Uday Bose wants the pharma industry to stop regarding market access as a burden. Until pharma companies see access as opportunity, the industry will never have the right attitude to take advantage of the possibilities that come along. Equally, says Bose, it’s time to regard payors as customers and treat them accordingly, understanding their needs and tailoring our services to them. Without the right attitudes firmly in place, says Bose, there is little hope of going forward successfully.
Bose, European marketing director for GlaxoSmithKline Oncology, spoke at an eyeforpharma conference in January of 2008. In his presentation “Pricing for outcome and risk sharing; how should pharma react?” Bose touched on many of the issues confronting the oncology segment of the pharma industry. In this article, we’ll look at Bose’s thoughts on the current EU environment for oncology, including pricing pressures and policies. In a second article, we’ll look at Bose’s discussion on pharma’s response to pricing pressures and impacts, risk-sharing strategies and his ideas on how pharma should respond to the challenges in the marketplace.
The current environment for oncology
Pricing is one major pressure point for the oncology industry. Oncology drugs cost. But, says Bose, “drug pricing needs to reflect the investment.” Drugs cost what they do because of the enormous investment involved in getting even one drug to market. In an initial screening, there may be as many as 5,000-10,000 compounds. Of that pool of possibles, as few as five may make it though to clinical studies on human subjects – only one will become an asset. That one product has to generate enough income to fuel the work at the top of the funnel; companies need sufficient return to keep R&D going.
Timelines to market are another source of problems. Typically, it takes around 10 years to take a drug from screening to first approval. Lately, Bose says, that timeline has been getting squeezed. Assets are being pushed to launch early and in indications they wouldn’t ordinarily be launched in. As a result of the pressure to get drugs on the market, we’re seeing launches for products to treat smaller tumor types, difficult-to-treat cancers. It’s the paradox of the time, says Bose, that there’s a rush to get to market, but difficulties in market access are also quite significant.
To make matters even more challenging, bringing drugs to market is getting harder. Despite rapid growth in R&D spending, FDA approvals are declining. The approval number for 2007 was one of the lowest in many years, according to Bose. While oncology drugs enjoy a higher rate of approval than other therapy areas, regulations are getting stricter for all.
Oncology is a very politically sensitive area of health care. With one in three people suffering some form of cancer in their lifetime, the pervasive and indiscriminate nature of the disease makes it highly emotive. Combine that with a very strong advocacy network for patients, and you have, as Bose calls it, “a politician’s dream.” Such outside attention and scrutiny doesn’t make the task of developing and launching new drugs any easier.
All signs point to tougher times ahead, says Bose. Price pressures aren’t likely to go away any time soon; the trend now is toward combining drugs, many of which may already be costly on their own. Regimens can involve as many as three treatments, tripling the cost and increasing the difficulty of managing care. Additionally, many cancers are now being regarded as “chronic diseases,” changing their reimbursement categories. And we have a growing population of people who are likely to suffer some form of cancer, and this has all sorts of implications for the future as well.
Pressures on price
Where once an oncology drug’s efficacy was the preeminent assessment measure of that drug, now much greater attention is being paid to other criteria. The number of Health Technology Assessments of cancer treatments rose from zero in 1990 to over 100 in 2002. These assessments evaluate not only a drug’s medical effectiveness but also its effects on quality of life, requirements for service delivery and, of course, its cost.
For those oncology drugs launched within the last five years, the monthly cost per drug is generally between €2000 and €4000. To illustrate the difficulties pharma companies face in determining the price of their drug, Bose gave this example: Company X has a new asset in Phase III. The clinical program of the drug is likely quite broad, and a first indication is due to release in the next six to 12 months. The asset has follow-on indications as well. The first indication will launch in an established market with a large number of competitors and little differentiation between products, including Company X’s. However, the second indication is extremely innovative. This indication will launch in a very different market and will be among the first of its kind in this segment. The third indication is due to launch in an established market with high generic erosion and therefore very little relative value. The fourth and final indication, which has perhaps a minor innovation, will launch in a large, established market. This is the reality for oncology assets today.
