IMS recently released its Pricing and Reimbursement Review 2004, an annual publication that assesses the impact of key events affecting the pharmaceutical pricing and reimbursement environment in the U.S., Europe and Asia. The review, developed by IMS's Cambridge unit, contains articles about the implications of reference pricing in Europe and Asia. The review, developed by IMS's Cambridge unit, contains articles about the implications of reference pricing in Europe and Asia, the market withdrawal of Vioxx, and Medicare reform and price differentials in the U.S. Also included are standard benchmarking data tracking the number of new products launched and the speed of market access.
The report notes that the number of new molecular entities (NMEs) brought to market by the largest pharmaceutical companies continues to decline. Only 12 NMEs in the U.S and 10 NMEs in Europe were launched by the 15 largest pharmaceutical companies in 2004, well below the five-year and 15-year average number of NMEs approved.
"Big pharma revenues are being squeezed from two directions: a reduction in the number of NMEs launched and the increasing pressure on prices in Europe due to referencing," says Jon Resnick, Cambridge Principal. "This increases the need to maximize the value of new products that do come to market by considering requirements of payers and their budgets early in the R&D process."
Reference Pricing
Several European countries have turned to reference pricing - setting a single price that the government is willing to reimburse for a group of interchangeable drugs - in an effort to control drug prices and volumes. If manufacturers price a product above the reference reimbursement limit, patients must pay the difference. While reference pricing is highly attractive for government authorities, pharmaceutical companies may not achieve a price premium for an NME if it is referenced in a group that includes lower-priced generics.
"Pharmaceutical companies must emphasize differentiation, concentrating on efficacy and side effects, so that the product can be kept out of a reference group," says Dr. Ad Rietveld, Cambridge Senior Principal. "At the same time, we must work to establish systems that recognize and reward the therapeutic progress of new products entering the market without comparators."
Medicare Reform
In the U.S., the Medicare prescription discount card program is expected to gain widespread participation beginning in January 2006, resulting in prescription drug spending by the federal government nearly doubling in the first year. Medicare is expected to account for 28 percent of prescription drug spending in the U.S. in 2006, up from just 2 percent in 2005.
"The private drug benefit plan sponsors will play a key role in containing costs, since they are responsible for negotiating discounts with manufacturers and have wide discretion in formulary development," says Resnick. "Over time, we expect that the need to control costs will increase reliance on generics and reduce access to innovative products. That will have major implications for manufacturers."
Issues and trends documented in Pricing and Reimbursement Review 2004 were previewed for 45 pharma industry executives attending Cambridge's annual pricing and reimbursement conference at Cambridge University in June. Click here to access the publication.