ERP stands for External Reference Pricing and is an instrument widely used in the last ten years in Europe for controlling pharmaceutical prices. The ERP Guidance document has only been released in July 2018, as Euripid Guidance Document on External Reference Pricing (ERP). It formulates and structures 12 guiding principles on how ERP should be applied in the context of the current environment and the available Euripid collaboration. This is the first ERP Guidance released in Europe aiming to centrally navigate the EU Member States.
As noted several times in previous publications, such central guidance was not available for many years since ERP was implemented and widely used by the EU Member States. In that respect, the current document is a bold step forward. Specifically, it was interesting to follow how ERP Guidance reflects three key pharmaceutical market´s aspects – innovation, competition, and sustainability.
Guiding principle 4, “Evidence has shown that ERP is most effective when applied to pharmaceuticals without generic or therapeutic competition” focuses on the scope and the selection of medicines “eligible” for ERP.
The guidance introduces the concept of the competitive market segments and briefly advises on using ERP together with the other price controlling instruments in mind. It also directly points out the competitive segments (generics and biosimilars) and concludes on ERP effectiveness.
Status one year later (May 2019): ERP is still applied to pharmaceutical segments with the competition. In many of the EU countries, there are no nuances in the ERP rules to differentiate between the competitive and the non-competitive pharmaceuticals market segment. Example: Recent changes in Bulgaria valid since April 1, 2019, now introduce limiting/restricting budgets for drugs exposed to competition. The new rules are in contrast to the above-mentioned recommendations released through the ERP Guidance from 2018.
The concept of competition was only discussed in the Guiding principle 4.
The concept of innovation is very briefly introduced through the introductory section of the Guiding principle 4. Importantly, innovation is then discussed in the context of the Guiding principle 7 ” The pricing formula applied for ERP should reflect the national pricing policy objective”. The recommendation states that “Fairness” and “reward for innovation” shall be carefully considered when determining the ERP formula, and when selecting reference countries (c.f. principle #3).”
This Guiding principle introduces also the concept that each market has to develop its own mix of tools and instruments to approach price controls.
Status one year later (May 2019): No particular advance has been made in the field of specific standardized formulas development in Europe to access the reward for innovation and implement respective ERP guidance. Example: No central guidance on specific formulas development.
Sustainability is first introduced through Guiding principle 1. It is stated that it should be considered how ERP fits into the respective healthcare system and how it could interact with other policies already in place. Guiding principles 4 and 7 also mention financial sustainability (of the manufacturers) and system sustainability. Sustainability is a key aspect of recommendations of the Guiding principle 9, “Due to different national regulations, marketed products and reporting standards, adjusting prices to national requirements is often needed. The adjustment of prices should be done in a transparent and sustainable manner”.
Sustainable price concept is introduced through the recommendation of the Guiding principle 11, ” Once determined procedures and input generation models shall be critically evaluated from time to time but not too often, to ensure a sustainable and predictable environment for all actors in the system”.
Status one year later (May 2019): No particular advance has been made in the field of measuring the sustainability of the pharmaceutical market and of its segments. The same uniform rules are applied to all its segments, regardless of the therapeutic area and competition. Example: New pricing and reimbursement rules in Bulgaria effective April 1, 2019. No other profound changes in other EU markets rules due to the ERP Guidance released in 2018.
Notably, there are indications that the Danish and Norwegian initiatives may lead to the inclusion of more tender winners for biosimilar products in order to guarantee long term product multisourcing and to prevent from disincentivizing the business in these two countries. This development, however, can not be directly connected to the ERP Guidance from 2018, but rather it is an evolution of the current regulations in Denmark and Norway.