Louisiana has already begun adopting a “Netflix” pricing model to pay for Hepatitis C treatments. Rather than pay per treatment, Louisiana would pay a flat rate per month to access as many Hepatitis C treatments as they need. The benefit of this is (i) states have predictable budgets and (ii) manufacturers have predicable revenues. This approach is beneficial as long as the subscription price adequately reflects the potential value of the treatment. If the price is too high, state governments may too much; if it is too low, life sciences companies will not want to participate. Is this Netflix pricing just a rouge idea?
The United Kingdom does not think so. It is considering trying out subscription pricing for antibiotic development. Antibiotics are valueable particularly as antimicrobial resistance (AMR) grows. Thus, in a standard state of the world with low AMR, new antibiotics are used infrequently and thus manufacturers have little incentive to innovate. On the other hand, in the case where AMR rises, antibiotics become very valuable. Moving from low to high AMR-states, however, may happen quickly; on the other hand, the drug development process takes years or even decades.
To better incentivize the development of effective antibiotics, the United Kingdom’s National Health Service believes that subscription pricing could be the solution. As Pharmafile reports:
Currently, the NHS buys antibiotics from pharmaceutical companies and pays for the amount that they use. However the current he model is failing to face up to the challenge of AMR, as the NHS sets out to reduce the amount of antibiotics they use. This means low returns on investment and thus less money and incentive to invest in the research needed to bring new antibiotics to the market.
“NHS to try out new subscription style payment model to pay for antibiotics“
However it is hoped that the new payment model will provide greater incentive for companies to develop new antibiotics and bring them to the NHS. The new model will be evaluated and the findings will be shared with other countries around the world.
Health Minister Nicola Blackwood commented: “Having a full pipeline of antimicrobials is critical in our efforts to address AMR, but currently not enough pharmaceutical companies are investing in the development of new drugs.
The UK, however, is just one country. To more fully incentive innovation, other countries need to step up to plate and join the UK. Having effective antibiotics will be crucial as microbes evolve and are able to better combat our existing antibiotic treatments.
This is really interesting. It shows that someone at NHS is using their noodle. Whether or not this new pricing model works, it shows a willingness to adapt to change and think out of the box. Too often, the response to problems (high prices, drug shortages) is that any change in the status quo will stifle innovation. The refreshing idea behind subscription pricing is that both sides gain something (as long as the price is right). The point is that there are no villains here, just a recognition of the need for a new way of doing business.