The Impact of International Price Referencing on Innovation and Access to Cell and Gene Therapies

US lawmakers are considering implementing international reference pricing (IRP) for prescription drugs, which would benchmark US prices to prices in other countries, but there are concerns that this could hinder innovation and access to promising therapies like cell and gene therapies. 

The US spends more on prescription drugs than other industrialized nations, making it a target for policies to reduce medication costs. One proposed solution is the Prescription Drug Price Relief Act of 2021, which suggests benchmarking US drug prices to those in other countries to ensure fair pricing. Despite concerns about clinical uncertainty and costs, gene- and cell-based therapies have been approved and have widespread market access, with positive assessments from the Institute for Clinical and Economic Review. Researchers have explored the possibility of applying international reference pricing to these advanced therapies to improve market access and pricing. 

IRP systems vary widely in their implementation, including the number of referenced countries, calculation methods, and price enforcement. While IRP can help countries obtain affordable prices, there is no evidence to prove its efficiency or compare outcomes with other pricing methods. However, there may be unintended consequences such as reduced funding for research and development and delays in patient access to new medicines.  

Pharmaceutical companies have also developed strategies to navigate IRP, such as controlling the launch sequence of drugs and entering pricing agreements. Concerns about price convergence and the need for alternative approaches like differential pricing are also present. Additionally, the frequency of price revisions in IRP systems varies among countries, and currency fluctuations can impact drug prices. Regular updates of pharmaceutical prices ensure alignment with the current value of the currency and prevent artificially inflated costs. 

Determining prices in medical care and pharmaceutical markets is complicated by insurance coverage and the global nature of pharmaceutical products. Economists argue that differential pricing based on ability and willingness to pay is necessary for goods with large sunk costs and global impact. However, benchmarking to countries with lower ability and willingness to pay may lead to falling prices and revenue, creating a "race to the bottom" effect. 

The BBBA (H.R.5376), narrowly passed by the US House of Representatives, failed to pass in the US Senate. Despite this, the Biden Administration aims to salvage parts of the bill, particularly those related to drug prices. Unlike HR 3, the act no longer requires the explicit use of IRP to lower prices. However, it grants limited authority to the Centers for Medicare & Medicaid Services (CMS) to negotiate prices for a small number of Medicare-covered prescription drugs. The bill, if passed, would allow CMS to directly negotiate with pharmaceutical manufacturers to lower prices for up to 10 "high spend" drugs, which will increase to 20 drugs.  

This program includes cancer drugs but excludes those with orphan drug designation. Additionally, the BBBA includes inflation penalties and limits Medicare beneficiaries' out-of-pocket expenses for drugs to $2,000 annually. Further details need to be worked out for this section as it comes up for a vote. The bill requires manufacturers to submit relevant information to the US Department of Health and Human Services (HHS) for negotiation purposes. Once a fair price is determined, the HHS Secretary will ensure its reflection on all Part D plan formularies. However, the bill lacks specific instructions on the negotiation process, additional data collection, and the use of international prices or cost-effectiveness information. If signed into law, CMS will implement an administrative process for negotiations, which may evolve over time. Analysts have concerns regarding the impact of price cuts on pharmaceutical investment, potentially resulting in a negative effect on global R&D pharmaceutical investment. 

“Studies suggest that IRP may lead to price decreases in the short term. However, applying these methods carelessly, without a comprehensive assessment of how IRP might impact long-term innovation, could negatively impact all stakeholders,” said researchers.  

The increasing number of CGTs in development poses a significant challenge in ensuring global patient access, which may lead to ethical pressures and concerns over health equity worldwide.  

“A large gap exists in policy work aimed at addressing the global pressures that will likely arise from these curative innovations despite the exciting promise of the underlying science,” concluded researchers.  

Reference  

Sullivan SD, Sullivan KD, Dabbous O, et al. International reference pricing of pharmaceuticals in the United States: Implications for potentially curative treatments. Journal of Managed Care & Specialty Pharmacy. 2022;28(5), 566–572. doi:10.18553/jmcp.2022.28.5.566