The critical issues of medication pricing and access are gaining prominence as part of the broader public health care discussion. Recent examples of new, exorbitantly priced life-saving medications, and counterintuitive price increases of older branded and generic medications, combined to call into question the rationale behind medication pricing and the sustainability of a largely unregulated American marketplace. In 2015, the Wall Street Journal (WSJ) ran a series of Pulitzer Prize Finalist, investigative articles examining the actions of pharmaceutical companies in an “Alice-in-Wonderland corner of capitalism, immune to the usual forces of supply and demand.”[1]

Starting from the WSJ series, I will review the practices of the pharmaceutical industry to increase profits; and, discuss the personal and institutional costs of excessive pricing power related to patent market-exclusivity. I will then use libertarian theories of property rights and distributive justice to account for the actions of companies that prioritize profit at the cost of medication accessibility and the greater good. I will demonstrate the libertarian model refuses the notion of a communal good, and the moral obligation to distribute medicines according to need.

After establishing the libertarian motivations of the pharmaceutical industry, I identify two approaches which states use to control costs and increase medication access. The two approaches differ primarily in the strength of intellectual property (IP) rights. Ultimately, I will argue that the United States (US) will follow the trend of maintaining strong patent-protections while relying on private market solutions to ration care. 

Financial Toxicity of Branded Prescription Drugs

The WSJ identified multiple profit maximizing strategies employed by pharmaceutical companies. These include purchasing the rights to widely used, undervalued medications followed by dramatic price increases; regularly increasing the price of older on-patent medications; and, the launch of novel medications at very high prices.[2] The same article highlighted the example of the Valeant Pharmaceutical International Inc. purchase of the IP rights of two established heart drugs used in the ICU, Nitropress and Isuprel, followed by the immediate increase in list price by 525% and 212%.

This is part of a broader pattern of regular price increases leading to an overall increase of branded-drug prices by 127% since 2008.[3] A review of whole-sale pricing of 30 commonly-used, branded-drugs in the US demonstrated an average price increase of 76% from 2010-2014. Price increases for older medications are increasing revenue despite an overall sluggish demand. The same subset of 30 medications demonstrated an average revenue growth of 61% in contrast to a 20% increase in prescriptions.[4]

The example of Pfizer’s new breast-cancer medication palbociclib, brand-name Ibrance, illustrates the sophisticated, calculating approach to pricing new medications. Pfizer invested three years of market research to inform the decision to price palbociclib at $9,850 per month. The art of pharmaceutical pricing balances the demands of the pharmaceutical company, prescribing doctors, and insurance companies. Too high a price risks loss of market share as insurance companies raise barriers to coverage, which reduces physicians’ willingness to prescribe the medication. Too low a price leaves money on the table without improving market share.

Pfizer interviewed 125 oncologists nationwide to assess the medication’s competitiveness in terms of physician interest and willingness to prescribe. Identification of marketplace competitors assisted with estimating a monthly list-price range of $9,000-$12,000. Additional interviews with 80 health-insurance administrators established the threshold of insurance company restricted access. At the $10,000 -$11,000 mark companies would require additional documentation from physicians demonstrating medical necessity; this, in turn, correlated with a 25% decrease in physician willingness to prescribe. The $9,850 price was just under this threshold, and additional analysis argued that lowering the price further would not increase prescribing patterns. The pricing decision proved appropriate for the US market. The medication was prescribed to 18,000 breast cancer patients in the first nine months after Food and Drug Administration (FDA) approval.

 

The same success was not achieved in other markets. The National Institute of Health and Care Excellence (NICE) recommended against adoption of palbociclib by the UK’s National Health Service citing poor cost effectiveness. The calculated cost effectiveness reflected clinical trial results demonstrating a doubling of progression-free survival in advanced breast-cancer from five to ten months, without an increase in overall survival.[5] At the list price of $9,850 per month, the total course of treatment is greater than $99,000. Despite the benefits of pausing the progression of the disease, and the delay of subsequent chemotherapy, NICE concluded that the cost and benefit of the treatment was not a just use of resources for the NHS. It was estimated that 5,000 women living with estrogen-sensitive, advanced breast-cancer would be affected by the NICE decision at the time of ruling.

