How Big Pharma Preys on Poor Countries – and Patients Pay the Price

Yves here. US readers often hear tales of egregious Big Pharma price gouging, particularly for medications that are essential in treating dangerous conditions. Patients here are regularly told, regularly with specific examples, of how much cheaper anti-cancer meds or insulin are in other countries.

While it is generally true that countries with systems that engage in centralized buying or price negotiations for medications get better prices than Americans, the article below explains that there is still considerable disparity between them. On the one hand, the drug companies justify their posture by acting as if they are giving volume discounts, as in bigger buyers get better breaks. That might make sense if the drug business had high variable costs. But manufacturing expenses are trivial and some who pretend that inquiries about their pricing are offensive claim high R&D expenses. Ahem, those aren’t variable, so how does this justify ripping off smaller countries? However, anyone who has been close to corporate accounting knows how much freedom there is in the classification of overheads, so whinges about high R&D allocations need to be taking with a fistful of salt.

One outrage, to which I have to confess my ignorance, is that the pharma players insist that their negotiated prices with various countries be kept a secret. Huh? Why does anyone comply? Or perhaps to put it another way, what if a big group, like all EU members, got together and said they were no longer playing ball, that they regarded this secrecy regime as unwarranted and therefore a competitive abuse. A big drug company might think it could stare down even Germany but all of the EU?

By uliet Ferguson, Eurydice Bersi, and Maxence Peigné. Originally published at openDemocracy

Confidentiality agreements are allowing pharmaceutical companies to make billions from secretive deals on life-saving medicines, an investigation by Investigate Europe and its partners has found.

Governments across Europe are unaware of what their counterparts in other countries have paid for a drug – meaning they might pay way over the odds for it or, in many cases, decide they can’t afford it at all.

Twenty-seven-year-old Monika Luty from Poland is among the hundreds of thousands of patients to have suffered as a result of these confidentiality agreements.

Luty has cystic fibrosis, an inherited condition that causes abnormally thick mucus to clog the lungs and digestive system. It is a life-threatening disorder for which there is no cure. There is, however, a way to manage it: a drug called Kaftrio is seemingly a game-changer in the treatment of the illness.

But not for Luty.

In 2020, weighing just 37 kilograms and with a lung capacity dangerously close to 20%, she posted a video online, begging Vertex Pharmaceuticals, which manufactures Kaftrio, to give her the drug. Although it had EU approval, it was not on the market in Poland.

Her plea to the company was in vain. But thanks to crowdfunding she was able to buy Kaftrio in Germany. Having seen firsthand how effective it was, she then upheaved her entire life to move across the border, getting a job in Frankfurt that allowed her to receive a free prescription for the drug.

Once in Germany, “it was so easy” to access Kaftrio, she recalls. “All I needed was insurance, a job and to live there.” In 2022, the drug became available in Poland and Luty was able to return home.

Modern medicine has given hope to patients with diagnoses that in previous times might have been a death sentence. Today, we can treat once-untreatable conditions, prolong lifespans and manage chronic disorders more easily.

But many of these innovative medicines come with an increasingly high price tag – putting European healthcare systems under enormous pressure.

In 2018, the percentage of healthcare budgets spent on medicine ranged from 8% in Norway to 24% in the Czech Republic, according to research by the IQVIA Institute for Human Data Science, a New Jersey-based think tank with a focus on healthcare. In the UK, the National Institute for Clinical Excellence  – a public body that provides guidance on improving health and social care – makes recommendations about which medicines the NHS should procure based on their clinical effectiveness and value for money. Around 9% of the annual budget for the whole of the UK is spent on drugs as a result.

Our research at Investigate Europe found evidence that in at least one category of very expensive and important medicines, stronger and richer countries get better deals compared to countries with smaller populations and weaker negotiating powers.

We looked at the income of Vertex pharmaceuticals by country, as stated in company accounts, and divided these by the number of patients drawn from patient registries. A treatment that costs around 71,000 euros per year per patient in France will cost 175,000 euros per year per patient in Lithuania – when it finally becomes available, after a multi-year delay.

“The price of our medicines is based on their innovation and the value they bring to the CF community, caregivers and healthcare systems,” a Vertex spokesperson said. “The reimbursed prices quoted in your inquiry are inaccurate.” The company declined to comment on individual countries or to specify the inaccuracies. It added that over the past decade, more than 70% of its operating budget was spent on research and development.

Higher-income countries are more willing and able to pay, meaning they offer a more attractive market and have a better negotiating hand, while lower-income countries’ greater budgetary constraints reduce their bargaining power.

