4th Health Economics Conference: Challenges for European Pharmaceutical Innovation Policy Roundtable

[music] Okay. So I I will start uh introducing and presenting the speaker. So this round table is about the challenges of the US most favored nation policy. we will detail a bit more about this policy and the consequences on pharmaceutical innovation and pricing. Uh so I will start uh the presentation um in order of sitting and of speaking uh with Pedro Pabaros with a professor of economics at Nova School of Business in uh in Lisbon. Vjini Bomman with the president of CPS which is a uh French economic committee of health products which is fixing prices uh in France for uh prescription drugs and reimbursement uh rates. Um Katherine Reno uh who is the head of international policy and communication of Fiser France. Nicolas Schlumbberge who's the head of market access at Sanopi France. um Morit uh who's an economist and uh who is working at the DG Sante at the European Commission and John Tiroll who everybody knows I guess from Tulu School of Economics. Um so maybe um before we start with Pedro was going to remind us the economics of MFN and a little bit about what is this policy just wanted to mention this policy um is is something in discussion since uh maybe 15 years in the US so that's not something new with the recent decision of the administration it was already in the inflation reduction act and it was even before in the in many discussions so that's something which is a long-term trend I think. Uh so that's not a new policy and um and it's probably going to to last. So it's important to study and understand the impact of of such policy. That's why we decided to to have this uh this round table today. Um and so we are going to start with Pedro who's going to present us from an academic point of view what we can say a little bit about uh this policy. >> Okay. Good afternoon and thanks for the this quick introduction. Um I think the key point here part is see that it's a policy that has been there as we are saying for a long time on the making and then suddenly you got a speed uh track for it in the in the last in the last year with the MFN policy. One important thing is to think about what is actually trying to do what is a long-term trend of what it ends to do and uh what is the operational parts that is taking care now um and then what can we say from economics from the European experience on some of the parts of it. So the most important point that we have associated with MFN with this uh with this policy is that you select a set of countries and then uh you use it as a reference point to setting prices internally. This has been known in Europe for a long time with a with a name of external reference pricing and so in a sense it's not new on it. What it's become new on this part is that the sheer size of the United States in doing it uh which makes it totally different and then you can single out particular parts of the policy itself because it uses only a handful of countries. So it has the G5 the five countries have a G6 plus Switzerland and Denmark as a benchmarks but it is going to use the second lowest price. So it's not the average of the prices, it's just the second lowest, which means that for each product can be a different product. We don't know exactly what's going to be there. Now there's going to be also things like they want to use net prices, not the list prices. So the price announced by the companies can be very different from the effective prices. And the way they're going to find the the net prices is that they're going to ask the companies to report on the net prices. And this is going to be important given the experience that we observe in Europe with these sort of problems for a long time. Now what's going to be the kind of effects that you could expect in the short run, medium and long run term. So the first thing is the driving force for this is the prices are much higher in the United States and elsewhere. And so the trend to lower these prices in the United States is going to be there. It's a long-term trend for sure and the compensation for it will be to try to raise the prices elsewhere. And that's the kind of economic effect that we're going to expect to see. In a sense, we are start to seeing it a bit. So the lowering of prices in the United States, it's unclear what it is because it's been set in a confidential agreements or non-public agreements between the the government of the United States and companies. Uh but we see the pressures in the Europe in European countries to raise the the prices and we see in the UK already some agreements even at the government level to put mechanisms that actually will have higher prices in the future and more products in the future. That's a short-term part convergence of prices in some way. The second part is uh what happens to the launching of new products and for that we know that there are going to be launch delays and some products may not even be launched in some of the countries at some point and uh that seems to also be occurring already. We see some reports public reports from the companies u data companies that show that the delays are increasing in Europe uh in response in the last year compared to the previous period the previous year. So we see this happening in somehow uh the what will be the strategic sequencing of delays is going of the these launchings is uncertain. It's going to be always first in the US. It's going to be in some countries. They will not launch in some countries at all because those countries will be used for reference for in countries that are referenced to the United States. So it could be a cascade of effects that you may have on this. So launching delays will be part of this story. And then we have the long run part which is the investment on R&D. And most of the discussions on investment R&D are focused on are we going to generate the same sort of revenues that allows firms to invest and some of the computations in the United States even prior to this MFN policy we're looking on that how much we need to raise in how much we need to raise in OECD countries to lower in the US to keep overall profits constant but I also would like to argue that's going to be a change in the type of uh R&D that's going to be done and the reason is that one thing that is long-term with this policy as well is that if United States use European prices as reference they are going to import uh HDA health technology assessment effect cost effectiveness analysis into the prices and which means that uh R&D will going to be directed to those products and populations that have a high uh ratio for this high effectiveness because those will command a higher price that will be imported to the United States. So the type of R&D through clinical trials was going to probably change as well not just the overall part. So you may having um kind of more hidden effects through which populations are covered which products are are researched on this part and so this gives a kind of short run short run medium run and long run effects of this MFN policy. Last layer which I'm not going to elaborate is how this interacts with industrial policy which is also part of this MFN idea at this point in the United States but that will take longer and I leave it for the last part of the discussion. So thank you. >> You got the five minutes. >> Thank you. Thank you Po. That's perfect. Thanks a lot. That's very very interesting. So to to see this short-term, medium-term, long-term impact and indeed industrial policy is going to be important. But maybe we'll keep this for the discussion and maybe Jean will have things to say on this at the end as he has worked on on