In OECD countries, pharmaceuticals accounted for between 6% and 35% of total healthcare spending in 2019. However, advances in the research and development of innovative medicines are significantly transforming the healthcare landscape, allowing chronic diseases – the greatest cost drivers – to be treated more effectively and affordably.
Our approach to pricing medicines
We want to help ensure that all patients have access to the most effective medicines for their needs, which is why we are working to prevent cost from becoming a barrier to treatment. We are committed to flexible, fair and sustainable pricing – both within and across countries. We therefore adapt our prices based on local market access, taking into account factors, such as health system capacity and financial standing, geographic circumstances and existing infrastructure, statutory requirements, unmet medical needs, and socioeconomic aspects, such as the patients’ ability to pay. This approach involves working closely with governments and other stakeholders. In addition to these considerations, we continuously monitor dynamic healthcare environments and markets, pricing and reimbursement systems as well as legal and regulatory guidelines, adjusting our prices as necessary.
We review our prices on an annual basis to ensure they meet patient access needs. We use a consistent, data-driven approach to monitor our local pricing. In line with our fair pricing commitment, we also make our products affordable to patients in low- and middle-income countries by participating in government tenders, establishing high-quality affordable brands or branded generics, implementing early access programs and operating patient access programs.
Moreover, we support innovative risk-sharing agreements and are working to improve data efficiency in health systems, in order to achieve an optimal distribution of funds and resources.
Setting medicine prices
Our Global Pricing and Market Access unit evaluates market launch prices in coordination with the respective franchises. The team reports directly to a member of our Healthcare Executive Committee. Our local affiliates are responsible for managing prices and continually adapting them to local conditions.
Our commitment: Medicine price guidelines and principles
The affordability of our health solutions is part of our broader patient value proposition, which includes increasing accessibility, availability and awareness. Our medicine pricing adheres to the stipulations of our overarching Access to Health Charter and is defined in detail by our Pricing of Medicines guideline. Additionally, our Patient Access Programs Policy sets out standards for offering medicines at affordable prices.
Understanding the effects of Covid-19 on medicine pricing
The pandemic has put a major strain on health systems and treatment payers around the world. In December 2020, we organized a virtual expert roundtable with former payers from Brazil, Germany, Italy, Japan, Saudi Arabia, and the United Kingdom. The objective was to understand the impact of Covid-19 on payer priority, affordability, budget shifting, and resource allocation, in order to identify effective approaches to work in partnership with payers from different markets. Due to the budget constraints caused by the Covid-19 crisis, those payers perceived higher needs in pricing approaches including patient access programs, direct discounts, public-private partnerships and value add services. This is in line with our key pricing initiatives and will help us further reinforce these measures going forward.
Customer-centric contracting models
We are dedicated to advancing value-based healthcare through pricing and contracting mechanisms that fully comply with all applicable local laws and regulations. In collaboration with payers, such as health insurance companies, we developed various product- and market-specific reimbursement and contracting models. These help to provide patients with prompt access to our innovations. For instance, in the United Kingdom, Ireland and Germany, we continued with innovative risk-sharing agreements that provide immediate access to Mavenclad® for patients with multiple sclerosis (MS).
We have also established innovative contracting models for our oncology drug Erbitux®, our MS drug Rebif® and our growth hormone Saizen®, to make it easier for patients to obtain access to these medicines. Similarly, we have capped per-patient costs and formed risk-sharing agreements in certain countries.
Pricing schemes to serve low-income patients
We work in close partnership with governments and other stakeholders on innovative, differential medicine pricing schemes. In addition, we supply products at affordable prices to certain countries in Africa, Asia, Latin America, and the Middle East. In India, we continued to cooperate with public sector representatives, such as Bharat Heavy Electricals Limited (BHEL) and the Oil and Natural Gas Corporation (ONGC), National Thermal Power Corporation (NTPC) and Indian Railways (IR) to offer discounted prices for certain general medicine and endocrinology products to patients with a limited ability to pay out of pocket.
Moreover, we regularly participate in government tenders for products that are used in public hospitals serving low-income patients. Many of these tenders take place in low- to middle-income countries.
High-quality affordable second brands
For some of our existing brands, we have created high-quality second brands at affordable prices, particularly in countries with a large percentage of patients with very low incomes. In Brazil, 11 of our high-quality products are available at these affordable prices and in South Africa, we also offer Betacor™, a second brand for bisoprolol (Concor®), with a price reduction on all payer formularies to increase access for low-income patients. We have also established new affordable second brands in countries, such as Mexico, the Philippines and Poland.
We offer branded generics particularly in low- to middle-income countries. We do this together with selected reliable partners with whom we enjoy trusted collaborations. These partners generally have track records in quality control and are able to provide products that comply with our high standards. In this way we can better meet the urgent need for affordable, high-quality medicines required to treat endemic diseases. We already have six such products available to patients in low- to middle-income markets, including in Brazil, Chile, Mexico, and the Philippines, and we are currently registering further branded generics to expand this effort to more countries.
Patient access programs
We operate patient access programs that allow us to offer certain products at affordable prices in several countries. We run patient access programs in countries, such as India, where we offer a patient access program for Erbitux®, providing financial assistance to qualified patients of low financial means for their treatment – in line with applicable local laws and regulations. Every year, we reach over 500 patients through this program. In addition to our oncology initiatives, we also offer such programs for our medicines in other therapeutic areas, such as Rebif®.
Patient support programs
We provide digital health and “beyond-the-pill” solutions as part of our holistic approach to supporting patients, caregivers and physicians. This approach enables health professionals to manage conditions more effectively, thus helping to generate improved patient outcomes. We offer a customized medication and adherence program for cardiometabolic patients in Brazil and Russia, registering significant improvements in the rates of adherence to the treatment. We also support prediabetic patients with digitally enabled, tailored and evidence-based lifestyle intervention programs, such as GlycoLeap in the Asian-Pacific region and Virgin Pulse (previously Blue Mesa Health) in Latin America.