In OECD countries, prescription drug costs accounted for between 6% and 29% of total healthcare spending in 2017. However, advances in the research and development of innovative medicines are significantly transforming the healthcare landscape, allowing chronic diseases – the greatest cost drivers – to be treated more effectively and affordably.
Our approach to pricing medicines
We want to help ensure that all patients have access to the most effective medicines for their needs, which is why we are working to prevent cost from becoming a barrier to treatment. We are committed to flexible and fair pricing – both within and across countries. We therefore adapt our prices based on local market access, taking into account factors such as health system capacity and financial standing, geographic circumstances and existing infrastructure, statutory requirements, unmet medical needs and socioeconomic aspects, such as the patients’ ability to pay. This approach involves working closely with governments and other stakeholders. In addition to these considerations, we continuously monitor dynamic healthcare environments and markets, pricing and reimbursement systems and legal and regulatory guidelines, adjusting our prices as necessary.
We review our prices on an annual basis to ensure they meet patient access needs. We use a consistent, data-driven approach to monitor our local pricing. We also make our products affordable to patients in certain countries by participating in government tenders, establishing low-price secondary brands or branded generics and by operating patient access programs.
Moreover, we support risk-sharing agreements and are working to improve data efficiency in health systems, in order to achieve an optimal distribution of funds and resources.
Setting medicine prices
Our Global Pricing and Market Access unit sets market launch prices in coordination with the respective franchises. The team reports directly to a member of our Healthcare Executive Committee. Our individual subsidiaries are responsible for managing prices and continually adapting them to local conditions.
Our commitment: Medicine price guidelines and principles
The affordability of our health solutions is part of our broader patient value proposition, which includes increasing accessibility, availability and awareness. Our medicine pricing adheres to the stipulations of our overarching Access to Health Charter and is defined in detail by our Pricing of Medicines guideline. Additionally, our Patient Access Programs Policy sets out standards for offering medicines at reduced prices.
Customer-centric contracting models
We are dedicated to advancing value-based healthcare through pricing and contracting mechanisms that fully comply with all local laws. In collaboration with payers, such as health insurance companies, we developed various product- and market-specific reimbursement and contracting models. These help to provide patients with prompt access to our innovations. For instance, in the United Kingdom and Ireland, we entered into a risk-sharing agreement that provides immediate access to Mavenclad® for patients with multiple sclerosis (MS). Under this agreement, the National Health Service only has to reimburse medication costs for patients who respond to the drug. If treatment has to be switched from Mavenclad® to another product, a partial rebate is paid to the National Health Service. Around 1,300 patients in the United Kingdom and around 250 patients in Ireland had been reimbursed for the cost of the drug under this program as of end of 2019. Since October 2018, we have been using a similar pay-for-performance contract for Mavenclad® together with GWQ ServicePlus AG, a network of around 60 health insurers with 11 million patients in Germany.
We have also established contracting models for our oncology drug Erbitux®, our MS drug Rebif® and our growth hormone Saizen®, to make it easier for patients to access these medicines. Similarly, we have capped per-patient costs and formed risk-sharing agreements in certain countries.
Pricing schemes to serve low-income patients
We work in close partnership with governments and other stakeholders on innovative, differential medicine pricing schemes and we supply products at reduced prices to certain countries in Africa, Asia, Latin America, and the Middle East. In India, for instance, we cooperate with public sector representatives, such as Bharat Heavy Electricals Limited (BHEL) and the Oil and Natural Gas Corporation (ONGC), to offer discounted prices for certain general medicine and endocrinology products to patients with a limited ability to pay.
Moreover, we regularly participate in government tenders for products that are used in public hospitals serving low-income patients. Many of these tenders take place in low to middle-income countries.
Low-price second brands
For some of our existing brands, we have created low-price second brands, particularly in countries with a large percentage of patients with very low incomes. In Brazil, for instance, 11 of our products are available in a lower-priced format. We have also established low-price second brands in countries including Mexico, the Philippines, Poland, and South Africa.
Together with our partners, we offer branded generics particularly in low- to middle-income countries. This helps meet the urgent need for affordable, high-quality medicines required to treat endemic diseases. In doing so, we help to ensure better access to consistently high-quality medicines at lower prices. To date, we have launched four branded generics in the Philippines and three in Angola. We also launched a branded generic product in Brazil and Mexico.
Patient access programs
Worldwide, we operate patient access programs that allow us to offer certain products at more affordable prices in several countries. Examples include efforts to expand access in China to Erbitux®, our oncology medicine used for instance in the treatment of colorectal cancer. Geared primarily toward low-income patients who receive the drug free of charge, our Erbitux® donations have benefited around 12,900 patients in China since October 2012. The program ended when Erbitux® was added to China’s national healthcare reimbursement catalog, which now gives patients immediate access to the product.
We run similar assistance programs in other countries such as India, where we also offer a patient access program for Erbitux®, providing treatment cycles for free under certain conditions. Around 2,300 patients participate in the initiative each year. In nations such as China and Peru, we offer a free-of-charge biomarker screening that determines whether Erbitux® would be a suitable treatment. In China, around 40,800 patients have benefited from this program since 2014.
In addition to our oncology initiatives, we offer access programs for our drugs Rebif®, Gonal-f® and Saizen®. In China, for instance, we operate the Gonal-f Baby Fund, an access program that provides financial assistance for fertility treatments to low-income couples having difficulty conceiving.