The issue of medication inaccessibility due to cost is a growing issue in the developed world. In the US, rare formal determinations of medication cost effectiveness are performed in the private sector at the level of the hospital or insurance company. The FDA approves medications based on efficacy and safety with no consideration of price, or calculation of cost effectiveness. In 2012, Memorial Sloan-Kettering Cancer Center (MSKCC) made the uncommon decision not to offer a new medication for advanced colorectal cancer which demonstrated no improvement over existing therapies despite double the cost ($11,063 per month). The senior physicians at MSKCC published a New York Times opinion article defending their decision, citing the unsustainability of the rapidly increasing cost of medications as a burden on patients and health care funding systems.[6]

As described by the MSKCC article, the escalating increase in medication costs is felt at both the individual and institutional level. Total prescription drug spending increased 12.2% from 2013-2014. Out-of-pocket costs increased 2.7% over the same period.[7] PwC’s Health Research Institute survey of employer-based health plans executive estimates spending on prescription drugs will account for an increasing share of employer health benefits expenditures, increasing 21% from 2007 – 2017.[8] This despite an annual decrease in utilization (decreasing number of Americans receiving employer-based health insurance) over the same period indicates that increased medication pricing is driving the increase.[9]

Patient interviews in the WSJ series anchor these statistics to the human cost. Two stories stand out. The first is the 76-year-old woman on a fixed-income who is given the unenviable decision of foregoing treatment of her leukemia, or requesting her adult children’s help with the $8,000 per year out-of-pocket cost after Medicare coverage of remaining $100,000 price of treatment. The second is a privately insured patient diagnosed with lymphoma who described an aggressive recurrence of the disease, after one year of remission while taking the costly medication, following his insurance company’s refusal to pay the $12,000 monthly bill for the medication. Both patients describe the prospect of dying early due to the inaccessibility of medicines due to price.

The breadth of the problems of accessibility due to cost, and the individually financially harmful effect of costly medications is impressive. Recent studies in the US demonstrate that between 25% -- 33% of cancer patients chose not fill prescriptions for life-extending medications due to cost, 20% of cancer patients took less than the prescribed dose of medication to reduce expenses. Medicare patients with cancer spend an average of 11% of their income on treatment, while those without additional supplemental insurance spend 23% of their income. Three percent of patients with cancer file for bankruptcy, and a cancer diagnosis increases the risk of bankruptcy by 2.7 times.  A study showing a 79% increase in the risk of death in cancer patient which declare bankruptcy may be a round-about way to assess the mortality of treatment with “financially toxic” medications.[10]

In the previous section, the case was made for deleterious effects of the profit-maximizing actions of pharmaceutical companies. The burden of increasing cost on payers and the harms of impaired accessibility are felt universally; however, because of the lack of a centralized negotiating mechanism, drug prices are higher in the United States than anywhere else in the world. And, because of an increased emphasis on the shifting of cost to the patients, inaccessibility is more closely related to poverty, illness, and lack of insurance.[11]

 

Intellectual Property and Libertarian Theory

Given the human toll of inaccessibility, the rapidly escalating costs of pharmaceuticals contributing to an unsustainable rate of increasing health expenditure, and the large profits reaped by pharmaceutical companies; there is little question why the subject elicits an emotional response. But, why hasn’t this emotional response resulted in a meaningful conversation between the pharmaceutical industry, payers, and patients?

