The International Association of Mutual Benefit Societies (AIM) has warned, following the publication of its latest report, that Europe could save up to €27 billion annually on new medicines if prices were better aligned with real costs and therapeutic value, according to new research using AIM’s Fair Pricing Model.
The study, published in PharmacoEconomics, found that applying fair prices to ten selected medicines would have reduced expenditure by 73% in the participating countries: Belgium, Estonia, Germany, the Netherlands, Slovenia and Switzerland. These medicines cover treatments in oncology, rare diseases and chronic conditions.
The findings show that the prices paid by health systems are largely disconnected from the actual costs of bringing a medicine to market, as well as from its therapeutic value, and are therefore excessive. Even larger price gaps were observed in the case of cancer medicines.
Fair Pricing Calculator
AIM has developed a transparent tool, the Fair Pricing Calculator, which determines an affordable price for both health systems and patients, while still providing sufficient incentives for pharmaceutical companies to invest in innovation and production. The model takes into account research and development costs, production costs, sales and medical information costs, a reasonable profit margin and, where justified, an innovation bonus linked to added therapeutic value. The underlying analysis assumes a lump sum R&D cost of €800 million per medicine.
A paradigm shift
AIM believes that this situation of overpricing cannot be treated as business as usual. “When medicine prices are set at levels that cannot be justified by underlying costs or public health value, governments and public authorities must be prepared to challenge them more firmly.” For this reason, it calls for greater public negotiating power and pricing approaches that better reflect both therapeutic value and real investment costs.
The study shows that the Fair Pricing Model can strengthen the negotiating position of purchasers and support discussions on pricing and reimbursement. AIM notes that the model is already being used by Dutch health insurers in negotiations with pharmaceutical companies over medicine prices.
