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Brazil finally edges towards first drug pricing reform after two years – is it a missed opportunity?

14 October 2021 Ewa Oliveira da Silva

In our recent blog on trends in international reference pricing (IRP), we mentioned that a public consultation was underway in Brazil on a reform of the country's 17-year-old drug pricing framework. With the consultation now closed and while the pharma sector awaits further updates from the Drug Market Regulation Chamber (CMED), it might be a good time to take a closer look at some of the revisions being proposed, what the implications might be, and what to expect next.

The publication of a draft resolution amending the country's drug pricing framework followed years of discussions on the need to modernize it and a protracted period of stakeholder engagement and regulatory analysis that began in 2019. The government seeks to update pricing regulations set out in CMED's Resolution 2 of March 2004, which defined the formulae for setting maximum ex-factory launch prices for drugs, based on their classification into six categories. Under current rules, categories I (new drugs with added value), II (other new drugs), and V (new pharmaceutical forms or associations of already existing drugs) are priced based on a basket of nine international markets and the country/territory of origin. Prices of new presentations of established drugs, falling under categories III and IV, are set based on the prices of already commercialized drugs containing the same active pharmaceutical ingredient, whereas generics (category VI) must not exceed 65% of the price of the reference medicine.

CMED's proposal envisages the creation of three additional pricing groups: category VII for biosimilar drugs, category VIII comprising several subcategories pertaining to new presentations of already marketed active ingredients, and category IX for medicines that have been subject to a transfer of ownership. According to CMED, these new subgroups are being proposed to address a marked increase in the number of pricing requests that cannot be accommodated within the existing methodology. The products standing to benefit the most from the changes are pharmaceutical forms and strengths with added clinical benefit, which under the proposed category VIII would become eligible for an "innovation bonus" of up to 35% of their IRP-based price. Modifying the pricing rules to reward so-called "incremental innovation" has been a long-standing request of the local generics industry and the proposal should be welcomed by the sector.

As for biosimilars, the reform envisions the introduction of direct price linkage whereby their prices may not exceed 80% of the reference product's price, which is broadly in line with international practice. This would simplify the pricing rules for this category of products, eliminating the differentiation between biosimilars with and without "proven therapeutic benefit" - introduced by CMED's Communique 9 of 2016 - and replacing it with a blanket formula. In addition, the draft resolution sets the maximum period of analysis for category VII at 60 days, down from the 90-day limit that currently applies to so-called omitted cases (products that do not fall under any of the existing six categories). This will likely lead to faster pricing decisions and quicker market entry.

When it comes to rules for pricing innovative drugs - categories I and II of CMED's classification system - these will largely remain the same, besides minor wording changes geared towards clarifying the difference between the categories. As an example, the tweaked definition of category I stipulates that the comparator against which the new drug will be assessed to determine added value must be a drug currently used for the same indication in Brazil. This should provide some more clarity to sponsors in terms of clinical data requirements, although is unlikely to make the hard-to-get category I status any more accessible. The pricing formulae for innovative drugs would also remain unchanged under the revised rules.

The draft version of the new resolution might still undergo changes as a result of the public consultation, now closed. There has been criticism from some quarters that following many months of silence on the subject, the government is now trying to hastily implement the reform without proper, transparent discussion with all stakeholders. Among these critical voices is the National Health Council, which has called on the government to publish the regulatory impact analyses that preceded the development of the proposal, and to carry out wider consultations with all relevant actors. The Council has also called for CMED to further clarify the criteria for the evaluation of added clinical benefit, and the rationale for the proposed pricing rules for categories VII and VIII. However, according to local sources, the government is keen for the changes to be implemented before the end of 2021.

While some further delay and modifications are possible, it seems that Brazil is finally edging towards the first substantive reform of its drug pricing framework, and the pharmaceutical industry should take note.

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Posted 14 October 2021 by Ewa Oliveira da Silva, Senior Analyst, Life Sciences

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