Principles for Pricing of Innovative Medicines

People are living longer, healthier lives than ever before, and much of the increase can be attributed to innovative medicines.1 With significantly more new medicines that meet the needs of patients with serious and debilitating diseases being introduced, near-term pressure on healthcare systems’ pharmacy budgets is increasing, and the cost of medicines and how prices are determined are topics of considerable debate. At the same time, the need to invest in medical innovation has never been more important as the population ages, the burden of disease continues to increase and scientific advances allow better targeting of diseases.

At Celgene, we embrace our responsibilities to patients today, by ensuring access to our medicines, and to patients tomorrow, by ensuring we can invest in future medical innovations that will help treat debilitating diseases and eventually find cures to some of the greatest health challenges of our time.

There is a clear need for public discussion to understand how biopharmaceutical companies price medicines. The pricing of innovative medicines is complex, and is based on the many factors that determine the benefits of a medicine for patients, health systems and society. A formula or a one-size-fits-all approach would not allow for the numerous and sometimes competing factors that must be considered. Celgene adheres to a core set of principles in determining the prices of its innovative medicines, ensuring an approach that allows patients, health systems and society to benefit and Celgene to continue re-investing in high-value research for unmet medical needs.

These principles for pricing innovative medicines are deeply rooted in our fundamental values, mission and purpose as a company.

When considering pricing for its therapies, Celgene follows an approach that recognizes the following four principles:

Principle 1:  The price of medicines should be based upon the benefits they deliver to patients, healthcare systems and society.

Value is fundamental to price, but can be a difficult concept to measure. When determining value Celgene considers the following criteria:

  • Patient Benefit: Considers how well the medicine treats disease, patients’ quality of life while on treatment, any side effects caused by the medicine, and the convenience of taking the medicine.
  • Benefit to Society: Considers the positive impact of a medicine on society, such as the benefits to the caregiver and family of the patient; the potential reduction in other healthcare costs; the ability to return patients to work; increases in economic productivity; and the overall positive impact of innovation on social and economic welfare.
  • Benefit of advancing medical progress in a disease: Considers factors such as the impact a new treatment can have to cure or manage the disease, the severity and rarity of the disease and the availability of other treatments.

Principle 2: Pricing should provide incentives for continued investment in discovery and development of innovative medicines.

Biopharmaceutical companies compete with other companies across different sectors to attract capital to fund research and development. To invest in future medicines, biopharmaceutical companies and their investors need to be confident that there is a financial reward for the innovative medicines that do succeed and incentives take account of the risks of drug development. Without such incentives, no company would be willing to invest in high-risk research, and patients would ultimately suffer. Consider lung cancer, a serious and fatal disease: of the last 177 medicines studied in clinical trials, only 10 have succeeded and were made available to patients. The other 167 failed, with costs borne by the inventors who discovered and developed the medicines.

Developing innovative new medicines is a costly and high risk enterprise with very low success rates. When important treatment advances are made, biopharmaceutical companies earn profits in line with other highly technical and R&D-intensive industries, which enables re-investment into research and development for the breakthrough therapies of tomorrow. At Celgene, we understand our responsibility to patients and currently re-invest more than 30% of our annual revenues into future research efforts , which is well above the biopharmaceutical sector average. It is important to note that when innovative medicines go off patent, society continues to benefit indefinitely from the availability of low-cost generic alternatives. Without the original research and development of the innovative medicine, generic alternatives would not be available to society.

Principle 3: Pricing flexibility among countries according to their financial circumstances permits broad global access.

The benefits of medical innovation are global, and Celgene believes that patients from countries of differing economic circumstances should be able to benefit from these innovations. At the same time, the costs of innovation should be shared according to the financial circumstances of a country, such as the relative per capita gross national income. A flexible model that allows differentiated prices according to an economy’s ability to pay is therefore required to maximize patient access and sustain investment in research and development. This differentiated approach is widely accepted in other cases where the benefits are global, such as support for international organizations like the United Nations and International Monetary Fund. Celgene is supportive of pricing flexibility to support broad patient access, however, with regard to biopharmaceuticals, some higher-income countries use international referencing policies to demand the same pricing developed to support patient access in low and middle income countries, which can adversely affect incentives to discover additional new medicines and patient access.

Principle 4: Patients who can benefit from Celgene products should have access to them.

Celgene’s purpose is the bold pursuit of science and a commitment to always put patients first. Ensuring patients who need Celgene medicines can receive them is central to this purpose. We work collaboratively with governments, health systems, payers and all other stakeholders to find constructive solutions to pricing and access issues. Our aspiration is to provide all patients with the medicines they need, but this requires the collaboration of all stakeholders. Patient access is a shared goal; it cannot be achieved by biopharmaceutical companies alone.

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These principles define how Celgene approaches the pricing of its innovative medicines in the countries where we operate, striving for consistency, clarity and transparency. Our goal is to apply these principles holistically with each other, acknowledging that in some cases this may be challenging due to the specifics of each situation. We are committed to continuing our efforts, in collaboration with all stakeholders, to ensure an optimal outcome for patients.


 

1 New therapies accounted for 73% of the increase in life expectancy between 2000-2009. Source : Lichtenberg FR. NBER Working Paper No. 18235. Pharmaceutical innovation and longevity growth in 30 developing and high-income countries, 2000-2009. Available at http://www.nber.org/papers/w18235.

2 Celgene Annual Reports 2010-14 reflect average research and development investment of 32.29% of total revenue based on GAAP reporting.