this a lot. Um I think uh it's important to to look from a European perspective also what is the consequences of this and of course the position is not easy for for the French authorities and vir this uh French CPS the economic committee for health products um has worked last year on trying to for the government trying to understand the impact and see what could be the the next polic decisions. I don't know. Uh and so maybe Vjini, you can talk to us about what you're thinking about all this and what you did in your mission flash last year. >> Okay. Good afternoon everybody. Thank you very much for the invitation. So effectively last year I was interested uh with the flash task uh to formulate proposals for uh modernizing drug policy on price setting and expenditure control. Uh, of course we took into account the general political context, but um I I must insist on that we don't want a French policy driven by MFN policy or driven by Donald Trump's policy. But of course we have to take this into account. Um the aim of the task was to find a balance between between attractiveness uh for pharmaceutical firms and for patients also and but also cost control as the social security budget in France. Social security budget deficit in France is huge as you probably know. So um what could be the answer? What could be the the proposals? Um I think the most important thing uh is to give predictability and visibility on French pricing policy. Uh so uh in the short term the proposals are to manage to settle uh conventional framework with the representatives of pharmaceutical industry to provide visibility and tra and stability. Uh the main uh measure we we propose is a more predictable life cycle pricing model. It means that um we give a more predictable and multi-anual pricing trajectory with predefined milestones for regulation discussions. In fact, it means price reductions most of the time and along the period of market exclusivity. It's it's based on predefined criteria among their real expenditure compared to cell forecast. for example, um or [clears throat] the entering of um competitors with lower prices. Um there will be a stability period between between two milestones and if uh it's justified the CPS may uh accept premium prices of uh at market and try for certain medicines under clear conditions. uh of course most innovative products and maybe also products um um located production located in in France or in Europe. But of course we have to compensate this close these premiums. So um regulation would intensify after patent experiences. Um I also plead in this uh mission in this report for multi-annual savings targets uh because for us it would help uh up in uh our task of regulation by allowing uh it to consider arrival of generics or bioimilars and uh of innovative uh therapies. Of course, when we have big generics uh which arrives on the market, it's easier for us to control the the expenditure. Um we also have uh proposal about the distribution market. I mean we would like uh pharmacists to be less dependent on the volumes of uh of products and on on the prices of products more paid by uh their role of um health professional. Um furthermore, um I call for stronger European comparation on pricing uh negotiation or at least pricing uh exchange of informations and uh it's there is a beginning uh last yesterday we we met full of a team of different uh country uh uh regulators Um and I also plead for coordinating industrial investment in incentives. I mean uh industrial policy at a European level. We we have French industrial policy but probably it would be more effective at a European level. Um maybe I could raise some questions. uh of course uh we have to take into account uh this situation the the cost of R&D in the pharmaceutical industry but we I think we should wonder if uh the actual current model of pharmaceutical industry is still sustainable for a long time as a permanent increase of expenditure in drugs uh is not so sustainable for social security uh system with the aging population, chronical disease and so on. And maybe I could also raise another question. uh is there a link between high price expectations of industrial pharmaceutic company and outsourcing of R&D and um maybe there will be um something uh that could help to manage this is the uh use of IIA uh for R&D R&D expenditure. Thank you. >> Thank you. Um so that's interesting. So some of your questions I think economists already have answers but not for all of them. And I think the it is clear from the literature that u uh the expected revenue of the industry generates uh R&D and so the level of price matters. It is not clear exactly uh whether uh it's the world revenue, the US revenue, European revenue, other countries revenue that there's a matter in the same way and there is some research going on on this which I think is is quite important. Uh but yeah there is also some so the link is clear the magnitude is not so clear there are different uh papers showing different magnitude of the of the impact. So that's that's interesting. So I I I take from you what you said that the the the the progress into the multiplayer budgeting uh is I think from all economist point of view something very important and could be uh could be helping the the French system and many many other countries and I think also the European level answer the more European level policy is uh is quite important so it's probably yet too early to think about health insurance at the European level. Um but that's probably that would be the ideal in fact in a in a in a world where Europe would converge more more rapidly. Um and uh and I think there are more and more people talking about this and saying finding trying to find ways to implement such such policy in the best interest of everybody. uh in fact um but maybe now it's useful to to discuss also with you Katherine about um first the first uh from the industry point of view how how difficult it is to deal with all these policies of course that are changing and what consequences these policies can have like the MFN policy on on decision of launch and uh so maybe you can tell from your own experience. >> Thank you. Hi everyone and thank you for the invitation. So let me start with a bit of context. The first thing I like to say it's um the MFN close is holding us um is holding up a mirror for us and what we see in this mirror uh I will say it's not really positive because France seems to be not performer in terms of access to to innovation in um anymore. Not because uh we have a lack of talent or a lack of science and we can see that here uh but because our system does not encourage enough innovation to come in France. In the same way for years uh the France model work well and and France was a real a real reference for science based in tripillar. Um the first one is universal access and our system allow all the patient uh to to obtain a treatment. The other one and now it's it's perhaps uh um a strike. It's a high volume uh which compensate u potentially relatively uh low low price and a stronger uh escare system uh funding but public investment uh in hospital and care delivery. I and I really want to highlight that because I think the different government really invest invest in infrastructure invest invest in public plan and France was really position in as a leader in oncology in in rare disease. So the the model was really attractive for innovation but now and you mentioned that uh this the system has to to face uh to huge public deficit and uh stay under pressure and today it's the system has become um too complex to slow and less attractive to the point it's not longer sustainable on um in this current form. The fact the fact are