Business ethicist Richard T. De George characterizes the conflict between the pharmaceutical industry and critics of the industry as an argument speaking two languages. The problem of affordability and access is typically framed as a moral argument for a right to life, health, and life-saving treatment. The counterargument by the pharmaceutical industry is a legal-economic argument resting on the traditional justifications for intellectual property protections with the additional heft of special status of pharmaceutical research and development (R&D) to produce life-saving treatments.[12]

Intellectual property (IP) is at the heart of the pharmaceutical pricing conflict because patent exclusivity grants the market power which allows increasing prices of established branded-medications and the inflated launch prices of new medications. As an example, using retail prescription sales data, the Express Scripts Drug Trend Report describes a 208% average increase in branded medications price from 2008 to 2014, while generic prescription prices decreased 75% over the same interval.[13] Additionally, an understanding of IP is necessary due to its central right in Robert Nozick’s libertarian philosophy and, by extension, the foundation of the pharmaceutical industry’s account of justice.

David B. Resnick develops a generalized account of intellectual property as a variant on the concept of property as a three-part relationship between the object, the individual or group of individuals, and society. Conceptually, property exists as a social institution which fulfills a societal function. It is codified into law to advance this function. Property extends rights protecting the interests of the owner, and corresponding obligations extend to society and individuals within the community. IP lies at the end of a historical evolution of expanding legal and moral definitions of property. Property laws in the land-based, feudal economy of Medieval Europe protected individual rights in respect to the ownership of real estate. The rise of mercantile economy in the Renaissance required an expansion of the definition to include moveable property including harvested crops and livestock. IP emerged as the expanded conception of property during the industrial and scientific revolutions.[14]

Separate IP law is a necessity because of the unique properties of the products of the intellect. Information, as the abstract substrate of IP, lacks location in space and time.  Lacking such physical properties renders IP non-exclusive, meaning “two people can possess and use the same item of intellectual property without preventing each other from possessing or using it.”[15] In the absence of laws protecting IP the act of creation risks losing ownership of idea brought to fruition. As an example, the author loses the rights to the story once the pages of the manuscript are transferred to the publisher or customer. IP protections thus grant exclusivity to a non-exclusive property.

De George identifies two common moral justifications for protecting IP – the argument based on consequences and an argument from fairness. The consequence-based position considers the social benefit of increasing the incentive for innovation. As succinctly stated in article 1, section 8 of the US Constitution, “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”[16] This argument recognizes a common good, or societal benefit, of the innovation fostered by IP-exclusivity which outweighs the potential costs of limiting access to the IP. The social costs of IP-exclusivity result from the lack of competition leading to increased cost and diminished innovation which is unable to build upon the original IP. Thus, the time-limited exclusivity seeks to balance the costs and benefits of IP rights.

The argument from fairness seeks to reward the time and energy of the creator of IP with exclusive rights to take credit and profit from her effort.[17] Although not identified by De George as such, the argument from fairness is a rephrasing of John Locke’s labor-mixing account of property creation. Beginning from a state of nature in which “every individual man has a property in his own person”, Locke extrapolates that the labor and work performed by the individual are similarly one’s exclusive property. The action of altering something from its commonly-possessed state of nature to benefit the individual is a process of mixing the object with his labor, thereby converting a natural object into an object of property:

He has removed the item from the common state that nature has placed it in, and through this labour the item has had annexed to it something that excludes the common right of other men: for this labour is unquestionably the property of the labourer, so no other man can have a right to anything the labour is joined to—at least where there is enough, and as good, left in common for others.[18]

The last line is worth noting because Nozick uses this “Lockean proviso” to establish the justifiable limits of the principle of justice in acquisition.[19] This point will be developed further in the discussion of applying libertarian ethics to the pharmaceutical industry.

The two arguments justifying IP rights are described by DeGeorge as the Standard Argument (SA). The SA is a common defense of IP as a general concept applicable to the range of IP from copyrighted creative works to patented inventions. A closer examination of the two arguments yields an interesting tension between the strength of property rights granted by the consequentialist and labor-mixing justifications. The consequence-based justification supports a definition of prima facie property rights contingent upon an overall benefit to society. Given a change in circumstances, such as a public health crisis, IP protections may be violated to benefit the common good. This justification of IP-rights is advanced by developing countries to defend practices to increase access to medicines, such as compulsory licensing and parallel importation.

