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Will a new tax and informal IRP network help France negotiate a lower price for Sovaldi?

20 October 2014 Federica Benassi

While an increasing number of new HCV treatments gain approval for marketing authorisation in Europe, EU member states are looking at ways to ensure that commercialisation of new-generation hepatitis C virus (HCV) treatments does not defeat the efforts of containing national expenditure. Since the marketing of Gilead Sciences' Sovaldi (sofosbuvir) in January 2014, two other HCV drugs - BMS' Daklinza (daclatasvir) and Janssen-Cilag/ Medivir's Olysio (simeprevir) - got the European Commission's nod for marketing authorisation. Although competition among these innovative medicines is set to increase as the number of HCV drugs that secure authorisation grows, payors at EU member state level are increasingly concerned about the potential impact that the new drugs may have on the national healthcare budget.

How France plans to contain pharma costs in 2015 The French government has recently put forward a proposal for a progressive tax mechanism targeting HCV drugs. In particular, the new social security bill (PLFSS) for 2015 introduces an annual threshold for HVC drugs; according to the proposal, the ceiling would be fixed at EUR450 million (USD568.3 million) in 2014 and EUR700 million in 2015.

The contribution mechanism is triggered if both of these two conditions are met:

  • the total turnover exceeds the amount set by law, 
  • the growth rate of the turnover exceeds the growth rate set by law.

However, the payback it is not the sole provision proposed by the French government to contain costs. Looking at the national target for expenditure in public healthcare (ONDAM) set for 2015, the healthcare spending threshold has been further lowered to 2.1% year-on-year (y/y) spending growth compared to the 2.4% y/y ONDAM set for 2014. The 2015 target is expected to result in EUR3.2 billion (USD4 billion) of savings for the healthcare budget. In particular, a significant share of the savings budgeted are planned to be garnered through savings in the pharmaceutical sector. In fact, through a number of measures, including lower drug prices and generic uptake strengthening, the pharma sector is expected to generate economies of EUR1 billion. Furthermore, improvement in the use of healthcare, including pharmaceutical prescriptions, will also play a major role in the saving plan for 2015.

HCV therapies:Impact in France In France, 200,000 people are affected by HCV and 3,000 people die each year from the disease (source: PLFSS 2015).Although prevalence of HCV in France is not as high as in other European markets - in Italy, which has a similar population, for instance, approximately 1.5 million people are suffering from HCV (Source: Italian Ministry of Health reported by Il Quotidiano Sanità) - arrival of new HCV therapies on the market will certainly put the French payer under pressure to ensure patient access to these innovative treatments which have showed high rates of success in treating the disease. Therefore, the payback mechanism proposed by the government for HCV treatments will play a major role in shifting part of the expenditure burden onto the industry side through the repayment of the overspending, or to act as an incentive to limit the overall annual turnover generated by the new drugs. Furthermore, the measure may also push pharmaceutical companies towards a stronger price competition to strategically gain greater share of the market as well as potentially avoiding the burden of the payback mechanism - although it is not clear whether the expenditure ceiling will be calculated per individual companies.

Meanwhile, Sovaldi received a positive endorsement for reimbursement by the French Higher Authority on Healthcare (HAS)'s Transparency Commission in May, and as a result, the French pricing committee is now in the process of negotiating a price with Gilead Sciences. The drug is currently commercialised in France at EUR56,000 (USD 70,703.36; source: Gilead Sciences) per patient for a 12-week course of treatment. Furthermore, the ASMR ratings (II and III) assigned by the transparency committee give the drug very high chances to secure a European-level price guarantee in France. Under this guarantee, Sovaldi's price cannot be below the lowest price of the same drug in the reference markets, namely Germany, Italy, Spain, and the United kingdom, for five years. However, the current payback proposal may provide the pricing committee with an extra leverage to exert in current pricing negotiations to lower the price of the drug.

European member states join forces Reduction of spending in the healthcare sector continues to be a priority for the French Minister of Social Affairs and Health, Marisol Touraine, and the other members of the executive. However, France is not the only EU country that decided to introduce provision to limit impact of Sovaldi reimbursement on the public payer. In Spain, for instance, Sovaldi reimbursement is capped at EUR125 million during the first year of reimbursement. In Italy, AIFA reached an agreement with Gilead Sciences on 30 September 2014 on the pricing and reimbursement conditions for Sovaldi. It will be necessary to wait until the publication of the decision on the Italian official gazette to know the details of the deal, but it is very likely that an expenditure ceiling will also be applied in Italy.

Finally, French Minister of Health Marisol Touraine said in July that 14 EU member states, including France, have agreed to "join forces to weigh on price negotiations" with Gilead Sciences. Under this initiative, EU markets have agreed to informally share price information on Sovaldi as the negotiations proceed. Price negotiations will continue to be conducted at national level and it is highly unlikely that Sovaldi price discussions will trigger a change towards any centralised pricing and reimbursement procedure since pharmaceutical budgets are set at member state level and payers have no incentives to delegate power to a supranational authority. However, exchange of information is likely to have the effect of an informal reference price system that will allow payers to gain power at the negotiating table.

This informal international reference pricing (IRP) will come on top of the already widely-used formal international reference pricing in Europe, but with one distinct advantage: formal IRP tends to be based on the list price of medicines, it seems that for Sovaldi countries intend to share the discounted price and thus prices referenced will be much lower than the list price.

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