health
services. Thus, strategies to improve people’s access to cancer medicines should be considered
holistically across all surgical, pharmacological, radiological and social interventions for the prevention,
treatment, rehabilitation and palliation of people with cancer. Such strategies should also be assessed
with respect to the entire health care sector, so that the benefits of improving access to cancer
medicines are not achieved at the expense of essential health care products and services for other
disease areas.
Benefits and risks of newer cancer medicines
8. Pricing of cancer medicines is often discussed alongside a discussion of their benefits, particularly for
newer cancer medicines. Cancer medicines that target a particular molecular alteration developed in
past decades (targeted therapies) may represent advances in the treatment of cancer. Some targeted
therapies have been shown to result in substantial improvements in health outcomes, such as overall
survival and quality of life, and have transformed patient care for several cancer types. However,
literature indicates that a considerable proportion of targeted therapies approved in the past 15 to 20
years have data only for improvement in surrogate endpoints, such as change in tumour size, without
evidence of a benefit in terms of survival or quality of life. For some medicines that have been found to
have an impact on survival, the size of the benefit may still be small; the average benefit is 3 months,
which may be considered marginal by clinical experts. Furthermore, some medicines may present
higher risk of toxicities to patients, with evidence of high rates of deaths related to treatment (toxic
deaths) and high chances of patients discontinuing treatment due to intolerance. In assessing the
benefits of cancer medicines, it is important to conduct a comprehensive evaluation of all evidence by
combining results across clinical trials and appraising the consistency of evidence in its totality. It is also
important to identify the potential limitations of evidence obtained in terms of its generalizability to
different health care systems.
Industry approaches to price-setting
9. The literature describes four broad determinants of medicine prices from the industry perspective: (a)
costs of R&D; (b) costs of production and commercialization; (c) the “value” of medicine; and (d)
sufficient returns on R&D.
10. Estimates of R&D costs, including for cancer medicines, are highly variable and not transparent.
Reported estimates, after adjustments for the probability of trial failure and opportunity costs, range
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between US$ 100–150 million and US$ 4–6 billion, but the most commonly accepted estimates are
between US$ 200 million and US$ 2.9 billion.
11. “Value-based pricing” has been proposed as a method of pricing new medicines. However, there are
many uncertainties associated with estimating value, as a result of different technical approaches to
assessment, incomplete evidence, comparison with inefficient practices, and different perceptions of
value. This method may lead to unaffordable prices for cancer medicines.
12. To examine returns on R&D investments, an analysis was undertaken to examine the sales incomes
from cancer medicines approved by the United States Food and Drug Administration from 1989 to 2017
for the originator companies. For the 99 medicines included in the analysis, the average income return
by end-2017 was found to be US$ 14.50 (range: US$ 3.30 to US $55.10) for every US$ 1 of R&D
spending, after adjustments for the probability of trial failure and opportunity costs; 33 of those
medicines had already qualified as “blockbuster drugs” by having an average annual sales income
exceeding US$ 1 billion. Many medicines, particularly biologics, continued to generate high sales
incomes for the originator companies after expiry of patents and the end of exclusive marketing rights.
13. Overall, the analysis suggests that the costs of R&D and production may bear little or no relationship to
how pharmaceutical companies set prices of cancer medicines. Pharmaceutical companies set prices
according to their commercial goals, with a focus on extracting the maximum amount that a buyer is
willing to pay for a medicine. This pricing approach often makes cancer medicines unaffordable,
preventing the full benefit of the medicines from being realized.
Payer approaches to price-setting
14. Authorities responsible for the pricing of medicines have adopted a range of approaches to set
medicine prices, including cancer medicines, such as cost-based pricing, value-based pricing, reference
pricing, and pricing through tendering and negotiation. Some authorities have also set a maximum
“ceiling” price, while others have agreed to arrangements with manufacturers to enable access to
cancer medicines subject to specified conditions, such as discounts or rebates based on volume of sales
or payment according to health outcomes. These agreements are known as “managed entry
agreements” or “risk-share agreements”. The conditions of such arrangements are often agreed on
confidential terms between manufacturer and purchaser.