In contrast, the Lockean labor-mixing definition of property supports a definition of IP-rights as absolute rights extending from man’s inviolable ownership of himself. It is here that we encounter the libertarian theory of property as an absolute right, limited only by the Lockean proviso which prohibits the worsening of the situation of others from their baseline.[20] Absolute property rights persist regardless of social circumstances, and preclude compulsory distributive justice.

Pharmaceutical Companies and the Entitlement Theory of Justice

I will argue that pharmaceutical companies, of which Pfizer is an example, approach to IP-rights and resistance to governmental efforts at distributive justice are consistent with both the libertarian theory of property and the entitlement theory of justice. This despite a reluctance by the industry to enunciate such a position.

As mentioned previously, the libertarian theory of property is founded on a principle of absolute property rights. The centrality of property rights results from an understanding of property as an expression of the inviolability of the individual. Nozick anchors the inviolability of persons to the “Kantian principle that individuals are ends and not merely means; they may not be sacrificed or used for the achieving of other ends without their consent.”[21] If we consider the corporation as a collection of individuals, it follows that the corporation enjoys the same right to treatment as an end, as the individuals of which it is composed. Similar to the individual’s right to define his way of life, the corporation maintains the right to define itself and give meaning to its existence. So too, does the same absolute right to property which extends to individual, extend to the group.[22]

The entitlement theory proposes three principles which encompass the whole of the libertarian theory of justice. Possession of holdings are considered just if, (1) possession is in accordance with the principle of justice in acquisition, or (2) possession is in accordance with the principle of justice in transfer. The third principle argues that no one is entitled to a holding except by principles 1 or 2.[23] Stating the entitlement theory in another way: possession of property is considered just if-and-only-if it is acquired through the mixture of labor and raw materials, or through the voluntary transfer of possession; any other means to acquisition or transfer is a violation of absolute right to property. In this respect, taxation is an unjust acquisition of another’s property which amounts to an abstracted form of forced labor, or slavery.[24] Thus, taxation and other violations of property rights by the state amount to an unjust declaration of partial “ownership of others by people and their actions and labor.”[25]

Justice is fulfilled when the rights of the individual to acquire and exchange property are unimpeded. The entitlement theory is a historical theory of distribution. The defining characteristics and criteria for justice are based on the historical realization of holdings; “whether a distribution is just depends on how it came about.”[26] In contrast, redistributive theories of justice use the distribution of holdings at a particular moment-in-time to define the criteria for judging the justness of a distribution; such theories are ahistorical, and therefore described as end-result principles of justice. The allocation of holdings based on a “natural dimension”, such as distribution according to need or merit, is described as a patterned, end-result or end-state principle of distributive justice.[27]

Therefore, the welfare state is characterized as an end-state arrangement with distribution patterned on individual need. A variation on the generalized welfare state is the example of the developing country in a state of public health crisis; in this example, redistribution of medicines according to need may be considered the actions of a medical-welfare state. Both general- and medical-welfare states assert the claim of partial-ownership of individual or corporation for the benefit of the greater good.

The application of the entitlement theory of justice to pharmaceutical company practice provides a theoretical framework for understanding profit-maximizing actions concealed beneath the publicly expounded cost- and value-based arguments used to defend pricing and profits. The cost-based arguments posit that the rising price of medications reflects the high price of R&D, and high profit margins are a necessary lure for investment in a field with high rates of project failure. The two arguments complement the value-based argument which asserts the societal value of the successful production of pharmaceuticals is sufficient to justify their costly business practices. 

