Without New Medicines, No Better Care

Without New Medicines, No Better Care


Costs of medicines are frequently discussed in the Netherlands. While this is understandable, the discussion is lacking any form of nuance. There is also a contradiction in the pleas for better health care and the strong criticism against companies that add to that improvement by developing new medicines.

The Netherlands has one of the best health care systems in the world.1 For instance, the life expectancy for patients with HIV, heart disease or cancer has increased significantly in the past two decades. Indeed, if health care had not improved since the mid-nineties, thousands of Dutch patients would have succumbed to these diseases. Instead, they are alive and well today.

In all these cases, the improvements were largely due to new medicines. Indeed, if we look at the increase in life expectancy among thirty different countries in the period 2000-2009, over 70 percent of the increase is attributable to new medicines.2

At the same time, medicines make up a small part of the Dutch health care budget: about eight percent. Costs per capita for medicines are around €360 a year, well below the European average.3 To put this into comparison: in Germany, this figure is € 650.4

In contrast to other expenditures within the health care sector, expenditures on medicines are relatively stable. In the past decade, health care costs increased by €23 billion; only €0.5 billion of that amount was attributable to medicines. The current cabinet expects health expenditures to increase from €76.7 billion in 2018 to €89.3 billion in 2022. During the same time, expenditures on medicines are expected to decrease slightly from €4,75 billion to €4,6 billion.5

This shouldn’t be surprising: even though new medicines increase costs, older medicines generate savings. Indeed, when patents expire, prices usually decline and this frees up budget to finance new medicines. In addition, medicines can also generate savings elsewhere in the health care sector, for instance by decreasing the number of hospital admissions or by lowering absenteeism among patients and their caretakers. 

Improvements made by new medicines are not solely attributable to the pharmaceutical sector. The public sector conducts important research into disease mechanisms. But translating this knowledge into effective and safe medicines is the expertise of the pharmaceutical industry. It is this industry that contains the necessary knowledge and experience, as well as the willingness and ability to make risky investments over a long-time period.

However, health gains from new medicines seem to be discussed increasingly less in the Netherlands. Instead, the discussion seems to become narrower and focus almost solely on the costs of these new medicines. This one-sided focus on costs results in far-reaching proposals such as limiting IP rights or reversing incentives. For instance, the current government is looking into the possibilities of replacing registered medicines by pharmacy compounds or stimulating economic off-label use.

The legal protection of innovation is crucial for the pharmaceutical sector, given the high R&D-investments made by this sector. Indeed, the amounts invested in research are significantly higher than in other sectors, such as the automobile, aviation or software industry. This applies both in an absolute sense (the total research budget) and relative sense (investments in R&D as part of total sales).6 At the same time, these investments come with more risks than in almost any other sector.7 Indeed, most medicines in development will not reach the finish line, and development will have to be terminated, often after years of significant investments.

Such large and risky investments are necessary to develop new medicines, but they become significantly less attractive for private investors (such as Dutch pension funds) when the period to earn revenues would be shortened.

The same can be said about proposals to limit incentives for certain groups of medicines. For instance, there are incentives to stimulate research into medicines to treat rare diseases. In all those years before the introduction of those incentives (in 2000), only eight so-called orphan drugs had been developed.8 However, in 2016 alone, fourteen orphan drugs were developed.9 Incentives to develop more medicines for children have been equally successful.10

We can understand that governments want to look critically at the prices of medicines. But this can be done in a broader and more constructive way. Let’s invest in appropriate use of medicines (the right medicine for the right patient at the right time), therapy adherence, diagnostics, prevention and new pricing models. National registries can also help to get a better sense of treatment results of specific medicines. All of this opens the door for payment that is based to treatment result as opposed to the treatment itself.

As American pharmaceutical companies, we are willing to contribute to affordable and high-quality pharmaceutical care, together with all involved stakeholders. However, to realize this, it is necessary to broaden the fixation on costs to include health benefits of medicines as well as shared ambitions. This can only be achieved by talking with the pharmaceutical sector as opposed to talking about the sector. 

 

Published: November 21, 2017
Authored by: Pharmaceutical Committee AmCham.
Michel van Agthoven, Chair Pharmaceutical Committee American Chamber of Commerce (AmCham) / Janssen, Pharmaceutical Companies of Johnson & Johnson.
Ad Antonisse, Co-Chair, Pharmaceutical Committee American Chamber of Commerce (AmCham) / AstraZeneca.

 

References:
  1. The Netherlands ranked first in the Euro Health Consumer Index 2016. Since the Index was initiated in 2005, the Netherlands has always been among the top-3 countries. See Arne Bjornberg, Euro Health Consumer Index 2016, Health Powerhouse, January 30, 2017, page 7-8.
  2. Frank Lichtenberg. Pharmaceutical innovation and longevity growth in 30 developing and high-income countries, 2000-2009. Health Policy Technol. 2014;3:36–58.
  3. OECD, Health at Glance 2016: Europe, page 121. 
  4. Edwin Kreulen, Nederland geeft minder uit aan medicijnen. Trouw, 13 November 2017. 
  5. Tweede Kamer, vergaderjaar 2018–2019, 35 000 XVI, nr. 2, page 186. 
  6. The EU R&D Scorecard 2016, http://iri.jrc.ec.europa.eu/scoreboard16.html, 55.
  7. The New York University has presented the “beta” for different sectors. The beta is the risk of an investment compared to the average risk in the total market. Investments in drug research carry among the highest betas of all sectors. The complete list can be found on pages.stern.nyu.edu/~adamodar/pc/datasets/betaEurope. 
  8. E Tambuyzer. Rare diseases, orphan drugs and their regulation: questions and misconceptions. Nature Reviews Drug Discovery 2010:9, 921.
  9. EMA, Orphan Medicines Figures 2000-2016, http://www.ema.europa.eu/docs/en_GB/document_library/Other/2015/04/WC500185766.pdf. 
  10. https://ec.europa.eu/health/sites/health/files/files/paediatrics/docs/2017_childrensmedicines_report_en.pdf, pagina 4.