quite clear. Um if I seem of the 1773 medicine approved in Europe between 2020 and 2023 only 103 are available in France. That means only 60% of new medicine are available in France when you have 90% um available in Germany. um the the the the patient wait um for 633 day uh in France to access to to medicine uh versus 158 uh day in Germany and the clinical trials France has dropped from the leading position to fourth place in Europe uh in the last uh in the last decade. So seems to be that French uh patient wait longer and access less um to to innovation. Uh this this gap is now real but we said that France still still has major strengths but these are now um offset by stru weakies. This and and Pedro Pedro mentioned that as real consequences um company are make are making choices and if returns are too low and access and the access too slow lunches are delayed uh or shifted to other country. My concern and I think we have to keep that in mind without without access there are no clinical trials which mean less innovation for patient less support for hospital and healthical system and that for me it's really the the virtuous the virtuous cycle for science the MFN clause um amplify amplifies this dynamic And uh as Pier mentioned the debate it's not new. Uh the United States are really clear. Uh they think they they found innovation they take risk and they pay at least three times more for medicine. In parallel uh a s significant part of of production for in innovative uh medicine remains located in Europe. If I take the example of fizer, more of uh 90% of our um medicine sold in France are produced uh in Europe. Uh so drug price pricing in the in the US is is really be partisant and this pressure are here to stay. Uh but more broadly and that is really my subject because we talk about MFN but the the O isue is um is really the increasing of the global competition and that is reshaping the the the landscape. Uh the pharmaceutical industry is ongoing under profontamation. uh as I mentioned uh competition increasing and the criteria for attractiveness are evolving rapidly investment are moving. I can mention also India and China and China is in particular is e emerging as a as a major player. Um they they invest a lot in in science in in biotech and and they are really really uh good and attractive now. So innovation is now global and the context directly impact us and uh investment goes where rules are clear timeline are fast innovation is valued and that is already happening. So in this context what we should do what we can do and it's not about spending more it's about spending better and acting faster. Um we the proposal you you you put forward um man are really going in the right way in the right direction and I think that reflects exactly the international reality. We need to act on pricing. We need to act on regulation and recognize innovation at the long-term investment because innovation somewhere build um and reinforce our healthcare system. Um we must think also at the re European level Europe together can have a real real uh leverage. Um I would like to finish to say that France has all the assets but today there is a clear a clear gap between the ambition on one side we express in in else and uh the the signal sent to um innovators and that is really the core issue. Uh because finally the question is not how we want uh how much we we spend but do you want do we want to stay in the race um can we remain as a country uh competitive in the in this global innovation landscape. >> Thank you. Thanks a lot. So that's very interesting to see from your point of view all the difficulties and maybe Nikolai is going to add more but I I think we we can it's very interesting to seen also the link between uh reimbursement pricing access and the and the R&D. It is true that for a long time we have uh we have overlooked this link uh and from the European point of view or French point of view the reiding position was very comfortable. So if you could if you don't see the link um you could say okay fine we we don't care so much about having this uh anti- Alzheimer treatment now we can wait uh and so let's let's pay the richer countries let's have the richer countries like the US pay for all the R&D and we will have access when it's a bit cheaper um the problem is that as you mentioned there starts to have a link also between the benefit of doing clinical trials in a local place and the reimbursement and I think that's an interesting point and we want we still want uh uh to have R&D in our uh in our country in in Europe um not only because it's good for the patients that are in the trials now it's good for the physicians who who train uh but also because it generates possible access in the future so this is something which I think was not very well understood so of course uh there is still an international gain game played and uh everybody does not want to to pay too much for for healthcare but um but I think it's it's it's important to raise this link um because it's important to be aware of it and maybe Nicolola you can add more and also I know you want to say more on industrial policy also but >> uh you're very right and just starting with an anecdote I think that there is a very good economist team named Jubu Pierre who's made some clarified the evidence between the link between uh clinical trial in a specific territory and the public health on the general point of view. So this is something which is of obviously very difficult to uh to uh to evidence but it is something extremely important with an indirect linking but very important between what we see in clinical trials and uh the the effect on on health the effect on education on the different territories where those clinical trials are held. Uh and here what do we see when we look at Europe? We see very diverging points of view and policies. Uh Germany uh recognizes uh clinical trials. Spain tries to make something with a global rating between industrial investment and clinical trial. Not necessar not necessarily a bad idea honestly, but it's just a rating. You have 100 or 80 or 50 or something like that. uh in France Madame Bman you uh you insisted in your mission that it could or should be uh taken into into account we were discussing it's difficult to make to make arbitration I understand that between industrial rewards and and clinical trial uh reward but at the end maybe that's first uh the elephant in the room is probably uh the European level same thing for industrial investment um We we looked at uh uh the the new policies or the new political orientations from German government very recently and what we see honestly I was quite surprised is that Germany is trying to make something very comparable to to France uh with uh uh the rewarding of uh industrial investment in Germany. And guys, I'm I'm very I'm petrified because if France rewards only industrial investment in France, Germany in Germany, Belgium, in Belgium, etc., etc., we in my opinion, we missed we missed really uh uh the reality of what is industrial investment in pharmaceutical industry. First, it is obviously uh the fragmentation of uh the industrial value chain. You make not one one line uh by products with everything which is the chemistry sometimes or the biological culture uh then the feeling then the primary packaging then the secondary packaging. It does it does not work this way for specialization reasons throughout the different countries over Europe or um sometime the qualification of the people the logistic reasons or in some specific cases uh fiscal reasons you fragment the value chain in industrial. So at the end you cannot consider that uh if I make one piece of the product in France, another