Priority Medicines for Europe and the World 2013 Update. Background Paper 8 - New Approaches to Promoting Innovation. BP 8.3 - Pricing and Reimbursement Policies: Impacts on Innovation
(2013; 74 pages)


In recent years, many industrialized countries have been confronted with rising healthcare expenditures. As increases in healthcare expenditures commonly exceed a country’s economic growth, governments have turned to various policies aimed at controlling both healthcare and pharmaceutical expenditure. During the last decade, European countries - particularly those countries hit by the global financial crisis - have implemented a range of cost-containment measures in the pharmaceutical sector. Governments have both an obligation to improve public health (through facilitating access to needed therapies for its citizens), a need to control healthcare expenditures - as a substantial part of healthcare expenditures are financed publicly – and commonly seek to reward pharmaceutical innovation. These goals are potentially conflicting and therefore, policy decisions may well require trade-offs across competing policy objectives.

The current focus on cost containment measures has given rise to concerns regarding the sustainability of pharmaceutical innovation. Pharmaceutical companies earn back investments in pharmaceutical R&D through profits generated by the prices of a minority of products that make it from the discovery phase onto the market, as new medicines entering the market will experience a period of market exclusivity due to patent protection. If pharmaceutical prices are not sufficient to (i) earn back investments and (ii) generate resources that can be reinvested in the development of new medicines, price controls and stringent reimbursement regulations have the potential to negatively impact pharmaceutical innovation as for the manufacturer of an innovative medicine, coverage and reimbursement are the key to economic success that is essential for sustaining its R&D.

In the context of Priority Medicines, therefore, appropriate policies and incentives for R&D – that are partly generated by pricing and reimbursement policies – are an important instrument to address pharmacotherapeutic gaps. The objective of this background paper is to discuss current pricing and reimbursement policies that may be able to align conflicting policy objectives – cost containment, access to medicines, rewarding innovation – and to identify priorities for research based on this discussion. Different sources have been used, including scientific publications, grey literature, interviews with experts, and policy documents for writing this paper.

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