However, the WSJ examples of Pfizer’s process of pricing palbociclib and Valeant’s price increases of newly-acquired established medications call into question the role of production costs driving prices. In Pfizer’s case, there was no mention of a minimum, or maximum, price necessary to cover the cost of development. Nor did Valeant argue for a minimum price to cover the cost of its acquisitions. Both companies targeted their pricing to the maximum that the market would bear. The market exclusivity of patented medications granted substantial pricing power over the market, as was to be expected of a legalized monopoly, and both companies took advantage of their position.[28]

The use of this power to maximize profits is consistent with the entitlement theory of justice. Valeant is entitled to its patents insofar as the transfer was voluntary and conformed to the principle of justice in transfer; while Pfizer is entitled to its IP-rights insofar as the medication development conformed to the principle of justice in acquisition. In accordance with the libertarian theory of property, the IP-rights of either company may be overridden if in violation of Locke’s proviso. A broader formulation of this proviso limits property rights that place others “in a situation worse than the baseline one.”[29]

The basis of the Lockean proviso is as a constraint on property rights which limit the freedom of others, and coerce them to involuntary action. Coercion of another individual violates both the fundamental side constraint against aggression and the fundamental premise of treating individuals as ends, while limiting the liberty of the same individual. The limiting arrangement is succinctly exemplified in the following statement: “My property rights in my knife allow me to leave it where I will, but not in your chest. I may choose which of the acceptable options involving the knife is to be realized.”[30] The range of acceptable options does not include those which are harmful to others.

The abstract nature of IP significantly reduces the likelihood of violating the Lockean proviso. Raw materials are unlikely to be depleted sufficiently to worsen others from their baseline. The invention of successful medication and refusal to sell except at exorbitant prices does not diminish a baseline state which pre-existed the invention, assuming no depletion of raw materials. Therefore, the inventor is within his rights to price the medication as high as the market will allow.

Were it not for the inventor, the invention would not exist, and no one would be the worse off. However, in time, one can easily imagine another inventor reaching the same conclusion to meet an ongoing demand. The placement of a time limit on patents is recommended because eventually the patented idea would have spontaneously emerged separate from the current inventor; thus, IP protections should be limited to time it would take for spontaneous reiteration of the invention. [31]

The above account of the Lockean proviso supports Pfizer’s inflated launch pricing of palbociclib, but raises concerns about Valeant’s practice of purchasing existing medications and dramatically raising the price. Similarly, it calls into question the practice of raising prices on established, patented medications. If the prior existence of the medication in the marketplace assumes a baseline that includes the medication in question, then the use of market exclusivity to markup the price amounts to a worsening of the baseline state, as accessibility is diminished.  Analogous hypothetical situations which violate the Lockean proviso include appropriating the only water-hole in a desert and profiteering, and accusing a shipwrecked castaway of trespassing on an isolated island as an expression of one’s property rights. Both situations describe situations of limiting property rights in setting of effective monopolies due to scarcity resulting in situations of unacceptable coercion.

State Responses to a Libertarian Industry

In contrast to the atomistic conception of society expounded by Nozick, the majority of communities at the state and international level conceive of society as a mutually beneficial arrangement of individuals working, in part, toward a collective good.[32] The issue of medication inaccessibility and exorbitant pricing threatens the health of individuals and the sustainability of systems of payment. As described in the Financial Toxicity section of the paper, this has recently become an issue in the developed world. In contrast, in the developing world, issues of medication access and inaccessibility due to pricing are part of a long-standing struggle to develop and maintain health care systems.

Rejection of the libertarian theory of historical distributive justice founded upon absolute IP-rights raises the question of how to distribute medicines, and by what criteria. I propose that two functioning models exist that seek an equitable distribution of medicines patterned on need. The primary distinguishing characteristic is the approach to IP-rights. The developing country model consider the consequence-based justification of IP-protections as prima facie property rights which may be overridden when conflicting with the right to health and health care. The developed country model maintains the stronger labor-mixing justification of IP-rights, and develops civic institutions to intervene on behalf of the citizenry to counterbalance the market power of patent-holding companies, and insure equitable use of common resources.

