Out With The OId, In With The New
Pharma must seek alternative pricing models if it is to become a greater dynamic force
As drugs become more and more innovative, so too must pricing schemes. But when you have costly solutions running up against a cash-strapped healthcare system, moving the needle is a mountainous challenge.
In response, many companies are working hard to help payers through alternative models of pricing. One such company is Roche, which is working to support payers by offering flexible pricing solutions such as pay-for-performance, or outcomes-based models, says Esther Haik, Region Europe Market Access at Roche.
“We want to reassure payers that they will only pay for the benefit that treatment delivers for the right patients – those that respond,” says Haik.
As many such schemes are new, healthcare systems need help. “We create an infrastructure, equipping the healthcare system and specific hospitals to track utilization data, to offer a scheme that is easy to implement and accurately reflects the efficacy of our drug. We make sure we put in place what is needed to ensure the system is ready."
A conversation with the payer also needs to happen. Yet such pricing models remain rare, despite the obvious benefits of paying just for those patients who respond. An expensive therapy used in a relatively small target population may not have the dramatic budget impact feared by payers. These solutions are essential for drugs that will only work in a limited population that is not clearly identified through clinical trial outcomes or for drugs where efficacy data (i.e. OS ) are not available at the time of price negotiation and thus represent an uncertainty for payers.
“We engage with the payer and explain why they should be open to this type of scheme rather than a simple straight discount. For example, cancer immunotherapy is a highly sophisticated form of therapy where there is still uncertainty regarding which patients benefit most. This is how to ensure that every patient has the same chance to get the best treatment but at the same time it is a guarantee for the payers that they will pay at the end only for those who really benefit from the drug.”
Other examples of innovative pricing include a model by which there is a fixed price for a particular patient pathology, regardless of treatment, but Haik says the outcomes-based model is the one gaining the most traction. By offering such models, this also gives companies a chance to differentiate themselves in what is becoming a competitive market. Haik also reiterates the uncertainty surrounding the efficacy of many of these therapies; “we know it works, but does it work the same with everyone? The pay-for-performance model would address this uncertainty.”
Martin van der Graaff, Secretary Scientific Advisory Board (WAR) at the National Health Care Institute in the Netherlands (Zorginstituut Nederland), is not convinced of the merits of innovative pricing models.
“The most difficult thing is that it is a topic that people say lends itself best to tailor-made solutions – I tend to disagree because there are lots of innovations coming onto the market for which industry would like to have some sort of specialised services and solutions but in the end, that would mean so much extra work it would overwhelm both HTA/payer organisations and the doctors that have to register effects.”
While outcomes-based models may have their place, he sees their use as limited to special circumstances (e.g. for products where overall effects are complete and measurable within months), if at all. “Currently there are no real performance-based pricing models, except perhaps for some local initiatives and perhaps some of the secret pricing deals of the health ministry. These might be very useful for juvenile products and ultra-orphan drugs if the reimbursement level can be tied to pre-agreed performance levels, and provided the initial reimbursement level is an equitable reflection of the still largely unknown performance of the product. Then reimbursement level might go up with a pre-agreed amount provided the pre-agreed milestones are reached.”
Van der Graaff views the solution to current access problems as much more straightforward. And, unsurprisingly, he sees cost as the main barrier to drugs reaching the patient.
“What you need within all pricing systems is a very simple set of general rules that say something like, anything that is priced below a certain level can have a temporary position on the list of reimbursed products. If you want more complete reimbursement, then you have to prove more. When you have lots of specialised solutions, an HTA/ payer organisation has to build some sort of reference set of decisions to make sure that your overall reimbursement policy is equitable and it’s not better for some manufacturers and products than for others.
The increased percentage of rapid approval decisions by the European Medicines Agency (EMA) are also stymieing reimbursement, he adds. “That generally means that the drugs registered today are less suitable for full reimbursement than they used to be, but the pricing of those products does not reflect that fact. You tend to have all sorts of juvenile products that are priced at an adult level”; a situation he describes as “highly unsatisfactory”. This means that often payers are paying for future promises, rather than the ability of a drug today.
Van der Graaff believes these so-called “juvenile” drugs should be far cheaper – “the more promising a product is dubbed, the less it is actually proven, and the less health care systems should pay for it while they remain unsure about performance.”
He uses recent controversy over the reimbursement of new therapies for cystic fibrosis to illustrate his point; ground-breaking but extremely costly, the delayed reimbursement of these agents caused controversy in many European member states. “We have had several products reach the market for which doctors claim the performance on all sorts of organ systems is terrific and these products should therefore be reimbursed. However, when you look at the clinical data what you see is a few per cent extra in the amount of air people can expire in one second and fewer hospitalisations for exacerbations. That is all the performance data there is at the moment – all those other things might actually happen and prove themselves in the future but to date that has not happened and the pricing of the product does not reflect that.”
This debate has only recently begun but it is a conversation that van der Graaff sees continuing for many years to come. He believes that a number of health systems will find themselves in significant trouble in the not too distant future as they try to fund more and more innovative therapies. He also agrees that both parties – manufacturer and payer – will have to collaborate in order to come up with new solutions. Bad company practice has tempered his expectations, however. “While bigger more established pharmaceutical companies are making concerted efforts to come up with constructive proposals to improve access, others are abusing their position, particularly those with drugs in monopoly positions.”
It is Van der Graaff’s belief that pricing agreements should in the long run be hashed out at a supra-national level, with European countries cooperating in a bid to get the best deal on new drugs. In fact, the Netherlands teamed up with Belgium, Luxembourg in 2015 to form the Beneluxa collaboration on drug pricing negotiations, and Austria joined last year.
“Too many member states are still attached to their own national systems, so they will not consider creating one big European reimbursement system. The problem will have to get a little bit worse before it gets better – we need to go towards some sort of European system in the end but a consensus on this would take quite some time to develop. In the long-term I see it happening.”
Esther Haik will be sharing her insights at the Real-World Evidence and Access Europe event in April.
Since you're here...
... and value our content, you should sign-up to our newsletter. Sign up here