Framework agreements serve to create some stability and predictability in the management of pharmaceuticals for both industry and governments. From a business point of view, having a predictable market is important and also from a government point of view it is important to know what the expenditure on medicines is likely to be over a given period, says Richard Torbett, Chief Economist at the European Federation of Pharmaceutical Industries and Associations.
Some countries have a long tradition of framework agreements between industry and government, such as the UK, which has had various forms of the Pharmaceutical Price Regulation Scheme (PPRS) for over 50 years, or the French ‘Accord Cadre’. Generally speaking, countries where industry and government sit down and agree how the medicines bill is going to be managed are more predictable for all sides.
In recent years the scope of some agreements has expanded, beyond just the management of medicines expenditure, towards the broader issue of how the life science sector can be a source of competitive advantage for European countries.
Committing to private sector investment is a matter for individual companies. But what associations can do, as part of these agreements, is to work with governments to ensure the right conditions for investment are in place.Global competition for investment is fiercer than ever, which is why many European Governments are keen to get their strategy right on this issue.
EFPIA began to get involved with framework agreements in around 2010, when it became clear that a number of European countries, notably those that required a financial bailout due to economic difficulties, needed to reform certain aspects in pharmaceutical markets.
We needed to figure out a way of coordinating our assistance to governments and to the Troika at that time. The Troika refers to the European Commission, the European Central Bank and the International Monetary Fund, which delivered the bailout programmes and offered technical support. In several countries it was clear that reform of the pharmaceutical market was necessary, and, as a responsible industry, it was important that we play a constructive role to ensure the right reforms were implemented in a way that laid the foundation for future innovation. Since then, we have been advocating these framework agreements in a number of different countries.
The way in which framework agreements are established has varied over the years. At EFPIA we always work in partnership with our national member associations. The first step is always to sit down with governments and look for shared objectives as a starting point from which we can develop an agreement.
Negotiations often start at a very senior level. Take, for example, a recent framework agreement signed with the government of Lithuania. The framework agreement was developed on the basis of a conversation between then EFPIA president, Chris Viehbacher, and the Prime Minister of Lithuania, within the context of the Lithuanian Presidency of the EU.
A tough but positive negotiation is better than protracted instability
While Lithuania was not one of those EU countries that had sought a bailout, it was clear at the time that it was interested in healthcare reform and upgrading its health system. They had some concerns about the pharmaceutical market and we identified a mutual interest in together finding a way forward.
Another interesting example is the recent push for a framework agreement in the Ukraine, for which a Letter of Intent was signed on March 3, by the country’s health ministry, the EFPIA and the Association of Pharmaceutical Research and Development (APRaD).
The route towards this agreement was complex. EFPIA Director General Richard Bergström travelled to the Ukraine to assess the situation amidst the ongoing crisis in the eastern part of the country. A conversation that started about what needed to happen in the short term to ensure the operation of the medicines supply chain developed into a broader conversation about what more we should be doing together in the long run in order to expand access to healthcare for Ukrainian patients.
So while the paths towards framework agreements vary on a case-by-case basis, so do their content and duration.
While the UK’s PPRS is 60-70 pages long, the EFPIA-APRaD-Lithuania framework agreement is a two-page policy document that states publicly the shared intent of government and industry. It may well be that the next time we sign an agreement with Lithuania it may be more detailed because we have learnt more about how the market works and what each side expects, so we can refine it.
Understandably, there is no fixed duration for a framework agreement either. The PPRS runs for five years, whereas the EFPIA-APRaD-Lithuania framework agreement has a span of two years. In terms of how long they last, this really varies depending on context.
It is vital that all sides involved are able to measure the success of a framework agreement and sometimes within the accord itself there will be a mechanism to do just this. This is because in the agreement itself you might set some objectives. For example, in the Lithuanian agreement we agreed collectively to make the off-patent pharmaceutical sector more efficient, but we also agreed to open a route to market for innovative products.
This came in the form of a new innovation budget line within the health system. The measure of success was simply to see if the agreed mechanism was implemented effectively, which was indeed the case. So the job has been done. While there are still other things to do, we are starting to see real progress.
In cases where a framework agreement contains no explicit instrument for measuring success, it may be equally important to assess what might happen if no agreement were in place. Sometimes the market may be more volatile and subject to more frequent litigation, for example. This creates a complex situation for all parties.
At the end of the day, even a tough negotiation with a positive outcome is better for patients than protracted instability in the pharmaceutical market.