15. Authorities in some countries have routinely monitored medicine prices, with a view to controlling prices
throughout the supply chain and at various time points throughout the product life cycle. These
strategies include regulating mark-up amounts, reassessing prices when there is a change in market
conditions, such as entry of generic and biosimilar products, or when the indications for an individual
medicine change.
16. Authorities in some countries have also used other strategies to achieve greater system efficiencies and
improve access to cancer medicines that may have an indirect effect on prices, including (a) requiring
clinicians to obtain approval from the payer before prescribing or dispensing a select set of high-cost
and highly-specialized cancer medicines; (b) implementing policies to encourage prescribing and
substitution of cancer medicines with generic or biologically similar products to increase competition; (c)
reduction or exemption of taxes on medicines; and (d) implementing pooled procurement of medicines
by combining financial and non-financial resources across various purchasing authorities in order to
create greater purchasing power through economies of scale and better negotiation position.
Relationship between inputs throughout the “value chain” and price-setting
17. Overall, there are gaps in data and information regarding the activities and costs required to bring
medicines to patients, throughout the value chain from R&D to service delivery. Moreover, the precise
relationship between “value chain” inputs and price-setting is not known in many countries, particularly
in low- and middle-income countries.
Impacts on price
18. Prices and costs of many cancer medicines are high, in recent decades often reaching tens of
thousands of US dollars per patient per year, while comparative analyses show that they exceed the
prices and costs of medicines used for treating other diseases.
19. Current pricing policies (or the lack thereof) have led to considerable variability in the prices of cancer
medicines within a country and across regions. Evidence from published literature shows that the
observed price variability does not seem commensurate with the demand or a given country’s
purchasing power, while existing procurement practices in some countries may not be very efficient.
When prices of cancer medicines are higher than a country’s ability to pay, this may impair coverage of
essential cancer medicines, causing delay in patient access to medicines and limiting the system’s ability
to achieve the best possible patient health outcomes. Finally, regional differences in medicine prices
within a country may cause inequitable access.
20. Evidence suggests that a lack of effective and consistent policies for managing medicine prices across
the supply chain (i.e., taxes and mark-up amounts) over time can result in uncontrolled and highly
dispersed prices for the same medicine. Furthermore, inconsistent pricing policies across service delivery
settings within a health care system (such as hospitals and outpatient facilities) can result in inefficient
cost-shifting activities and inequitable access for patients.
21. Comparative analyses indicate that more pricing regulations may contribute to lower medicine prices
and costs. Yet even in countries that have implemented a range of policy measures to manage
medicine prices, the prices of newer cancer medicines have continued to grow substantially in recent
decades. Thus, more measures may be needed to realign the prices of cancer medicines and expand
access to cancer medicines by treating higher patient numbers at lower average costs, thus ensuring
the long-term financial sustainability of health care systems and industries.
22. Policies that facilitate price competition among pharmaceutical companies for clinically substitutable
medicines have generally led to lower prices of generic brands compared to their originator
counterparts, yielding expenditure savings. However, the extent to which pricing policies can enhance
competition and reduce medicine prices is dependent on a range of factors, such as existing price and
non-price policies; the number of competing companies and the size of products and markets;
regulatory requirements and processes for generic and biosimilar medicines; and enforcement of
robust competition policies to prevent companies from engaging in behaviours that may impair
competition. Documented examples of anti-competitive behaviours by companies include introduction
of “pseudo-generics”, tacit or actual collusion, “product hopping” (switching a patented medicine to a
modestly reformulated product that offers little or no therapeutic advantages in order to preserve
market exclusivity) and wasteful non-value-added activities, such as lobbying or filing patent clusters to
delay generic/biosimilar entry.
