3 March 2017

1. Pricing and Reimbursement of Medicines – Sovereign Member States Face EU Law and Market Realities – Where Does This Leave Business? Peter L’Ecluse Partner, Van Bael & Bellis Pharma Law Convention, Vienna, Austria 3 March 2017

2. Overview and Introduction • Sovereignty of Member States in Pricing and Reimbursement Matters • Legal and economic limits on Sovereignty of Member States in Pricing and Reimbursement Matters • Cooperation of Member States in Pricing and Reimbursement Matters (“Pooled Sovereignty”) • EU Driven Cooperation of Member States • Future of EU Healthcare • What about business?

3. Sovereignty of Member States in Pricing and Reimbursement Matters

4. Policy • Member States want to pursue their own health policies • Own healthcare systems; • Own performance standards; see, Euro Health Consumer Index 2016 which ranks healthcare systems on the basis of 6 criteria: (i) patient rights and information; (ii) accessibility (defined as waiting times for treatment); (iii) outcomes; (iv) range and reach of services provided; (v) prevention; and (vi) pharmaceuticals (1 out of 35: Switzerland; 2. The Netherlands; 3. Norway; 4. Belgium; 13. Czech Republic). • Own challenges. • This applies also to pharmaceuticals.

5. Budget • Member States have their own budgetary constraints and spending patterns. OECD figures for 2015 (Health at a Glance 2016) http://www.oecd.org/health/health-at-a-glance-europe-23056088.htm • Health spending accounts for nearly 10% of GDP in the EU; • Germany,Sweden and France allocate 11% or more of their GDP to health spending; • Latvia and Romania spend respectively 5.6% and 5.0% of GDP on health.

6. Budget • Pharmaceutical spending (excludes products consumed as part of inpatient or day case treatment) : • Total pharmaceutical spending amounted to EUR 200 billion; • Germany: EUR 551 per capita; Ireland: EUR 523; • Denmark: EUR 201 per capita – Estonia: 230; Poland: 248; Latvia: 251; Romania: 283; Czech Republic: 286.

7. Budget • Belloni, Morgan, and Paris, “Pharmaceutical Expenditure and Policies”, OECD Health Working Papers, No 87, 2016 • Key policy challenges: • Pharmaceutical spending will grow in some countries but growth will decelerate • Number of high-cost medicines will continue to expand and their prices will continue to increase • High prices are a significant barrier to access, even for developed countries • High prices are not always justified by important benefits • Barriers to uptake of biosimilars delay possible savings.

8. Limits on Sovereignty of Member States in Pricing and Reimbursement Matters

9. Directive 89/105 (Transparency Directive) • Transparency Directive lays down three major requirements with respect to individual pricing and reimbursement decisions: • decisions must be made within a specific timeframe (90/180 days); • decisions must be communicated to the applicant and contain a statement of reasons based on objective and verifiable criteria; • decisions must be open to judicial appeal at national level. • 2012 European Commission proposal that would have established new Directive replacing Directive 89/105 was withdrawn at the end of 2014. • European Commission says it will pursue individual cases under Directive 89/105. • On 2 March 2017, European Parliament adopted Resolution on Options for Improving Access to Medicines (“ROIAM”) which calls for new Transparency Directive (ROIAM, §§ 57-59).

10. Free movement of goods • Liable to tackle Member State measures that are “arbitrarily discriminatory” or form a “disguised restriction of trade”, but public health (“the protection of health and life of humans”) is a broad exception to the free movement rules that recognises the Member States’ significant powers in this area (Article 36, Treaty on the Functioning of the European Union). • Despite their broad powers, Member States have not been overly successful in stopping parallel exports of medicines to avoid shortages (cfr. dual pricing saga in Spain). But there are recent fresh governmental attempts to curb parallel exports temporarily and conditionally from countries such as Bulgaria, the Czech Republic, Romania and Slovakia. • Similarly, the Court of Justice of the European Union found on 19 October 2016 the German system of fixed prices for prescription-only medicines to be in breach of Article 34, TFEU (Deutsche Parkinson Vereinigung v. Zentrale zur Bekämpfung unlauteren Wettbewerbs).

11. Competition rules May, depending on the circumstances, reinforce or thwart Member State health care policies. • Target private conduct rather than governmental measures. • Enforced by both the European Commission (DG Competition) and national competition authorities. • Cases come in waves: • Protection of parallel trade in medicines (but Court of Justice of European Union arguably removed most extreme aspects of Commission’s thinking in Lelos (2008): even a firm with a dominant position on the relevant market can now refuse to sell in order to stop parallel exports if orders are not “ordinary” (depends on size of order in light of both market requirements and previous business dealings)). • Reverse payment or “pay-for-delay” arrangements in patent settlement cases. • Excessive pricing: Italy (Aspen); UK (Actavis (pending); Pfizer and Flynn) – European Parliament wants more of these (ROIAM, § 81).

