The growing need to provide healthcare in aging societies poses major challenges to health systems. While reforms often focus solely on the price of medicines, it is important to consider the costs of medicines within the context of overall health systems. Medicine expenditures make up an important but still small portion of total spending. According to the OECD, spending on prescription medicines generally accounts for around 10%-16% of total healthcare spending in many OECD countries. Furthermore, science and innovative medicines are currently transforming care and allowing the treatment of many chronic diseases – the biggest cost-drivers – more effectively, thus achieving overall cost savings in health systems. At the same time, our commitment to creating a healthy society means that we must take a responsible approach to pricing our medicines.
Our approach to pricing medicines
We want to ensure that all patients have access to the most effective medicines for their needs, which is why we’re working to prevent cost from becoming a barrier to treatment. We therefore adapt our prices based on local market access and regulatory considerations such as health system capacity and financial standing, infrastructure, legal requirements, and unmet medical and treatment needs. Partnering with governments and other key stakeholders, we adjust our prices in different geographical or socio-economic environments to take account of patients’ ability to pay. In addition, we continuously monitor the dynamic healthcare environments, pricing and reimbursement systems, and legal and regulatory guidelines, adjusting our prices as necessary.
Patients are at the very heart of our health solutions. We support patient access programs, flexible pricing, differential pricing, and risk sharing agreements. Moreover, we seek to improve data efficiency in health systems in order to achieve an optimal distribution of funds and resources. By following this approach, we balance our commitment to improving access to our products with our dedication to maintaining a sustainable medical innovation environment for future generations of patients.
How we set medicine prices
Our Global Pricing and Market Access unit reports to the Chief Marketing and Strategy Officer of our Healthcare business sector. This team sets our initial prices in coordination with the respective businesses. Our subsidiaries are responsible for managing prices and continually adapting them to local environments.
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. As a key component of our overarching efforts to improve access to health, medicine pricing adheres to the stipulations of our A2H Charter. Our approach is also informed by our Pricing of Medicines guideline. Furthermore, our Patient Access Programs Policy defines standards that enable us to offer medicines at reduced prices through our patient access programs.
Implementing our pricing
We review our prices on an annual basis to ensure they meet patient access needs. To assist this process, we use a consistent, data-driven approach to monitor our local pricing. Based on the results, we define guidelines and, if necessary, adjust our prices to keep them affordable for patients. Our investment in enabling technology and our dedication to patient access allow us to make timely strategic pricing and reimbursement strategy decisions. We also make our products affordable to different patient segments within individual countries by participating in government tenders, establishing second “lower-price” brands or operating patient access programs.
Innovative contracting models
We are committed to advancing value-based healthcare through innovative pricing and contracting mechanisms in full compliance with applicable local laws. In collaboration with payers such as health insurance companies, we have developed various product- and market-specific reimbursement and contracting models with the aim of providing patients prompt access to our innovations. Examples of such models include a shared-risk agreement recently established in the UK that will provide immediate access to Mavenclad® for MS patients, while the health service only has to pay for medicines for those patients that respond to the drug.
Government tenders to serve low-income patients
We work in partnership with governments and stakeholders on innovative, differential pricing schemes. 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 developing countries. For instance, we supply reduced-price products to governments in Africa, Asia, Latin America, and the Middle East.
Second “lower-price” brands
We have established second “lower-price” brands of some of our existing brands. In South Africa, for instance, a second brand of our antihypertensive agent Concor® (named Ziak®) is available at discounted prices.
Patient access programs
Worldwide, we operate patient access programs that allow us to make our products more affordable to different patient segments within individual countries. These include programs in China to expand access to our oncology drug Erbitux®, which is used to treat conditions such as colorectal cancer. One example is our Erbitux® China Patient Assistance Program (ECPAP). Launched in 2012 in collaboration with a local charity, ECPAP is geared primarily toward low-income patients, providing them with the drug free of charge. Since 2015 we have also been partnering with the China Charity Federation (CCF) and helping cover the costs of treating middle-income patients. In some cases, we split these costs with patients and a local insurance fund. To date, around 10,000 patients in China have benefited from our ECPAP donations.
We run similar assistance programs in other countries such as India, where we also offer Erbitux® at discounted prices. In South Africa, we support the Savanti Patient Access Program, which enables patients to be treated with Erbitux® at a lower co-payment rate.