Impacts on availability
23. Two large surveys examined the availability of medicines for solid tumours in the national formularies of
49 European countries in 2014 and 63 countries outside Europe in 2016. Data showed that countries
with lower national income had lower availability of cancer medicines, or availability only with higher
out-of-pocket patient payments, especially for higher-cost medicines, including targeted therapies. One
survey found that 32.0% and 57.7% of essential medicine list cancer medicines were available in lowermiddle-income countries and low-income countries, respectively, only if patients were willing to incur
their full costs.
24. Case studies from several countries show that the judicious selection of cancer medicines and the
rational application of access requirements with consideration of the specific health-system context can
deliver better health outcomes to cancer patients for the available financial resources. A policy of trying
to fund the same number of cancer medicines as are available in other countries will not result in
substantive health improvements, but will result in significantly higher costs. Countries should instead
consider their specific health care context, including factors such as population need and available
funds.
25. However, there is evidence that in some countries, cost-containment measures undertaken due to the
high costs of cancer medicines, irrespective of population needs, have resulted in reduced, delayed and
even cancelled treatment, which may have adverse impacts on patient health outcomes. While
differences in system capacities and population needs must be recognized, policies for controlling costs
to ensure system sustainability must be balanced with the primary objective of facilitating timely patient
access to medicines.
Impacts on affordability
26. A modelling study shows that universal coverage of cancer medicines alone, at 2018 prices, would
greatly exceed a generously assumed budget of 5% of the total health care expenditure: standard
treatment regimens for a selected set of cancers would cost much more than the estimated annual perpatient “budget” of US$ 800 (low-income countries) to US$ 40 600 (high-income countries).
27. In the absence of insurance coverage, cancer treatment is unaffordable for many patients. A course of
standard treatment for early stage HER2 positive breast cancer (doxorubicin, cyclophosphamide,
docetaxel, trastuzumab) would cost about 10 years of average annual wages in India and South Africa
and 1.7 years in the United States of America. The costs associated with other medical care and
interventions (such as surgical interventions and radiotherapy) and supportive care (such as anti-emetics
and haematopoietic growth factors) would make overall care even more unaffordable. Even with
insurance coverage, patients living with cancer in many countries have reported financial stress, to the
extent that they may lower the treatment dose, partially fill prescriptions or even forego treatment
altogether.
Impacts on R and D
28. In 2017, there were almost twice as many registered clinical trials on cancer medicines as in the next four
highest therapeutic categories combined. Leading experts have noted significant inefficiencies of cancer
drug trials due to duplication of research efforts and the pursuit of marginal therapeutic indications with
non-clinically significant health outcomes. Some failed investments could have been prevented given
the lack of compelling evidence of efficacy in humans prior to embarking on major clinical trial
programmes.
29. While acknowledging the tremendous challenges in finding effective and safe cancer medicines, the trial
redundancy (that is, duplication of trials that may be unnecessary) of cancer medicines suggests that
excessive financial returns combined with market dominance have encouraged companies to engage in
excessive risk-taking in R&D by investigating cancer medicines despite the lower probability of success.
Simultaneously, companies have adopted a “de-risking” strategy by pursuing marginal indications with
the expectation that the market would continue to bear high prices in the name of so-called
“innovation”. In the long term, such distortion of investment and corporate behaviour will stifle genuine
innovation.
30. Concerns that lower cancer medicine prices might impair future R&D seem misplaced because evidence
suggests that (a) prices of cancer medicines bear little or no relationship with R&D costs; (b) financial
returns of cancer medicines are high; (c) potential impact on revenue due to lower prices could be
offset by higher volume, especially when the marginal cost of production is low; and (d) governments
and the non-profit-making sector have made substantial contributions to the R&D of medicines
through direct funding and other incentives.