12. Economic challenges • Belloni, Morgan, Paris • ROIAM, §§ 24 – 37: no pricing transparency (Member States are partly to blame) – lack of bargaining power of small Member States – reduced access to medicines • Larger Member States are struggling as well. • At the same time, need to protect and encourage pharmaceutical industry and value innovation (even incremental innovation – ROIAM, § 49).

13. Cooperation of Member States in Pricing and Reimbursement Matters (“Pooled Sovereignty”)

14. Beneluxa • Cooperation in medicine “procurement matters” between Belgium, The Netherlands, Luxemburg and Austria. • No official documents describing mechanism, scope and objectives of cooperation. • Known details: orphan medicines; exchange of information; possibly “joint negotiations”. • Goals: creation of countervailing “buying power” and reversal of information asymmetry. • Ireland has suggested it wants to join.

15. Central Europe • Apparently two groups • Proposed cooperation between Croatia; Czech Republic; Hungary; Latvia; Lithuania; Poland; Slovakia; and Slovenia • Bulgaria and Romania signed agreement in November 2016; • Joint negotiations with pharmaceutical companies in areas such as oncology.

16. Southern Europe • Informal exploratory talks among Greece, Italy and Spain. • Chances of creating some form of cooperation are unclear. For example, Italy seems less keen on cooperating with other Member States.

17. EU Driven Cooperation of Member States

18. Innovation – horizon scanning • Horizon scanning - 17 June 2016 – European Council Conclusions on Strengthening the Balance in the Pharmaceutical Systems in the EU and its Member States: “Assessment of future introduction of new medicinal products with a possibly significant financial impact on health systems at an early stage through so called 'joint horizon scanning’” “[This] entails a forward looking scan of emerging trends and future developments in pharmaceutical research and development aimed at better anticipating the arrival of new, expensive, innovative medicinal products that might potentially affect current policy and practice. • Innovation – On 3 August 2016 the European Medicines Agency published its final report on the adaptive pathways pilot project. Iterative approach: (i) medicine for well-defined patient group which leads to early access for patients with unmet medical need; (ii) evidence is collected through real-life use that supplements clinical trial data; (iii) possible treatment of wider patient group. More efficient use of existing procedures.

19. Innovation – horizon scanning • EMA workshop in December 2016. • Key words: collaboration with stakeholders (health technology assessment bodies; payers; and patient representatives).

20. Health Technology Assessment • HTA is a multidisciplinary process that facilitates the collection and dissemination of information about medicines and other healthcare products to inform health policies that seek to achieve best value. • 21 October 2016 – European Commission launches public consultation (ended in January 2017). • European Commission seeks to define way forward when current, third, joint action (“EUnetHTA”) and associated financing end in 2020. • Basis: September 2016 “inception impact assessment” describing five possible options for the future. One alternative contemplates the status quo (and an end to cooperation in 2020) while the fifth, most ambitious, option involves cooperation on the production of joint full HTA reports. • ROIAM, § 85: recommends in detailed fashion important future role of HTA.

21. Future of EU Healthcare

22. White Paper on the Future of Europe • On 1 March 2017, the European Commission presented its White Paper on the Future of Europe. • The WP outlines 5 scenarios: (i) carrying on; (ii) nothing but the single market; (iii) multi-speed EU based on “coalitions of the willing”; (iv) doing less more efficiently (or doing more in a reduced number of areas); and (v) doing “much more” together. • Most of these scenarios will impact health policy. In the most dramatic approach (under scenario (iv)), public health would be dropped as a EU policy domain.

23. VI. What about Business?

24. What about Business? • As before, business will deal with multiple layers of decision-making (with additional governmental layers in federal states such as Belgium and Germany or states with devolved powers such as Italy, Spain and the United Kingdom). • European Union will probably become less assertive. • Member State powers will continue to grow. • Paradoxically, smaller Member States will intensify cooperation. • At times, such cooperation will be driven or defined by European institutions. • Everything may change under specific scenarios of White Paper on the Future of Europe. • Brexit a further complicating factor?

25. Thank you for your attentionQuestions? • Peter L’Ecluse T + 32 2 647 73 50D + 32 2 790 49 34F + 32 2 640 64 99E plecluse@vbb.com