Victor Mendonça, chair of the Generic Market Access Committee at Medicines for Europe, outlines why patient access to medicines is at risk due to intense price pressure and unprecedented inflation and proposes ways to tackle this.
The COVID-19 pandemic and the conflict in Ukraine have caused unprecedented challenges for Europe, among which the surge of inflation which has increased cost of goods as well as energy and transportation costs.
The generic, biosimilar and value-added medicines industry provides up to 70 percent of dispensed medicines in Europe, yet account for less than 30 percent of pharmaceutical expenditure . This sector is at the core of expanding patient access to essential medicines and sustaining healthcare systems across Europe.
The COVID-19 pandemic and the conflict in Ukraine have caused unprecedented challenges for Europe, among which the surge of inflation which has increased cost of goods as well as energy and transportation costs. Inflation affects the off-patent medicines industry disproportionately, since off-patent medicines naturally have smaller profit margins thanks to competition between multiple manufacturers and off-patent medicine price regulations do not allow companies to adjust prices, unlike other industries where prices have risen in line with inflation and increasing costs.
For the last decade, government tender and pricing policies have driven prices of off-patent medicines to an all-time low as governments look for ways to deal with healthcare budgets. This was a short term response to long term cost trends caused by ageing populations, the high cost of new innovative medicines and more recently the health consequences of the COVID-19 pandemic. These policies have triggered a rapid downward price pressure, resulting in the consolidation of the market and increased risk of supply disruptions undermining patient access to essential medicines.
Our sector cannot continue to operate in an environment combining rampant cost inflation and increasing cost of goods with regulated pricing policies that can essentially decrease prices. Data from Belgium revealed that one in five generic medicines are no longer on the market after just one year and similar withdrawal risks are appearing everywhere across Europe.
The widely recognised link between medicine shortages and price-driven, single winner procurement practices, as well as unsustainable price-referencing systems must now be addressed as a high priority.
So, what can be done? There is a clear need to shift to policies that encourage healthy market competition, allowing patients access to essential medicines. The widely recognised link between medicine shortages and price-driven, single winner procurement practices, as well as unsustainable price-referencing systems must now be addressed as a high priority. Public procurement best practices such as multi-winner tenders and MEAT criteria which reward companies that invest in secure supply and green manufacturing must be introduced. Furthermore, companies should be able to adjust reference prices to the level of inflation.
These urgent policy actions should be supported by longer term reforms to ensure viability of the off-patent market. A study by Creativ Ceutical highlighted that pricing policies for generic medicines are failing to create a competitive market for generic medicines and are leading to market consolidation and jeopardise access to medicines negatively impacting health outcomes. New pricing models should be implemented that establish a link between the level of competition in the market and the price level. For example, the Creativ Ceutical study recommends tiered pricing model, where the price of a medicine is established based on the number of generic manufacturers competing on the market, similar to the Canadian Ladder Pricing Model.
Coping with current challenges will not be easy. However, advancing reform measures for the sustainability of the off-patent medicines industry will create a more resilient, viable and future-proof healthcare system in Europe. Our industry is ready to work with the Commission and Member States on solutions to maintain the access and availability of medicines.