31. The public sector has made a wide range of contributions to the R&D of medicines generally, including
cancer medicines, ranging from providing direct funding of basic science research and clinical trials to
building physical research infrastructure, supporting the operation of institutions such as cancer
registries, building medical research workforces through education programmes and incentivizing R&D
through tax credits or reductions. Such public-sector investment has often led directly to the discovery
and development of cancer medicines such as abiraterone, temozolomide and enzalutamide.
32. Given this consideration, some stakeholders have questioned whether pharmaceutical companies can
legitimately claim to recover the full costs of R&D by setting high prices for medicines. They see a need
to clarify whether the public has been “paying twice”, or should be paying twice, for medicines
developed with at least partial support from public resources. It is also important to clarify the
relationship between the government, industry and universities when pursuing joint research ventures.
33. Determining research priorities and gaps requires both technical assessments and value judgments.
Studies have suggested that research on haematological and breast cancers may be overfunded, while
research on cancers of the liver, thyroid, lung, oesophagus, stomach, bladder and pancreas may be
underfunded; these studies have assumed that the allocation of research funding for each type of
cancer should be in proportion to their respective disease burden. However, as society may have a
higher preference to help children and young mothers, the prioritization of research for haematological
and breast cancers may be considered justified.
Impacts on price transparency
34. The use of discounts and rebates may signal competition in the market and is often considered a
legitimate competitive practice if applied legally. However, confidential agreements on rebates and
discounts have obstructed market transparency, including information about the level of price
competition.
35. Growing differences in list prices and net transaction prices of medicines (i.e. after discount and rebates)
may mask actual increases in medicine price. Pharmaceutical companies may also be motivated to keep
list prices high to impair the effectiveness of external reference pricing.
36. Non-transparent medicine prices may conflict with the principles of good governance and confidential
agreements may compromise clear lines of accountability. A lack of price and process transparency may
even lead to corruption, especially in health care systems with weak overall governance.
37. Theoretical arguments on whether greater price transparency would lead to higher or lower medicine
prices are inconclusive. There is a lack of evidence of the effectiveness of confidential agreements in
lowering prices and improving access. On the other hand, there is limited context-specific evidence that
improving price transparency has led to better price and expenditure outcomes. Nonetheless,
improving price transparency should be encouraged on the grounds of good governance.
Unintended negative consequences
38. Current R&D incentives, regulatory flexibility and pricing practices for medicines to treat rare diseases
(orphan drugs) may have led pharmaceutical companies to pursue an indication for rare cancer in the
first instance and then expand the indication to other more common cancers, with a view to gaining
faster market entry at high prices.
39. There have been documented cases of disruption in the supply of cancer medicines in recent years.
Causes of medicine shortages are complex and involve both supply and demand factors. Low market
attractiveness due to low prices and small market sizes are possible contributing factors as well.
However, data from regulatory reporting indicate that shortages of cancer medicines are probably due
to problems related to meeting the quality standards for injections, rather than to lack of financial
incentives to ensure the ongoing supply of lower-priced medicines. Overall, existing data on medicine
shortages are not robust. Until more compelling evidence is presented, payers should not be deterred
from seeking lower prices for fear of causing shortages. This will minimize the incentive for suppliers to
prioritize higher-priced and more profitable medicines over lower-priced medicines.
40. There are some documented examples of inefficient, unethical and even illegal activities induced by the
high prices or profitability of cancer medicines, including the emergence of substandard or falsified
cancer medicines, practices prohibited by antitrust laws, deceptive marketing and activities for off-label
prescribing.
Options that might enhance affordability and accessibility
41. A set of options that might enhance the affordability and accessibility of cancer medicines have been
identified through a review of policy and evidence and consultations with experts, broadly pertaining to:
(a) strengthening pricing policies at the national and regional levels; (b) improving the efficiency of
expenditure on cancer medicines; (c) improving the transparency of pricing approaches and prices of
cancer medicines; (d) promoting cross-sector and cross-border collaboration for information-sharing,
regulation and procurement; (e) managing factors that would influence the demand for cancer
medicines; and (f) realignment of incentives for R and D.