Both prima facie and absolute IP-rights models, used by developing and developed countries, respectively, start from a premise of fundamental human rights that include a right to health. The United Nations uses a moral definition of universal, fundamental human rights grounded in the inherent “dignity and worth of the human person, in the equal rights of men and women and nations large and small.”[33] The 1946 Constitution of the World Health Organization was the first international articulation of the right to health as one of the fundamental human rights. The negative rights of health include freedom from non-consensual and/or degrading treatment, and torture. The entitlements of the right to health include education, equal access to a health care system, the right to prevention, treatment, and control of disease, and access to essential medications.

Developing Countries: Intellectual Property Protections as a Social Contract

Limited medication access represents significant source of morbidity and mortality in the developing world. Widespread disparities in disease burden and medication access divide along geographical and economic lines. In 2004, South-East Asia and Africa accounted for two-thirds of the world’s population, 54% of the global burden of disease, and only 5% of total medications sold. Financial inaccessibility is compounded by an institutional failure to invest in the research and development of medications to treat common diseases limited to tropical climates.

The World Health Organization Model List of Essential Medications is regularly issued to establish a baseline of safe and cost-effective medications which meet the “minimum medicine needs for a basic health-care system” treating the priority health needs of the population.[34]  Nearly two billion people lack access to essential medicines worldwide. This widespread inaccessibility results in an estimated 10 million deaths per year.[35] The relative expense of meeting these needs is outsized in developing economies, accounting for 25-66% of health care spending. In low-income countries, medicines are the second largest public expenditure on health after personnel costs; and the largest household health expense.[36]

The passage of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) by the World Trade Organization (WTO) in 1994 established a binding international consensus on the rights and obligations related to IP. The passage of the agreement coincided with the AIDS epidemic in developing countries further exacerbating the crisis of medication access. Strong IP-protections extended the pricing power described in the Financial Toxicity section to a context where countries were unable to afford the cost of medicines as a function of widespread need and excessive pricing.

The state obligation to provide for the needs of its populace led to a prioritizing of the right to access to life-saving medicines over the IP-rights of pharmaceutical companies. The obligation to increase access was realized through mandatory licensing of branded-medications to generic drug manufactures to produce affordable medicines, and the parallel importation of such generic-versions alongside branded-versions in countries without the manufacturing capacity.[37] The state’s right to override IP-protections is consistent with the definition of IP law as a codification of a social contract between the company and the State which grants the privilege of increased profit in exchange for the company’s obligation to provide widespread access to the patented medication.

The failure of the company’s obligation to make medicines available to persons-in-need violates the social contract which grants market exclusivity to the company.[38] The appeal to the social contract is a powerful argument because it restores negotiating power to the state. Extension of the social contract into a legal agreement creates enforceable obligations even among libertarian companies that refuse to acknowledge a moral obligation to expand.

In response to the limitations of the TRIPS Agreement, developing countries proposed the Doha Declaration on the TRIPS Agreement and Public Health during a 2001 WTO conference in Doha, Quatar. The declaration formally enunciated the power of the individual state to bypass IP-protections to protect public health and in times of national emergency.[39] Following the Doha Declaration expanded use of flexibilities in patent agreements provided legal authorization for use of generic versions of patented medications.  As of 2013, more than 60 countries used the flexibilities to access lower priced versions of critically-needed medications, and over 90% of patented HIV medicines in developing countries were generics.[40]

Developed Countries: Countering Strong IP-protection with Civic Institutions

The alternative approach seeks to retain the strength of near absolute IP-rights while meeting the right to health of its citizens. Civic institutions are employed to consolidate purchasing power, and assess the cost-effectiveness of medicines. Most developed countries use the resources of the state to counter the pricing power of pharmaceutical companies to negotiate discounted pricing. So too is there recognition that the finitude of resources to dedicate to medicines necessitates prioritizing purchases in some manner.

