Tendering and value-based pricing: lessons from Italy on human papilloma virus vaccines
Authors: Livio Garattini, Katelijne Van de Vooren, Nick Freemantle
Journal: Journal of the Royal Society of Medicine (2014)

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. 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. The regions of Lombardy and Piedmont recently held tenders, both of which were awarded to the bivalent vaccine manufacturer which offered its vaccine for E34.47 per dose while the most recent one (Veneto region) went to the quadrivalent vaccine at E32.75. 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 E95 for bivalent vaccine and E104 for quadrivalent vaccine. 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. 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 and in three regional tenders in Italy), 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. 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. 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. Such a negative scenario depends largely on the size of the tender setting, and in countries like Italy the