Breakthroughs in the development of new medications are regularly reported. Pharmaceutical companies play a significant role in determining the pricing of new drugs. However, the position of medical centres and physicians in setting the market price of a medication is less known. André den Exter, Associate Professor of Health Law at Erasmus School of Law, wrote an opinion piece in Trouw about the "pharma pirates."
Lucrative agreements
The European Medicines Agency must approve medications before being allowed on the European market. After a new drug is approved and registered, negotiations begin over an appropriate price for the drug. This process is shaped by pharmaceutical companies negotiating with national governments and medical centres negotiating with pharmaceutical companies. Den Exter writes in Trouw: "Academic hospitals are especially at the forefront of the development process of medical innovations. They enter into lucrative deals with pharmaceutical companies when the results of clinical trials prove positive." It is common for doctors to receive a percentage of the market price of a new drug. In this way, medical centres and physicians acquire private funds for research that has been paid for with public funds. Den Exter in Trouw: "One could cynically conclude that this is entrepreneurship in its prime. However, from a societal perspective, this is a serious matter because, in this way, academic centres contribute to the increasing cost of innovative and often expensive drugs."
Transparency is essential
In his opinion piece in Trouw, Den Exter writes that transparency is needed regarding contracts between physicians and pharmaceutical companies. When transparency is achieved, a socially responsible price can be agreed upon for new medications. Den Exter points to the Dutch Government's Public Information Act (Wet open overheid, Woo): "Honored Woo requests provide insight into all concluded contracts and details about the relationships with pharmaceutical companies." This reveals under what conditions and for what remunerations academic hospitals sell research results to pharmaceutical companies. On whether the Transparency Register for Care still ensures transparency between physicians and pharmaceutical companies, den Exter says: "The Transparency Register for Care is voluntary and only provides insight into primary sponsorship and fees for services. The details are lacking."
At the moment, transparency is still lacking in pharmaceutical companies' pricing of new drugs. Den Exter indicates that transparency is essential. In Trouw, he writes: "There is nothing wrong with earning money from the development and marketing of drugs. However, the market price of some drugs does not correspond to the investments made in their development. Excessively high prices threaten access to innovative drugs. Therefore, these high prices must be fought against by governments, health insurers, and organizations advocating for access to healthcare as a human right."
The duty of care of pharma pirates
This summer, two pharmaceutical companies will appear in court. The 'pharma pirates' Leadiant and AbbVie will have to justify themselves to the court for pricing much higher than the reasonable price request. The reasonable asking price can be well estimated by economists. Additionally, a reasonable profit margin is calculated. Den Exter in Trouw: "Such analyses play an important role in price negotiations and preventing excessive prices."
AbbVie will have to justify its profit margin of over 50 per cent in the sale of the drug Humira. Rheumatoid arthritis patients use the drug. With the excessive profit margin, AbbVie has made a windfall profit of 110 billion euros worldwide. Den Exter explains that pharmaceutical companies do not have an explicit duty of care. He indicates that pharmaceutical companies have a duty of care based on the unwritten law. This is based on tort law, as Article 162 of Book 6 of the Civil Code stipulated. "In the pending lawsuit against AbbVie, the court will have to decide whether the excessive price of the drug Humira has led to health damage by displacing care and whether the company has acted unlawfully. The unlawfulness of the action lies in AbbVie's disregard of its societal duty of care and its violation of the right to access medicines at a reasonable price."
Den Exter indicates that it is also possible that asking for an excessive price could lead to abuse of a dominant market position. Subsequently, if sufficiently substantiated, competition law could also be used to compel pharmaceutical companies to lower the prices of drugs.
A temporary solution
Den Exter further writes in Trouw about preventing excessive prices: "Another card to play is the use of so-called pharmacist preparations of drugs for which a patent has been granted. With this preparation, known as magistral preparation, drugs are produced on a small scale without the involvement of the pharmaceutical company and at a fraction of the market price. A temporary solution, but for certain categories of patients, a possible solution to still obtain a working drug at a reasonable price." The Healthcare and Youth Inspectorate supervises drugs produced in compounding pharmacies. In addition, pharmacists are subject to medical disciplinary law. The quality argument is, therefore, often used by pharmaceutical companies to prevent their preparation. Den Exter in Trouw: "The threat of this magistral preparation hopefully makes pharma pirates realize that they have a societal duty to produce affordable medicines and are not solely for the shareholders."
- Associate professor