one in Germany and another one in Belgium, I have only the investment is not recognized as if it is really done in over the European Union. Second point is that of course you like the critical mass. uh we we should have a market of I don't know 500 million people and of course this should be re rewarded at this stage maybe not at the level of price of the US we understand that but of course if you have a significant reward for for a market of 500 million patients of course this matters and this would have um a real consequences on the choices that could make a pharmaceutical company otherwise Otherwise, sorry, but uh we are just building some windfall effect, some windfall gain and it's really a pity since it is uh uh public uh public investment. So at the end and second time the elephant in the room in my opinion is clearly the European level. And finally and again since I do believe as a European citizen uh that we need more Europe that we we we see the debate right now in Europe uh regarding the biotech act one and two. We consider that is this absolutely essential to the future of of our industry and so very clearly I hope that we will be able to embrace this issue at at this level. Finally, uh I do understand that um some people could be reluctant to transfer some comp competencies to to the European level. But sorry guys, when we look at federal uh countries, uh you can perfectly admit that there are two levels of uh of uh uh reimbursement of cover. Uh look at Spain. Uh it is very surprising for us French citizens to see that you could have in some uh communal autonom uh reimbursement for one product and in another one no reimbursement. If you look at Brazil, you have a federal level for reimbursement, but every state is absolutely free to decide to launch a protocol of reimbursement for his products even if the 26 other states of the federation do not reimburse. So we should not be afraid of create creating this additional level if we not refrain or possibilities to diverge and to accept to reimburse if we want. So uh if we consider that a European cover is not enough. So again my conclusion is really look at European level. Thank you. That's a very good point. I think I I agree almost almost 100% with what you said and I think uh economists argue very often about uh the fact that Europe is a solution because the French French population is too small and I I I almost dream of seeing Mrs. Bern being the head of the European level CPS. she would have a much easier work to do a large large population and it would be much easier for her to negotiate prices for the European level population than for just for France while the Germans are doing their own negotiation and it's it it cannot work as well if you have each country doing that. So as you said Nicolola it's maybe it's a little bit a utopia for now to think about European level healthcare and European level CPS but I think we would be forced to go in this direction and it's probably probably going to be a long way and maybe Moritz who is working at the open commission can tell us about what's how what they're doing now and uh how difficult it is but still they make they make a lot of things so maybe Moritz Well, thanks a lot for the invite and uh thanks for having me here. Uh it's fantastic to hear these pro European visions uh and I share absolutely many of uh these positive uh thoughts though I'm not sure it will be easier to uh negotiate the pharmaceutical prices at the European level given the you know large differences in the organization of healthcare and the large differences in also the ability maybe to uh and the willingness uh maybe also to to pay for certain uh medicines uh across Europe. But so maybe we um before um saying a few more words about the different policy initiatives at the European level maybe coming back to and complimenting u's um uh starting points because what we see here when we look at the um implementation of the most uh favored nation policy uh by the US administration we actually not only see reference pricing as as part of the strategy but it's uh it's complemented um by tariffs which are imposed on pharmaceuticals of up to 100%. It's currently implemented. It's um the effect will be very different across countries. There will be lots of exemptions also on the per product basis, but it's clearly part of the MFN strategy. It's also uh >> it's also exit US technology. I'm sorry. >> Sorry. >> No, the um so it's um implemented uh hand in hand with tariffs on pharmaceuticals but it's also implemented handinhand with uh deals bilateral deals 17 bilateral deals between the US administration and leading large leading pharmaceutical companies. Those companies cover roughly 80 to 85% of US revenues and the deals exempt for these pharmaceutical policies from some these pharmaceutical companies from some or from all of the US policies on pharmaceuticals. The deals are confidential. So really nobody knows what's in the deals. um u but but they of course impact lounge strategies and pricing of uh companies not only in the US but also in Europe. Uh fourth uh strand that we see is that the US administration also approaches actually European and also non-European governments directly uh and requests uh an increase um of pharmaceutical prices. Um we can see this for example there's a deal between the US and the UK that explicitly mentions uh tariffs um but also u mentions pharmaceutical prices. So this is all a big uh mix and match of different policies from different areas but all of them are affecting and targeting the pharmaceutical industry and potentially all of these um all of these policies they may have an effect on European on Europeans on European patients. There are spillovers on the European industry and on European patients. And this is why of course the European Commission and also all of the member states pay very close attention to to these policies and in particular to the exact implementation of these policies because here it really matters on how the policies are implemented and you know the devil is in the detail. So as of now what we see is a lot of policies are announced. um that leads to a lot of uncertainty in the pharmaceutical sector in the pharmaceutical markets and actually I mean we are economists here so we are very much concerned with um with the causality of effects what we see now actually none of the policies is implemented yet but we already see an impact which is not due to the policies but due to the uncertainty in induced in pharmaceutical markets due to the announcement of policies in the US so we may see a launch delay in Europe which is due to the announcement and not due to the policy. So we actually have to see and assess and monitor and understand and analyze how the policies will be implemented and what then will be the uh impact on the uh on on Europe on and and then to potentially you know find a targeted response um to uh to these policies. I can just very briefly maybe give you an example also to complement what what was said before. It's the the reference pricing alone is implemented by four different policy uh actions uh generous globe guard and bilateral deals. Those affect Medicare part D and B, Medicaid uh and a small share of direct to consumer sales. So I mean it's it's a small share of the population in the US is actually affected because when we think about the so some of these policies are mandatory, some are voluntary. uh for some this US states can opt in for others they can opt out or they cannot participate um so there's um a different subset of the population so for example for the Medicare uh policies there's only a test case for 25% of Medicare enroles so it's really uh it's