Pricing models that benefit the pharma industry

The Federal Council wants to anchor managed entry agreements with secret discounts within a reform to the Swiss Federal Law on Compulsory Health Insurance (LAMal). However, the measures will do nothing to stop prices of cancer treatments from skyrocketing – quite the opposite. The loss of transparency will put pharma companies in a stronger position when it comes to imposing their abusive prices and margins.

In Switzerland, the price of a medicine is set by the Federal Office of Public Health (FOPH) on the basis of two comparisons – firstly, of reference prices in nine other European countries  and secondly, of the price of similar treatments already on the market ). However, with the approval of increasingly complex and onerous new treatments, such as in the case of cancer treatments, the FOPH no longer manages to guarantee timely inclusion on the List of Pharmaceutical Specialties (LS) – which opens the door to automatic reimbursement by the compulsory health insurance – and above all to a price that meets the conditions stipulated by the law. 

Within the framework of the second package of cost-containment measures regarding the compulsory health insurance, the Federal Council wants to amend the LAMal to legalise ‘price models’ (also known as managed entry agreements) and enable the FOPH to negotiate secret discounts on the official price for new medicines. A price model is an agreement between the FOPH and a pharmaceutical company that sets the admission modalities of a drug onto the List of Pharmaceutical Specialties (price, discount, requirement for additional studies) to enable the cost of the treatment to be covered by the LAMal. Different categories of managed entry agreements exist focusing either on the price (discounts provided by pharmaceutical companies on each treatment), volume (covered up to a certain annual quantity), or performance (treatments are reimbursed by the producer if they do not meet their effectiveness target). 

Public Eye kämpft seit Jahren für mehr Transparenz bei der Preissetzung von Medikamenten; hier mit einer Kampagne im Jahr 2018.

A policy of fait accompli 

Price modelsare becoming all the rage in Switzerland. In January 2019, there were only around 20 such agreements in place; today over 100 managed entry agreements cover 79 products – five times as many as in 2019. Three years ago, these discounts were all published in the public LS database

In early 2022, around half of these managed entry agreements provide for secret discounts. 

The proposed amendment to the LAMal has not yet been accepted, yet there is already a strong trend of the FOPH negotiating secret discounts. The amendment is set to legalise a practice that is already common – a policy of fait accompli. The new element of the amended law would prohibit the amount of these discounts and the basis on which they were calculated from being obtained through a Freedom of Information request – and thus to know the net price of these medicines taken on by the health insurers. The principle of transparency would be sacrificed in the name of commercial policy, creating a dangerous precedent in the field of social insurance. 

Switzerland breaches its international commitments 

In its August 2020 explanatory report (available in French or German), the Federal Council claimed that managed entry agreements with undisclosed rebates are inevitable. The report stated that they allowed for significant savings in European Union (EU) countries, which have used them for a long time. However, the Federal Council only cites three studies, including one sponsored by a pharmaceutical company and another dating back to 2012! Independent studies undertaken in Switzerland and the EU demonstrate that the introduction of managed entry agreements with opaque discounts has not led to the swifter provision of patient care or to better cost-containment. On the contrary, prices have further skyrocketed.    

In 2019, Switzerland made a strong commitment on greater transparency at the World Health Organization by supporting Resolution WHA 72.8 that urges Member States to ‘publicly share information on the net prices (after subtraction of all discounts) of health products’. 

Making the price-setting of medicines more secretive in Switzerland directly contravenes the Swiss government’s international commitments. 

During an initial public consultation on the proposed amendment to the LAMal in 2020 (consultation report only available in French or German), to which Public Eye also took part, over half of the 126 entities that voiced an opinion on the subject clearly rejected the exclusion of discounts from the remit of the Law on Transparency (LTrans). The Federal Council should therefore renounce secret discounts when it presents the new version of the package of measures over the course of 2022. However, given the strong pharmaceutical industry’s lobbying of the Swiss government, this is unlikely to happen. 

© Mark Henley / Panos

The solution – address the power imbalance 

Price models will change neither the method or setting nor the level of prices. These will continue to be set according to biased geographic or therapeutic comparisons. Neither will the agreements change the power imbalance between a pharmaceutical industry that enjoys a monopoly and the FOPH who does not even know how much the former has been really investing to develop the treatment. The power imbalance is shocking. 

Studies have confirmed that, in benefitting from price models with secret discounts, the pharmaceutical industry will start the bidding process at the highest price in order to uphold its margins. At the same time, it will be giving the FOPH the illusion of savings through discounts allegedly higher because they are kept secret. Obtaining secret discounts is in fact a longstanding demand of the pharmaceutical industry which is seeking to maintain inflated fictitious official prices (list prices) without having to reveal the associated discounts, given that list prices are used as the reference of international comparisons (20 countries take into account Switzerland’s prices). 

Switzerland should instead instil greater transparency, by publishing the amount of discounts and also – as Italy and France have recently done – by introducing legislative provisions obliging the pharmaceutical industry to (as a minimum) disclose the public subsidies obtained for the research and development of the product in question. Switzerland should also do more to address abuses linked to monopolies through the legal mechanism of compulsory licensing, and negotiate prices together with other EU countries of a similar size. In sum, Switzerland should re-establish a power balance that provides for real negotiations aimed at obtaining a fair price in light of the real investments incurred. 

Opaque price models benefit the pharmaceutical industry – not the public interest. The possible short-term savings for the compulsory health insurance are an illusion when the longer-term, negative budget implications of such a policy are taken into consideration, namely increasingly excessive prices in Switzerland and elsewhere.

No secret deals Transparent medicines' prices