What is fair pricing in oncology?

Finding a balance between price and availability of innovative therapies is complicated. Each stakeholder, from the patient and healthcare systems to research and development (R&D) companies, has a very different view of fair pricing for innovative therapies. Also, a universally accepted definition of fair pricing remains elusive, despite years of discussion amongst health economists. Economists tend to prefer the term ‘efficient pricing’, as this separates the costs associated with the appropriate use of a therapy in clinical practice and the costs of incentivising the R&D of future new therapies.

Unfair pricing of cancer medicines is part of a continuum of economic issues that inevitably impacts on patient care. There is a clear disparity between countries in relation to healthcare resources in general, but also the structure, management and financing of cancer care, including preventative and early detection strategies. A fair pricing strategy discussed at the WHO Fair Pricing Forum in April 2019 involved innovators declaring the R&D costs associated with a new therapy, which would then determine its cost. However, I think this is somewhat simplistic as only the cost is considered, while its value is disregarded. Paying high costs for the development of medicines of low value does not give the right incentives for investments in pharmaceutical R&D.

Value-based pricing is an alternative strategy where the price of a therapy differs according to the health benefit gained – a lower price in an indication in which a therapy has a smaller benefit and higher price in one in which it has a greater benefit. This may seem a pragmatic approach, but it also requires lower prices in countries with lower incomes and healthcare expenditures per capita. There is also great difficulty in determining value-based prices for new innovative therapies, since there is often limited information on their value in the ‘real world’, as opposed to clinical trials. We thus need new payment systems linked to the number of patients treated in different countries, the indications treated, and the actual outcome of treatment. There are changes in these directions, but neither healthcare systems nor industry is yet prepared for this.

The key to fair and efficient pricing is a payment system where prices reflect the actual cost of using the medicine, with an additional value-based payment that rewards innovation and compensates for resources used and risks involved in R&D investments. This would mean that the bulk of the R&D cost of new innovative medicines is paid for by higher-income countries, just as is the case today.

New cancer medicines have high R&D costs, with indications in often small patient groups. However, it would be efficient and fair if these medicines were available at a price that reflected production and distribution costs, with only a small profit margin, regardless of a country’s income level. This would make for productive investment in cancer R&D and increase the public’s willingness to pay for the medicines. This relies on lower-income countries having the appropriate healthcare infrastructure, including resources for ‘best practice’ cancer care that incorporates accurate diagnoses and management of complicated treatment-related toxicities.

In Europe, treatment costs are usually covered by national health services and other third-party payers; consequently, the affordability of innovative medicines varies widely between lower- and higher-income countries. In this regard the use of value scales, such as the ESMO Magnitude of Clinical Benefit Scale (ESMO-MCBS), is crucial to assign a grade of clinical value to new medicines. Also, cost-effectiveness analyses based on prices that reflect the actual social costs of using the medicine will be an important tool to inform decisions on allocating public resources.