really selected you know audience that is exposed to to the reference pricing uh policies then when we look at the policies themselves we see the reference basket actually differs for each of the policies. So there's one basket which is G7 plus Denmark and Switzerland and there's another basket which includes how many 20 25 countries including 11 20 >> 19 >> 19 okay including 11 uh EU countries. So and they have all different ways of calculating a reference price. One is the second lowest. The other one apparently an average which is still yeah confirmation here was good. Um so uh but all of this of course has a different impact. I mean depending on the methodology there's a different impact on European consumers on the launch strategy by the pharmaceutical industry on the potential impact on Europe. So it's very very very important to get this right and to assess the policies correctly before finding possible uh policy uh or policies that address potential uh problems here. And when we look at the toolbox that's available at the European level. So at the member states level there are several policies available for pricing pharmaceutical pricing is actually not a competence of the European comm uh commission. So we can do very little here. So that's with the member states but we coordinate very closely. So we have regular calls with the industry with the member states to discuss these issues uh to coordinate on pricing to find strategies um um to find pricing and procurement strategies. actually right at this moment uh it's there's a lunch uh of all the 27 EU health ministers in Luxembourg that actually discuss guess what MFN pricing so it's a very timely uh timely uh event here I would say so when we look at the European um policies um we have these policies that make Europe interesting for the pharmaceutical industry to bring products to Europe to launch products in Europe This is for example the biotech act which was mentioned before. Uh we proposed that there's one additional year of basically patent protection for biio medicines. Uh that would make the EU market more attractive maybe counter some of the effect uh from from the MFN uh policies but also for the general for the reform of the pharmaceutical legislation. There are certain parts that modernize that streamline um and make it easier and less costly to launch in Europe. uh and that g gives an extra reward basically to for truly innovative uh medicines to against unmet medical needs. Uh basically there is also there are policies that to that secure basically access and um availability of medicines on the European market on the EU market which is mainly the critical medicines act but also other joint procurement for example the joint procurement agreement is another one but those foresee targeted investments in the farmer supply chain to make basically supply chains more robust to avoid shortages in Europe to increase access of European patients to um to uh medicines. Part of that is also the coordination of joint procurement of the member states um that then eventually when we think about the economics of that that would eventually amass uh buyer power then to to um to make pharmaceutical industry interested to launch in a in a in a range of uh countries. It was mentioned just briefly before well by the speakers before it was also mentioned the competitiveness of the of the European industry that that concerns more I would think it concerns more the production side of uh and the manufacturing and the R&D of of medicines which is important industrial uh policy objective um where there's a range of policies also supporting Europe's pharmaceutical industry again the uh the the biotech act that uh amends basically the clinical trials regulation that makes it easier to to conduct clinical trials in Europe in different countries in Europe. Um the biotech act also improves funding for biotech medicines. There's a biotech EU investment vehicle which raises 10 billion euros I think in the next years for startups and scaleups. Um there's in the farmer reform there's a very interesting aspect that facilitates innovation which is a regulatory sandbox which is also something I think which is very much appreciated by the industry because it provides really like a sandbox [laughter] a guarded environment for pharmaceutical firms to to to conduct um research for innovative technologies innovative medicines. Um and last but not least there's the the European um health technology assessment regulation which is basically about the harmonization and coordination of joint clinical assessments. So this is also a step which is important um not only for the industry but also for the payers and the member states to to coordinate the clinical assessments uh across Europe. So what we are seeing is a complex landscape and um not a one policy fits all type but we have different tools to target different problems here. >> Thank you. It's very interesting. I think it's it's very important to think about Europe and despite the fact that it's it's it's really uh interesting because despite the fact that pricing of drugs and reimbursement is national competency most European countries and uh to see all these policies like technology assessment the new farmer legislation uh happening at the European level that that's very encouraging also because it's probably not understood very well but all these policies have some consequences on pricing even if pricing is a national competency. So uh so I think these are going in the good direction and maybe that's it's because I'm not working within the European Commission. I'm more optimistic but uh all these new legislation uh tell me that uh there is some hope that we go in this direction like industrial policy of course devil is in the details and maybe Jean is going to talk about that. uh um industrial policy is is complex, the governance is is difficult etc. But one thing I wanted to add is that um maybe it's not perceived as well but if you look at the farmer's legislation that has been introduced recently you have something within the legislation which we have worked on with John and Paul which is a transferable exclusivity extension for financing new antibiotic uh new antibiotics. This is clearly uh going to affect uh uh the health insurance budget of each country uh because you're you're extending the exclusivity of some drugs that are going to purchase this exclusivity extension after the innovation happening. So it's it's a case where we basically European countries have agreed in a way to have this common policy and to delegate some and I I'm hoping that um all these policies are basically if you can you could imagine an advanced market commitment at the level of Europe uh or some reward mechanism like as you said we are going to have also for two shortages uh something at the European level to that uh the IND industry the innovators are getting uh you know in the pro in the exchange of a promise to give access to all European countries and then each country just have to pay the marginal cost in a way. So if you if you look in this uh if you go in this direction, you have no more problem of national competency being being an issue because basically the R&D part of the pricing is going to be paid at the European level and then the national national countries will just decide whether they are able to reimburse the marginal cost. Uh but maybe we can talk more about this in the discussion before um after after Jean tells us what what he thinks and and then we will have questions from I'm I'm sure there are many questions from from you. Some of you here in the audience have worked on this topic. So Jean, >> well thank you. I'll I'll be discussing