Rapid advances have been made in research and development to find new anti-cancer drugs. But these new drugs are often extremely expensive, endangering patients’ access to these treatments. This also places pressure on hospital budgets and the healthcare system.

Research groups led by Wim van Harten (Health Technology Assessment, Netherlands Cancer Institute) and Theo Offerman (Amsterdam School of Economics and UvA CREED Center for Research in Experimental Economics and Political Decision Making) conducted the world’s first empirical behavioural research into alternatives to the current approach to price-setting. Until now, policy to curb high prices for medicines were chiefly based on the opinions of experts. This was demonstrated in previously published NKI research. In addition to their new study published in Cancer Research Communications, Van Harten and Offerman simultaneously published a position paper in the journal Cancer Discovery in which they advocate an increased emphasis on curbing the price of medicines based on empirical research.

Confidentiality

The manner in which prices are set in negotiations between EU governments and pharmaceutical companies is usually confidential. The R&D costs are also not revealed. Prices can also vary to a high degree from country to country because some countries can make agreements to obtain discounts on the actual price. But no one knows what the actual price is. Pharmaceutical companies counter with the argument that the high prices are the result of high R&D costs. There is also the argument that transparency about R&D costs will deter investors. However, proponents of transparency say that confidentiality drives up prices

Sharp drop

But does transparency among countries negotiating prices with the pharmaceutical industry actually work? In other words: do drug prices drop so more patients can be treated, while investments in R&D remain at the same level? For Van Harten and Offerman the answer is yes. But only if you are also transparent about aspects such as R&D costs. In their experiments, prices then drop by 26%. And despite the sharp drop in price, there is no reduction in R&D investments. If you provide transparency solely in how prices are set, there is a also a modest drop in price, but this is accompanied by lower R&D investments.

Behavioural economics experiment

The researcher conducted a behavioural economics experiment in 4 countries (the Netherlands, Germany, Spain, and Poland). The 400 participants (all students) in this experiment took on the role of their own government in negotiatiations with a pharmaceutical company (also played by a student) to set the price of an innovative anti-cancer medicine.

Experimental behavioural research is a tried and tested method in the social and economic sciences to determine the viability of implementing measures. These experiments often accurately predict what will happen in reality. Ideally, these experiments are followed up with field research or pilots in real-world settings

Coalition agreement

There is a strong call for transparency into the pricing of new, often extremely expensive anti-cancer drugs. Both the Dutch government and the European Parliament are insisting on more transparency. The new Dutch coalition agreement will use transparency as a tool to pursue cost reductions.

Publication

Nora Franzen, Andreas Ziegler, Giorgia Romagnoli, Valesca Retèl, Theo Offerman en Wim van Harten: ‘Affordable Prices Without Threatening the Oncological R&D Pipeline - An Economic Experiment on Transparency in Price Negotiations’, in: Cancer Research Communications (27 January 2022). https://doi.org/10.1158/2767-9764.CRC-21-0031

Nora Franzen, Giorgia Romagnoli, Andreas Ziegler, Valesca Retèl, Theo Offerman en Wim van Harten: ‘Improving the Affordability of Anticancer Medicines Demands Evidence-Based Policy Solutions’, in: Cancer Discovery (27 January 2022).
https://doi.org/10.1158/2159-8290.CD-21-1153