The US is unique in its refusal to allow Medicare, the largest payer for prescription drugs in the country, to negotiate prices with pharmaceutical companies. The task of negotiating prices is relegated to private purchasers, and pharmacy benefits managers such as Express Scripts. As the administrator of insurance medication plans pharmacy benefits managers (PBMs) create formularies and assess claims for coverage. This consolidation of private insurance benefits combined with purchasing power of internal pharmacies increases the negotiating power of PBMs leading to discounted pricing by pharmaceutical companies. Express Scripts notes in their 2016 Drug Trend Report that the average cost of prescriptions drugs in plans managed by Express Scripts increased by 2.5% from 2015-2016 compared to an average list price increase of 10.7% in the open market.[41] Despite the successes of PBMs, 98% of the most common medications were priced higher by Medicare compared to the UK NHS in 2015.[42] Because Medicare sets its prices based on the national average of medication prices negotiated by private plans, it forfeits is bargaining power resulting in overall increases in pricing.

The role of PBMs in mediating prescription drug access is controversial because of the lack of transparency in its assessment of medication value and cost-effectiveness (CE). Unlike Medicare which is legally obligated to cover FDA-approved medications without preferential ordering, PBM formularies restrict patient options by charging differing out-of-pocket copays. PBMs can squeeze substantial discounts from drug companies that compete for the market share of being a preferred medication. The role of clinical efficacy in determining preference is unclear. In a New York Times article about the influence of PBMs, the chief innovation officer at Express Scripts made the blanket statement that “Clinical always comes first, and the cost is second.”[43] But no data is available about specific decisions to assigned preferred drug status.

The opaque deliberation process frustrates patients and threatens the moral propriety of a necessary calculation. CE is a key measure for effective allocation of limited resources in an equitable fashion. The minutia of determining CE, balancing cost and clinical value, are weighed differently by differing individuals. The contentious nature of CE requires a careful transparent approach to assessment to yield a just decision which that respects individual autonomy and the social good.

National Institute for Health and Care Excellence

In the UK, the National Institute for Health and Care Excellence (NICE) is tasked with establishing the clinical and cost effectiveness (CE) of medications prior to adoption by the NHS. As such, NICE produces judgements of both scientific value, as pertain to clinical effectiveness, and social value in developing treatment recommendations which balance the needs of different population groups.[44]

Principles of Social Value Judgement[45]

NICE uses a four-principle approach (respect for autonomy, non-maleficence, beneficence, and distributive justice) to address the moral issues of their work. Distributive justice is further broken down into utilitarian and egalitarian approaches to conceiving of the problem. The utilitarian approach acknowledges the priority of the “health of the community as a whole” and the potential for unfairness and overriding the interests of minorities to meet benefit the majority. The egalitarian approach seeks “to allow each individual to have a fair share of the opportunities available” with a goal of providing adequate health care to all. A fundamental question of the definition of fairness is acknowledged and unanswered. [46] 

An ultimate emphasis on procedural fairness utilizing the four conditions (publicity, relevance, challenge and revision, and regulation) described by Daniels is used to maximize the fairness and legitimacy of contentious decisions.[47] NICE-specific accommodations to enhance procedural fairness include procedural principles of inclusiveness, independence, and transparency. The inclusion principle includes “all parties with a legitimate interest in the guidance” including professional organization, patient advocacy groups, and medication manufacturers. The role of these advising organization is both at the beginning in terms of developing the scope of NICE’s guidance, and after the project in commenting on the drafts of the recommendation.

The principle of inclusion is further promoted through the activities of the Citizens Council of NICE. The Citizens Council is a 30-member organization designed to reflect the age, gender, socioeconomic, and ethnic diversity of the populations of England and Wales. The group is tasked with representing the public in values discussions. Substantive work includes contribution to the discussion regarding discrimination by age and behavior-dependent conditions.[48]

 

QALY and ICER​

Cost-effectiveness of individual interventions utilizes the Quality Adjusted Life Year (QALY) model for quantifying value. No specific threshold is mentioned for determining CE, and the Social Values statement specifically states that cost-utility analysis cannot be the sole criteria for determining CE.[49]

The incremental cost-effectiveness ratio (ICER) is used to compare the CE of two interventions. The ICER is the ratio of the difference in mean costs to the difference in mean health outcomes between the considered intervention and the next best alternative treatment. ICER is expressed as cost/QALY gained. No specific threshold of ICER is cited as the boundary of CE. But, generally an ICER of less than £20,000 per QALY is considered cost-effective.

