Sustainability & Pharma Procurement in Europe: Are You ‘Green’ Enough? 

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In the wake of the 2021 United Nations Climate Change Conference (COP26), sustainability is once more a hot-button issue across all industries, including pharma. Here, Marco Rauland, vice president global market access & pricing strategic planning at Merck Group, casts his eye across Europe to assess how sustainability criteria are being integrated into the drug procurement process in different nations.

 

Sustainability is the ability to develop resources that meet the needs of the present without compromising the needs of future development. Sustainability is an umbrella term for environmental, social, and governance (ESG) issues.

In general, environmental impact is the biggest focus for investors, but the pharma industry has some particular differences when it comes to ESG evaluations. Pricing and healthcare burden is a widespread issue that tends to influence ESG evaluations in the pharma industry. There is an increased momentum in ESG or sustainable investing in the pharma industry to address its deeply rooted issues like exposure to litigation, drug pricing, product safety and recalls, and access to affordable healthcare.

Many pharma companies have effectively incorporated ESG criteria in their R&D, production, consumption and supply chain to improve environmental and social sustainability practices, and to address the UN’s Sustainable Development Goals (SDGs).

In Europe, we see the increasing trend of the inclusion of ESG criteria along with quality and pricing in the decision-making process specifically with respect to tenders and procurement.

So, what’s the status with regard to sustainability considerations as part of multi-criteria decision making in drug procurement? Here are some examples which prove the increasing relevance of sustainability in pharmaceutical decision-making.

 

Denmark

Amgros is a Danish organization, established in 1990, to ensure supplies of medicines to Danish hospitals that are procured at the best possible prices. However, the times when supply was only a matter of quality, price and delivery have passed. Amgros is now committed to making its mark on the sustainability agenda at both national and international levels. In 2020, Amgros issued the first Danish national tendering procedures in collaboration with Nordic Pharmaceuticals Forum, in which the environment is an important criteria alongside price and quality. The environmental criteria includes environmental management, packaging (plastics and paper/cardboard), transportation and social responsibility. These criteria were selected based on the interactions with Technical University of Denmark and pharmaceutical suppliers.

 

Norway

Norwegian Hospital Procurement Trust (Sykehusinnkjøp HF) is a pharmaceutical procurement agency for the specialised health service responsible for faster implementation, better compliance with agreements and faster access to pharmaceuticals. In 2019, Sykehusinnkjøp HF in collaboration with the environmental group of Norwegian Association of Pharmaceutical Manufacturers (LMI) and Norwegian Medicines Agency (NMA) effectuates the procurement of pharmaceutical products on a national basis for all health authorities in the country. When preparing a new procurement of antibiotics, companies that can document good environmental efforts during the manufacturing process will be rewarded in the procurement process. In the new procurement of antibiotics, environment friendly production will be weighted by 30% as allocation criteria.

 

Sweden

The National Agency for Public Procurement is responsible for developing and supporting the procurement carried out in Sweden. The agency has issued sustainability criteria for procurement of pharmaceuticals for in-patient care and OTC products. In 2016, Swedish Environmental Protection Agency (EPA) carried out a project with an objective of including environmental context in the CSR Compass (an online tool to help companies to implement responsible supply chain management) alongside social context to provide information access to environmental impact data for decision-making in procurement of pharmaceuticals.

 

Portugal

SPMS (Shared Services for the Ministry of Health of Portugal) is a public enterprise established in 2010, functioning under the Ministries of Health and Finance. The aim is to provide shared services in order to “centralise, optimise and rationalise” the procurement of goods and services. In 2021, SPMS and HIMSS (Healthcare Information Management Systems Society) collaborated to structure a new agenda for healthcare with the aim of achieving value-based care based on quality, scale and sustainability.

 

Germany

Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz: LkSG) in Germany, introduces new obligations for German companies with regard to protecting human rights in supply chains. The act introduces obligations regarding environmental protection. The entire supply chain, from the extraction of raw materials to the delivery to customers, is covered by the LkSG. The new ESG requirements are dependent on the degree of influence a supplier has within the supply chain. The initiative will continue throughout 2021 and is expected to arrive at a set of policy recommendations, potentially involving ESG and human rights protections within the context of global supply networks.

 

United Kingdom

NHS sets core principles of good practice procurement to be applied while undertaking any procurement exercise. The assessment must be based on a number of criteria for evaluation including price, quality, sustainability, innovation and technical merit. NHS price shall not be the sole or over-riding factor in the decision-making process. The Most Economically Advantageous Tender (MEAT) approach should be used in tender appraisal. In 2020, the NHS Sustainable Development Unit (SDU) have released a new programme to help organisations plan their sustainability criteria and deliver environment, social and financial value. The programme contains “Green Plan Guidance” and “Templates” that can be used to facilitate organization’s sustainability planning. The programme contains an online Sustainable Development Assessment Tool (SDAT) to help organisations understand their sustainable development work, measure progress and help make plans for the future.

 

Conclusion

Decision-making bodies are now progressively taking sustainability criteria into account alongside traditional cost-effectiveness, for their procurement, pricing, and reimbursement policies for pharmaceuticals. Country-specific evidence demonstrated that including these criteria in the policies has proved to be sustainable for pharma decision-making. However, when it comes to pharma market access and pricing, this is just the beginning and a lot to explore and establish.

 

References

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  16. https://www.euro.who.int/__data/assets/pdf_file/0009/379710/PolicyBrief_AUSTRIA_PB30_web_13082018.pdf
  17. https://www.globallegalinsights.com/practice-areas/pricing-and-reimbursement-laws-and-regulations/italy
  18. https://www.pbs.gov.au/info/about-the-pbs
  19. https://researchers.mq.edu.au/en/publications/health-system-sustainability-the-pharmaceutical-benefits-scheme-i
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  21. https://ihsmarkit.com/research-analysis/germanys-esg-law-a-case-study-for-new-pharma-pricing-model.html

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