industrial policy a little bit but before that let me say a couple of words about MFN. uh it's quite natural that we have different prices in different countries, different incomes, different uh institutions, different sizes. You know, big countries have lower prices in Europe and different local pathologies and so on. Um it's it's a subtle form MFN are subtle forms of extr territoriality and it's a very interesting one. Pedro actually talked about the trickling down or the cascade. you you you said the cascade of very rich country basically comparing to rich countries and comparing to low and middle inome countries and so on. Actually, it's even more complicated than that. There's a publication and I'm going to show you from here. One of you in the back of this room will have written this and will notice this uh this matrix here. Incredibly complex matrix in Europe. If you can see it, Luca has actually has written it. Um so nobody has ever solved actually this exact issue about how you you form prices and the and the like. I mean the generalized Nash bargaining solution is still missing I believe. Um but you know there are lots of interesting aspects to it. For one thing and that has been mentioned many times it's not a zero one decision. It's not like France is going to have the molecule or not. Actually the thing is more that France will have the molecule with a delay and you know the question is why I mean even that we don't know why because it could be 01 I don't I have it or I don't have it and you know for us economists we should be actually you know if you're looking for a paper to write and look at basically you know why is that that you know actually the the inefficiency come from a delay rather than just non-conumption is that the coian durable good monopolies and if so will you make a difference between some recurrent treatment which you have to take every every month or every year and a oneshot treatment which is going to become more and more prevalent with targeted therapies. Um you know it should not give you the same result at all in terms of uh of the delay. So there are lots of things to be to be done in terms of the of the research but of course there is an inefficiency coming from uh from basically some uniformization of prices across countries and we know that from parl trade in Europe we have the same issue in principle you want to price discriminate depending on the country so let me say a few words about industrial policies and first I don't know what industrial policy is because there are many notions of industrial policies is and it's not only the instruments and there are many instruments for that but it's also what you are trying to do in the first place. So are you just trying to secure procure um molecules which already exist? I mean that's what Sweden does with antiotics. You know it's spending the money to make sure that they they have access to uh to the molecules. It's they're not encouraging innovation in that way. And then there is the innovation part trying to to develop new molecules and those are very different concepts I I think and I will we'll return to that. Um so on the procurement thing there's of course all this talk about reshoring and again not that many studies about whether it's really necessary um whether you want to to have long-term contracts instead which is what Sweden does with antibiotics supply diversification stockpiling. I mean, when I see that France is is pushing for paracetamol, I'm I'm a little bit nervous. I'm totally incompetent, but I'm a little bit nervous to be honest that the future of France will be Paracetamol. Uh I should not say that because one of the factories will be in so [laughter] I may have to leave the city um and the country as well. Um the I'm more interested in the innovation part. Actually the innovation part I will come back to that is is more of a public good than a procurement part which is trying to grab access to to to private goods. Um I mean it's more complic and and Germany about what we call the midte trap. It's amazing how the US has specialized in it tech and we in Europe we are specialized in midtech which explains in large part actually the the huge difference in R&D spending between the two countries um onethird of the money in Europe private money goes R&D budget goes to the automobile sector and when you see what the the European automobiles are you start being nervous right one half actually goes to midtech it's 85% in the US which goes to biotech and tech and John has written on that and you know it's huge difference and in the report we look at horizon Europe which is a big program and actually you know very very small fraction actually of that money which was supposed to be the new DARPA in a sense very very small fraction 5% was going to to to itch I mean just just just amazing So um and then we of also undericap by a governance and I could spend hours trying to tell you why is going wrong with the just return saying with the spreading of money across many countries and many uh many firms the unonyimity rule in Europe which is of course very difficult it's as if Nebraska chose uh the NIH the level of the NIH NSF and and NAZA budget I mean you know what will happen then it will makes no sense. Um so there is this innovation and then there is a reshoring and you can mix the two as well actually. Um, so there was this uh this mention of a of a contract which will tie the work in the national content um in France you know so that the R&D better and maybe that will be a question for Vini and you know how you going to do that you know I'm very interested I'm very interested in knowing by the way I'm not against it on theical grounds You know, innovation is a global public good and you know, if France get a little reward from it, that's all right with me. You know, I'm very much against protectionism, but it's a case where I'm not against it actually because we supply a global public good. By the way, I will not say the same thing for procurement, which is not a global public good. So, I'm talking about innovation here. It's very important. But then, how are you going to do it? How are you going to measure the R&D content? So, for example, Sani, you know, there are lots of important R&D done by Genzyme, you know, is that French? Um, you know, probably not. At the same time, it's very important that is doing those uh those things. Um, what does higher prices mean? It's a negotiation. So, how do you commit to higher prices? How do you do it? And you know, all those things. So it's not an answer at all. It's a question for actually for Vini but for all of you. What's going to happen right? I mean I'm be very c curious about this. There's no formula. You know X% of R&D in the country gives you Y% higher prices. No, that doesn't exist. So that would be very interesting to see what happens. Um and of course there's usual thing about what the price means given it's usually a multi-dimensional thing. uh it's not only a price. So that's that's interesting. So maybe I should I should uh I should stop here. Uh but more questions than answers, I'm afraid. >> Thank you, Jean. So yeah, more questions than answer, but we will try to have answers and we will try to maybe raise even more questions. So we can have any of you speaking if you want to add something, but maybe we can also take questions from uh from the room here from the audience. I'm sure there are a lot of questions. So if you want to ask something just raise your hand and then you will pass the microphone and thank you very much. Maybe a question to to any of you, but maybe directed to digitant maybe. Uh I would be very interested in in knowing how you you foresee