Joint Procurement Moves Up the EU Agenda

With Ireland’s signing of a vaccine procurement agreement last month, the EU’s move toward joint action on medicine acquisition is gathering pace, writes Reflector.

A small ceremony with big implications for drug manufacturers took place at the tail end of a routine meeting of the European Union (EU) health council in June. For hours, health ministers had discussed the main agenda item - the bid to create new rules for medical devices in the wake of the French scandal over faulty breast implants. And the big news from the meeting, ostensibly, was that they had reached an outline agreement. But the real news was in fact the holding of that obscure little ceremony.

It was a low-profile event, on the face of it rather insignificant. The head of the Irish delegation at the meeting, health minister Leo Varadkar, signed a joint procurement agreement, alongside Latvian health minister Guntis Belēvičs, currently president of the health council, and European health commissioner Vytenis Andriukaitis. “So what?” could be an understandable response. But as a straw in the wind, it means quite a lot.

The agreement that Ireland signed gives it membership of a growing club of EU member states who are interested in working together to purchase vaccines. It doesn’t cover all 28 member states - but it does now cover 21 of them. And it doesn’t cover the full range of medicines: just “pandemic vaccines and other medical countermeasures” for combating serious cross-border health threats. But this latest signature shows how the ambition is growing for joint action on acquiring medicines - and that is certainly big news.

This agreement arises out of the recriminations that followed the H1N1 pandemic of 2010, when member states were competing with one another to get hold of scarce supplies of medicines in an epidemic of large-scale panic buying, and - they felt afterwards - were obliged to pay high prices for medicines that, in the end, were hardly needed, and which - many critics maintained - didn't work all that well either.

Working on the basis that communicable diseases and many other health threats do not respect borders, and that better EU coordination was needed in everything from risk assessment through to crisis management, the Commission took a decision - with the backing of the member states - to move towards a common approach. One of the central elements was improving the access to vaccines and other medical countermeasures - expressed at the time as "the possibility for joint procurement, in particular for pandemic influenza vaccines".

In EU jargon, joint procurement means combined purchasing of goods by two or more contracting member states, so that only one tender is published on behalf of them all, and the decision was touted as a way of ensuring that each country taking part "gets vaccines for its citizens in case of an outbreak, and gets a better deal, since combining purchasing activities can lead to economies of scale" - particularly for smaller member states. After lengthy reflections among themselves, the national governments agreed on a memorandum of understanding to give effect to the concept, and last June 14 countries signed up to it. Ireland is just the most recent of another seven that have also put their names to the agreement over the last year.

So far, the agreement is limited to vaccines and other medicines and equipment for tackling "serious cross-border health threats" (and so far it has been used only for common purchase of protective clothing for medical staff treating patients with highly infectious diseases). But in the current European climate of concern over the cost of medicines, it is only a blink away from becoming a model for much wider common action in buying drugs.

Already, the Belgian and Dutch governments have agreed to work together on negotiating prices for medicines for rare diseases - and they have approached Luxembourg as an additional partner. Bulgaria and Romania recently announced a similar intention. And the momentum is still powerful from last year's horrified reactions among member states to the price of Gilead's Sovaldi. That unprecedented challenge is still driving much of the thinking among Europe's authorities which pay for healthcare. They were already worrying about the high prices for new treatments for rare conditions - but rare conditions present, by definition, only limited demand. By contrast, Sovaldi, with its effectiveness in the widespread condition of hepatitis C, gave a sharp new twist to their anxieties, since it combines high price with high volume.

So across Europe the pressure is mounting to find new ways of tackling soaring drug budgets. Under the broad title of "innovation for the benefit of patients", health authorities are determined to put their heads together as never before in a search for systems that can meet patient demand for innovation without bankrupting national health budgets. The focus is increasingly on the patient - as governments are increasingly recognizing that frustrated patient hopes represent a political threat. That automatically means less focus on the interests of industry that generates the innovations. As Luxembourg takes over the rotating presidency of the EU in July, innovation is high on its agenda - but innovation as something patients deserve, not something the industry deserves to be rewarded for creating.

Even before its presidency began, Luxembourg officials were briefing that their priority in this would be aiming to assure equality of access to innovative medicines. Officials from the Netherlands, which will hold the EU presidency in the first half of 2016, has already indicated that it is keen to pursue the exploration of joint negotiation or joint purchasing of medicines, to get better value for money out of deals with the drug industry. And the British government is in favour of continuing those reflections when it holds the EU presidency in the second half of 2017 (incongruous though that may seem as the prospects of Brexit - a British exit from the EU - continue to mount).

And as if that wasn't enough to worry about, the other - and even more imminent - threat to the integrity of the current EU, Grexit, is posing another challenge. Greece has always been a major source of parallel-traded medicines, with the cheaper prices there - even in euros - providing plenty of scope for entrepreneurial arbitrage. Smart sourcing and smart repackaging has been giving middlemen healthy profits from reselling Greek supplies just a few hundred kilometres up the road, in Austria, Germany or the UK. With Greece outside the eurozone, mayhem threatens, since the local price, no longer denominated in euros, could offer dramatically more attractive profits for parallel traders, and add new fuel to an already thriving business that bleeds many manufacturers of the returns they might otherwise have had from their own direct supplies to the markets in Europe that offer them better prices.

2015 is indeed "the year when the conversation shifted" - as Richard Bergström, director general of the European Federation of Pharmaceutical Industries and Associations (EFPIA) chose to call his introduction to his annual report, released in June. Admitting that neither industry nor governments had anticipated the shift, he wrote: "Next time around we need to have different mechanisms to plan and budget for rapid, yet managed, access to new medicines for patients."

Next time around is already here.