Tendering and value-based pricing: lessons from Italy on human papilloma virus vaccines

Cervical cancer is the second most common female cancer worldwide, mainly affecting women aged between 35 and 55 years. It has important consequences in terms of life-years lost. ¹ The high-risk types of human papilloma virus (HPV) are a recognised cause of cervical cancer. HPV vaccine is the first available against a cancer. The European Medicines Agency has approved two HPV vaccines. The quadrivalent vaccine protects against HPV types 6, 11, 16 and 18, and the bivalent vaccine only against types 16 and 18. Types 16 and 18 are responsible for about 73% of all cervical cancer cases in Europe. The low-oncogenic HPV types 6 and 11 mainly cause genital warts (90%), low-grade neoplasia and recurrent respiratory papillomatosis. To our knowledge, HPV vaccines are the most expensive of all available vaccines, their manufacturers claiming the high prices reflect a major research and development investment and relatively complex manufacturing processes. Vaccination advisory bodies have passed a recommendation in favour of HPV vaccination in most EU countries.

Both the bivalent and the quadrivalent vaccines are used in Italy for the prevention of cervical cancer. The Italian National Health Service, a public service funded by general taxation, has three institutional tiers: the Department of Health; Regional Health Authorities; and Local Health Authorities. Since 2001, a Constitutional Law has increased regional autonomy (so-called ‘regionalisation’ or ‘devolution’) in healthcare policy, which leads the Regional Health Authorities to develop different economic strategies. Most Regional Health Authorities run tender schemes to exploit potential competition between the two vaccines manufacturers. ¹ The regions of Lombardy and Piedmont recently held tenders, both of which were awarded to the bivalent vaccine manufacturer which offered its vaccine for €34.47 per dose while the most recent one (Veneto region) went to the quadrivalent vaccine at €32.75. This price illustrates the steep decline which started in 2007 with the first regional tender for HPV vaccines. The current tender prices indicate substantial savings for the Italian National Health Service, as the ex-factory prices per dose negotiated by AIFA (the Italian agency for drugs) are €95 for bivalent vaccine and €104 for quadrivalent vaccine. ¹

The Italian experience demonstrates that tendering may be associated with worthwhile price reductions even where competition is limited, with only two manufacturers offering products for sale. It appears that the same has been achieved with tendering in other EU countries like Sweden and the UK, although tender prices are considered commercial in confidence in these countries. ² Some indication of prices paid in the UK may be gained from The Department of Health’s Commercial Medicines Unit, which provides mean prices paid for pharmaceutical products. Differences between the two vaccines can be addressed through adding a ‘quality score’ in tender clauses (as in the recent UK tender ³ and in three regional tenders in Italy ¹ ), in an attempt to maximise cost-effectiveness rather than simply minimise cost.

Economic theory suggests that tendering procedures may achieve important savings when purchasing power is high on the demand side, where there are potential suppliers for similar products (shifting the balance of power to the buyer) and where there is perfect information. ⁴ A further tangible benefit of tendering is when it increases the transparency of prices, at least in the countries where they are publicly available and discounts become directly observable between different contracting authorities. ¹ If low prices achieved through tendering are sustained over time, highly centralised and long duration tenders could force some manufacturers out of the market, generating dominant positions. This could erode competition and lead to future price increases. ⁵ Such a negative scenario depends largely on the size of the tender setting, and in countries like Italy the choice of the regional tier seems to be appropriate to limit the risk of market failure.

Vaccines are potentially cost-effective health interventions in both lower and higher income countries and may offer a relatively inexpensive way to prevent substantial morbidity and mortality. ⁶ HPV vaccination is an area where economic evaluations have been built on long-term modelling. ⁷ The need for extensive recourse to assumptions is an intrinsic limit of long-term models dealing with disease prevention, where only short-term experimental data are available. This is likely to lead to great within, and between, study variability generated by authors’ wide discretion in choosing sources of information and assumptions. In particular, industry-sponsored models may be exercise in marketing rather than science, ⁸ mainly aimed at supporting prices held high by manufacturers. Health policy-makers should be fully aware of the intrinsic limitations of long-term models developed with the explicit intention to show acceptable cost-effectiveness.

For a market place to operate successfully, perfect information is required, that is accurate and detailed information on the relative attributes of pharmaceutical products offered for sale. A potentially important function of government in health markets is to provide reliable information on the relative attributes of products and this falls into the remit of Health Technology Assessment Agencies such as the National Institute of Health and Clinical Excellence (NICE) in England and Wales, Scottish Medicines Consortium in Scotland and Institute for Quality and Efficiency in Health Care in Germany, which all provide this information to a greater or lesser degree. Value-based pricing, ⁹ by replacing in 2014 the 50-year-old Pharmaceutical Price Regulatory Scheme in the UK, should finally bring pricing as an explicit activity into the work of NICE. The concept of value-based pricing has been developed for pricing innovative medicines after thorough assessment of their added value, ranging from the level of innovation to the unmet need of patients. On the basis of this full assessment of product value to patients and society, in a potentially larger perspective than that used by NICE assessments so far, the threshold or maximum price would be determined. ¹⁰ However, in many cases there might not be enough evidence to support the value-based pricing assessment of a new product.

Economic theory suggests that economic evaluation will be a useful decision-making tool when market competition is lacking. Economic evaluation has not, however, proven useful in the case for example of HPV vaccination, where models are limited by the need for assumptions and by challenging conflicts of interest in their development. Particularly in these times of economic crisis, we should consider the option to decrease prices by tendering for innovative products, even when competition is limited.