the the made in Europe for biotechnology. Um well, the the text is under review is not even published. So it's probably not possible for you to to say everything but just for your being interested in having your perspective on how such mechanism of having a kind of made in Europe incentive or criteria could really uh shape the future of Europe for innovation. >> Yeah, very good question. Thanks. Um the um yeah indeed about the made in EU uh industry industrial accelerator act I I I cannot say much um it's but um so the proposal for the biotech act for example they um they also I mean there's a proposal to extend the statutory uh patent patent so the SPC uh extension so that's a that's a proposal um and there uh discussions also to link this to specific conditions as to conduct research in uh in Europe. This is very much mirroring um provision which is already in the general farmer legislation which gives extra protection an extra protection period to uh companies that conduct uh clinical trials in Europe. So um it's on the agenda to also have R&D in Europe to keep R&D in Europe and to support R&D. Thank you Mo. Uh any other question. So if if there is no other question maybe if some of you wants to react to the different uh discussions. Uh if Nicolola Pedro maybe first you were the first to talk. >> Yeah I I can go again. Um because one one of the important themes on this is that um we want to improve research in Europe fine but research depends a lot on the revenues and half of the half of the revenues of major companies come from the United States and so I think that is cannot forget that. So anything that we do on pricing in Europe will have to in revenues will have to deal with that part. And what I what be my best guess for the near future on this is that companies and the countries will try to go around the MFN external referencing as the way they have did in eur in Europe with external reference pricing in general. So what I can guess that may be happening is that you're going to see more of those pricing mechanisms that kind of hides create opacity between list prices and net prices. things like subscription models, the Netflix model, you pay a fixed amount per year and usage is determined by need. What is what is the net price there? Um if you have uh payback mechanisms, if total expenditure exceeds a certain amount, you give back some money. How do you distribute that accord to the different products to have a net price? Um if you have performance-based and performance based is measured two years after the product is administered to see that you have the net price after two years. How is that going to be used in this process? I think all of these things that um that we've been holding back sometimes in in some agencies will appear. This counts according to volume. So everything that's going to create opacity is probably the first line of change that we're going to see and uh I can say that from my side okay maybe people from the industry do not agree but in two years we'll check on this conference whether that is happening or not. Um the other thing that is going to change it's going to and we should monitor that is going to be on the clinical trials. Clinical trials are the way to define which populations are targeted by the drugs. Now, if you have a widely uh applicable new drug but has a low cost effectiveness in that population uh in in Europe, but you have but if you narrow down that to 10% of that population and then suddenly you have a high a high ratio of a low cost for effectiveness. So you can command a high price in Europe, companies will get that at a high price just because of the United States market if it is a reference price. So you're going to start seeing changing and narrowing the the clinical trials to cases in which you can show high with high effectiveness so that you can have a high price and that will lead to situations where you have patients out without even noticing that they are out because you don't do the clinical trials for them in the first place. And that's probably something that we can monitor over the next two years or three years because clinical trials have to register. So we can observe that and that's probably the second line of uh of change that I would expect to see. It's not going to be immediate. Clinical trials are already going but the new ones I'm pretty sure that will react to the new to this new environment. Well pretty sure as much as I can I be but it is let's put this this is an hypothesis of work that we should check empirically in the future whether there is causal effects. So I I I agree with you Pedro. There are already some papers showing the link between revenue and clinical trials. So clearly the type of clinical trials is going to be affected by by this policy. It's a subtle effect which you you raise your I think it's a very interesting one. Yeah, this needs to be checked for by maybe some students or researchers here want to study this in the future. Um we still have 10 minutes. for Nicolola. Yeah, I I just wanted to to uh to stress uh one point of uh of professor Troll was mentioning about um the possibility of just a delay in the launches of the product and I'm quite afraid of that because um if we if we start to say okay we will not launch this product and we will wait for the arrival of the generics and the bioimars. uh but that the sales in for instance in France or in Germany are zero. I'm very afraid that they will not launch as well because if you look at what happens between the launch of a pharmaceutical product and the arrival after the patent expireies uh of of copies uh you have an enormous work uh of education of the prescribers which is done by the pharmaceutical companies uh which will definitely definitively select between the good products and the bad products. We have good surprises and bad surprises versus the clinical trials that give you only a reasonable certainty but not the absolute certainty of the quality of the product. You have all the protocols that are based uh and that are built by the professionals uh in association with this product it works in association with with that it does not work. uh the selection of the of the patients of with for this kind of patient very efficient for the other not at all etc etc if you do not make this work I'm sorry but the generic companies will not make that because it is not their job very very simply so I think that one of the solution because I understand I I fully understand your point of view Mrs. By it is not possible to ask for French CPS, French authorities, German authorities to reimburse each and every drug. It's not possible in in this context. We have to be reasonable especially if we ask for very high prices. So uh one of the solution I just take my Brazilian example is that u if you multiply the levels of reimbursement in Brazilities municipality, state, federal level, private market, you multiply the possibilities of certain population to have access to your drugs. At least at least you you can launch the product. You can see whether it works or not and you can have this kind of I would say oil effect on other channel when it works really really great and when the price start to erode I'm not sure we will find an agreement on that but honestly it could be one of the solution for me >> maybe I can add about that well I don't think it's politically acceptable in France for the moment uh because in France equality is something very important but uh we have tried to do something like that with obesity drugs because we have restricted prescriptions only on the people we have the big the biggest obesity but we I I'm very concerned about that because we have big pressure from