Challenges of the evolving health care payer environment for drug firms

Governments as drug payers are finding that health care is the biggest single item of public expenditure, with drugs the fastest growing item on the bill. As growth rates consistently rise faster than the gross domestic product, drug prices are perceived to threaten the long-term viability of health care systems. Unlike other major items of health care spending, such as physician and nursing staff wages, cuts in drug prices do not carry public disapproval, as they do not appear to harm people's livelihoods. Pamela Santoni, a senior principal at IMS Health said: "predictably, payers are applying management tools to curtail the growth in budget impact, thereby putting pharma profits at risk."

Ms Santoni was speaking at The Economist's 13th Annual Pharmaceutical Conference in London, UK, which was on the theme of "Growing pains: how to adapt in a changing market." She listed the market management tools employed by various countries as: the UK's National Institute of Health and Clinical Excellence's (NICE) guidelines (Marketletters passim); Germany's Institute for Quality and Efficiency in Health Care (IQWiG) guidance and reference pricing (known as "jumbo reference pricing;" Marketletters passim); France's clinical merit rating (ASMR) and price/volume agreements; The Italian Medicines Agency (AIFA) negotiations, Spain's visados (special approvals by a state inspector for patients before they can have a drug dispensed by a pharmacist) and innovation type assessments. In the USA, meanwhile, tier level and access restrictions, for example by a formulary, are the payer's budget control options.

Drug industry wants premium prices