The result is unequal access to medicines across Europe, with life-saving medicines out of reach in some countries. At the same time, pharmaceutical companies are reporting huge profits, often from medicines that were developed in their early stages with public money. Forbes lists the healthcare industry as the second of its top five sectors to invest in.

Statista puts pharma revenues worldwide at $1.48trn in 2022, while a 2019 University of East Anglia study showed that Amazon, Apple and Google made a combined revenue of just 56% of pharmaceutical income.

With a monopoly on the treatment of cystic fibrosis, US-based Vertex Pharmaceuticals can charge governments more than €200,000 per patient per year for Kaftrio, according to researchers in the UK. This is not uncommon: novel medicines (often innovative products for previously unmet medical needs) that treat only 2-3% of patients are expected to constitute half of pharmaceutical spending in high-income countries by 2026, the IQVIA has found. They have not yet made predictions for what this means for low-income countries.

In the Netherlands, the Pharmaceutical Accountability Foundation is taking American pharmaceutical company AbbVie to court, claiming that it overcharged the Dutch healthcare system by €1.2bn for the arthritis drug Humira. AbbVie denies the allegations, saying it “acts in accordance with all applicable laws and regulations” and remains “fully committed to the patients and the societal needs we serve”.

In the EU, the European Medicines Agency is responsible for deciding whether a drug is safe to sell on EU markets Individual member states are then free to decide whether or not their healthcare systems will purchase the approved drugs – and to negotiate the prices they will pay for them.  After discounts and rebates, the final price paid by a country for a drug remains a closely guarded secret.

This hybrid system allows the pharmaceutical industry to negotiate with each country separately, explained Dutch lawyer and public health advocate Ellen ‘t Hoen. “Having all couched in secrecy gives them an enormous power to play a divide-and-rule game,” she told Investigate Europe.

“Price secrecy is considered a core value of the industry,” says Wim van Harten, a Dutch oncologist who has for years been trying to find out what cancer therapies across Europe really cost.

The lack of transparency means countries “lower their purchasing power” according to Sabine Vogler, from the Austrian National Public Health Institute. They go in blind and sit opposite a pharmaceutical company negotiator who knows the real prices in all countries. “They could increase their negotiating power if they had the full picture,” said Vogler.

A spokesperson for the European Federation of Pharmaceutical Industries and Associations (EFPIA), a trade and lobbying group for the industry, told Investigate Europe: “There is a broad consensus that prices need to reflect the ability of a country to pay for medicines.

“EFPIA and its members propose a system for Europe where the countries who can afford to pay less for medicines, pay less.

“This type of agreement would require solidarity among member states to embed these ‘fair principles’ and prevent them from being undermined, for example, through international reference pricing or through supply diversion, where a medicine sold more cheaply in one country is immediately exported to a country with higher prices.”

They added: “The industry supports initiatives that deliver the timeliest access to medicines for patients”. In some cases, they said, this can involve cross-country collaboration.

When the world was upended by the Covid-19 pandemic, the scramble to get people vaccinated forced EU countries to work as one. For the first time, the European Commission negotiated and bought medication on behalf of all EU member states, as well as countries in the European Economic Area, such as Iceland and Liechtenstein.

According to the EU Court of Auditors, “by November 2021, the commission had signed contracts on behalf of the member states to purchase up to 4.6 billion vaccine doses”.

The joint procurement of Covid vaccines proved that the mechanism can work, but prices were still secret. “That was really a missed opportunity,” says Vogler. “If the EU had used its joint forces to not agree to confidentiality clauses, this could have been a game changer.”

A spokesperson for the EU Commission told Investigate Europe that it “fully supports any exchanges or cooperation between member states that could improve access and affordability of medicines”.

They added that joint negotiations would require a degree of similarity between states’ pharmaceutical systems and pricing and reimbursement processes – though they said “greater transparency around price information” could improve these processes.

Giorgos Pamborides, the former health minister of Cyprus, believes European countries’ refusal to act together on drug negotiations is a mistake – describing confidentiality clauses as “tools for the abuse of the dominant position that industry has vis-a-vis its clients, the states”.

“Without the slightest consideration, the EU is giving up on its sole advantage: its size,” Pamborides added.

It is pure market logic: even the best discounts that the strongest country in Europe can obtain on its own are insignificant compared to those that could be obtained by a unified market and joint negotiations. And it’s people like Luty, with long-term health conditions, who pay the ultimate price.