practitioners to extend the prescript description, right? So, I'm not sure we'll be able to monitor this, but anyway, we will lower the price if we extend practitioners, prescriptions. Um, I I just want to mention something uh about delays and about um the arriving of of drugs in France. You mentioned Mrs. Rena about 60% of products only arrived arriving in France. It's not really u I'm not I don't agree exactly with this figure because 40% of the products which did not arrive in France most of them and a large really most of them are products with no benefit therapeutics benefit and even uh firms don't even apply for reimbursement and pricing in France. So we have to uh to be careful about that. Uh for the moment we don't really see um an effect of MFN policy. The only effect is due as Morris said uh to uncertainty. I can admit that it's difficult for companies to see what will happen in the United States and then in Europe. But we we still have agreement with uh for innovative products in France. Uh we are the first country to reimburse in the EU obesity drugs. So that's something that's a signal that's something important even if I'm concerned about that. But uh anyway, we still have agreement and uh we want to go on uh to streamline to modernize our our policy. Thank you. Yeah, it is interesting to yesterday was the first day where this GLP1 anti-obesity drugs were reimbured in France. So for of course for the very obese people with some with some medical condition. So uh it's going to cost some money for sure but uh I think it's I mean from the point of view of obese people it's a good decision. uh uh there are a lot of studies showing the benefit of those uh of those treatments whether it's going to be make the budget uh in deficit even more uh maybe in the short run but uh we will see I don't I don't think it's a bad decision um even if it's costly um but as you said a lot of these considerations are also political decision it's not necessarily your your job to determine the healthcare budget in France it's a political decision and um uh that's the current system which I don't think is good but that's what it is a question then go ahead go ahead >> because I also would just have a question coming back to a topic we touched earlier upon which is the location of uh production um of pharmaceutical firms because I it's just a curiosity which I really never uh understood which is so there were for example recently there was an announcement that um Eli and I think Bing Engelheim they announced huge investment in Palmer manufacturing in Germany they did that a year ago or I don't know when so recently they scrapped all of these investments by saying look Germany is not paying higher prices for pharmaceuticals anymore so therefore we have to scrap our decision to manufacture in Germany so this is I mean from my basic economic understanding. Those are maybe two different optimization problems. One is one is where to and how to produce and the other one is where and how to sell. But maybe that I mean that seems to be not the case in the pharmaceutical industry. Um maybe I mean somebody can help me to understand this a bit better. Hi, I'm Meka from Masark University and also USC um in California. So, kind of having a US European perspective. I'm always struggling with this idea of um companies moving mostly to the US while profits and revenues are concentrated there, the pie will simply shrink and with Europe aging faster than the US, the demand seems to be increasing for chronic uh treatment. So just curious what the implications for the global pie, the size of the pie really are of this uh reaction and whether Europe actually is not undermining its own negotiating power by just kind of not coordinating. And it seems like Europe should not be reacting to the US and its trade policies, but really being on par if not even more um important um in future uh negotiations with the US. Then I maybe I'm looking at at the EU representative here because I still don't see Europe uh taking strong enough steps and I also don't understand how companies uh would manage to keep their market power or ma manage their revenues without Europe. In a way, I feel like the pie is really shrinking and somehow there's something missing. And I'm not sure if it's just strategic ambiguity with respect to very unpredictable US policies where Europe is basically holding back and hoping that internal domestic politics um kind of takes over. And I have seen many, you know, conservative economists in the US criticizing MFN. It's not like there's universal um agreement on this. So, are we just waiting for the midterms and then we'll respond or are we giving up our European position in the negotiations? >> Well, that's quite a tricky uh question to answer, but I mean the So, first of all, the I mean really pricing. So, MFN is partly about reference pricing. So it's really about prices and here we as a commission we cannot you know we cannot do anything we don't have a budget to buy any pharmaceuticals we don't have a competence we're just not allowed um so but as mentioned before we can indeed coordinate and so the question is not so much you know reacting emotionally to uh to policies that are uh imposed on us by a third country so it's more to assess what is the potential implement implication for EU patients and for EU industries and this I mean our I mean I cannot speak for any political level but our work is for sure not affected by the midterms or or hold it back I mean we are not holding back until uh until so we are preparing and if it turns out that there's a problem with access to innovative medicines or a problem that the pharmaceutical industry disappears from Europe for sure there will be polic initiatives um also also coming back and this is uh maybe one of the flaws of this specific European dem um democratic process. It takes time sometimes and I share u maybe the the how to say the disappointment that sometimes it's a bit slow or it can be perceived as slow. Uh but that's how the process is and it's a consensus based European uh yeah it's a European project. >> Thank you Moritz. Uh any other remark before we finish and close Vi maybe >> just a final remark. Um I think that uh Trump MFN policy could be a lose-lose policy because we could have a loss for European countries if we have to pay more or uh if we are deprived for from some innovations but we we didn't speak about China and China is a big is a big issue for for Europe but also for the US and so the American firms if Chinese firms increase their market share could suffer also from the MFN policy. So we have to be very careful about what China will do in Europe because it gives competition and we already see a Chinese firm coming with very competitive uh drugs very effective and also very with very low price. >> Thank you. I think we are reaching the end of this uh round table. So unless there is an urgent question uh we can have more conversation during breaks. I think yeah but to conclude I think uh we we raised a lot a lot of very interesting point a lot of questions of course probably a lot of ideas for for future research for everybody here in the in the room. uh I think we try to do here at the health center TSC we try to to focus on all these policy question try to have so you know some research that is policy relevant that uh that makes sense and uh and uh I'm very happy of this round tables because it's uh going to feed even more our our discussions and uh and trying to um to help us design maybe more ideas more policies and hopefully for for the common good as Jean would say. Uh so thanks a lot for everybody and uh thank for the round on table speakers. [music] >> [music]