NICE’s recommendation against NHS adoption of palbociclib is an example of the contentious nature of CE evaluation and the high stakes of withholding treatment. As mentioned in the Financial Toxicity section, palbociclib is the medication released by Pfizer at $9850 per month for treatment of advanced estrogen-receptor positive breast cancer. The unadjusted ICER for palbociclib plus an aromatase inhibitor compared to just the generic aromatase inhibitor is £ 150,000 per QALY.

Determinations of CE for palbociclib are complicated by two factors. First, the prolonged period of limited treatment options in this type of cancer means that the difference in mean costs of the new high-priced medication and the generic standard of care is more substantial than a disease with a higher priced alternative treatment. Second, the QALY model is weighted to give preference to increases in overall survival rather than progression-free survival.

Statistical adjustment theoretically accounts for the quality of life gains of progression free survival, but this invites questions about the appropriate level of weighting the model. For example, per patients with metastatic breast cancer, quality of life is as important as length of life. How then to reflect this sentiment in the existing model? This conflict calls to mind John Harris’ argument against QALY as it fails to address the fundamental uncertainty of comparing the value each of us places on our lives.[50] But, if we reject the QALY as a method of comparing CE it is not clear what will be used to determine effectiveness. The measurement of which is of vital importance if the egalitarian or utilitarian model of allocation of resources is to be used.

NICE’s current recommendation against the use of palbociclib in the treatment of advanced breast is a difficult ruling to accept for patients and patient-advocates. The transparency of the deliberation process provides a substantive basis for appealing the decision. At the very least, transparency yields the careful focus on procedural justice which appeals to acceptance of a decision, despite disagreement with the ruling.

Conclusion

In this paper, I have elucidated the unintentional harms produced by an industry with unchecked pricing power derived from patent-protections. I applied libertarian theories of property and justice to account for the actions of pharmaceutical companies.

Beginning from a premise of fundamental human rights including rights to health and health care, I argue for two approaches to tackling a powerful libertarian industry which recognizes no moral obligation to control costs or improve mediation access. The first, the social contract model of IP is commonly used by developing countries to establish corporate obligations to increase access. The contract includes the caveat that market exclusivity may be revoked in times of crisis, or if the company fails to fulfil its obligation.

The second approach retains strong IP protections while relying on civic institutions to control costs and ration care. In the UK, NICE demonstrates an exemplary model of CE evaluation and guidance of NHS pharmaceutical purchasing. NICE fulfills the task of equitable distributive justice with procedural fairness and transparency. In contrast, the US relies upon the vagaries of market solutions including PBMs which make CE determinations that guide rationing decisions through formulary designation. The process of deliberation lacks transparency in both general principles and specific criteria of assessment. Medications remain more highly priced in US than anywhere in the developed world, despite the aggressive actions of PBMS. This is due in part to the refusal to allow Medicare to negotiate pharmaceutical pricing.

Based on the preference for private market solutions and a distrust of governmental institutions, I predict the US will continue to seek control over pricing through PBMs. The negotiating advantage of increased purchasing power will lead to consolidation of PBMs through mergers and acquisitions. If prices continue to rise, legislative pressure will push for increased pharmaceutical company transparency in the cost of R&D and the assignment of prices. The legislative momentum will also allow Medicare to negotiate drug prices to balance the pricing power of the industry. It seems unlikely that revision of legal protections for IP will be seriously considered because it is a nuanced issue with anti-free-market overtones.

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