In Europe, there are downward pressures on price. With each new indication, because your volume is increasing, your price is reduced — you must, as Bose says, “give up something in price.” However, pressures to raise the price are substantial, and most oncology drugs see an increase in price within a year of their launch.
In an ideal world, says Bose, each major indication would launch as an individual asset, with the novel, innovative indication set at a premium price and the “me too” indications set at a standard price or even a discount. Then, says Bose, the price would truly reflect “the attributes of the product.” In this less-than-ideal world where the first launch establishes the trajectory of the brand and the price for the lifecycle of the asset, the strategy becomes one of prioritizing. Given a scenario like Company X, Bose would recommend skipping the first launch and prioritizing the high-value second launch.
So what are the implications for pharma? Bose has several suggestions for maximizing the market. If the first indication is indeed the most important, then prioritize the most innovative indication; launch that one first. Push back on me-too indications, he says. Challenge your R&D department when you know an indication is not likely to be reimbursed because it’s too similar to existing products.
Be sure your idea of what qualifies as “innovative” matches your customers’ ideas. Like proud parents, sometimes companies get overenthusiastic about the attributes of their offspring. Is a slightly different formulation or an oral version really all that novel? Launch first the truly innovative; let the less groundbreaking indications come later.
Keep customers informed. There are positive aspects to the reimbursement system, says Bose. Innovation does get identified and rewarded. However, “innovations” come to be identified as only those times when there are dramatic leaps forward. Small, deliberate gains, accrued over time, may be ignored. It’s necessary that the customers be educated about the small advancements as well as the breakthroughs.
And while you’re educating your customers, include information about supportive care therapies. Often overshadowed by more dramatic treatments, the value of supportive care products can be overlooked. Bose gives as an example the NK1 therapies. When paired with 5HT3 agonists (treatment for the emesis that results from chemotherapy), the combination has proved very effective in controlling nausea and vomiting. This is not a trivial concern: if emesis is not controlled, patients simply cannot tolerate chemotherapy. But despite their efficacy, NK1 treatments have shown disappointing uptake across Europe because payors have not been sufficiently educated about their benefits. Make clear the “magnitude of the possible effect on patients,” says Bose. In the case of NK1 therapies, improper care of emesis effects could lead a patient to stop chemotherapy. Clearly, these drugs are worth another look. It’s up to companies to convince prescribers of the value of supportive care therapies, Bose says.
Picking your price
So, asks Bose, what is the criteria for pricing oncology drugs? In theory, the sustainable price is the junction where supply meets demand. In reality, establishing a price is never so simple.
Typical approaches to pricing, according to Bose, include the following:
• Price against current standard. These include premium prices for any additional benefits the treatment offers and discount prices for “me too” drugs that have numerous competitors and little differentiation.
• Price as per therapeutic class.
• Price to achieve target rate of return/profit margin
• Price to achieve cost effectiveness. (“Increasingly prevalent,” Bose says.)
While producers are trying to get the highest possible reimbursement for their products, payors are focused on cost containment. Regional authorities contain costs by lowering prices; national bodies employ several tactics to contain costs, including approved pricing, parallel importing (buying the drug from “next door,” if it’s cheaper than one produced locally) and reference pricing.
Pricing is not uniform across the EU, of course. Spain and Italy have price controlled markets where much of the responsibility for budgetary controls has devolved to regional bodies. Germany and the UK have regional prescriber-led markets. One pricing tactic that’s had significant impact on how pharma companies do business is reference pricing.
France, Italy and Spain all employ reference pricing — the strategy of setting a drug’s price based on the amount the drug costs in other EU countries. Pharma companies therefore place a high premium on a drug’s launch in Germany, usually choosing to launch there first. If you can get a good price in free-price market Germany (which also has the advantage of relatively quick reimbursement), then that sets the price for the reference-pricing countries that follow. Instead of launching a drug across all of the EU at the same time, the usual sequence to generate the best return is to begin in Germany, followed by the UK, then France, then Italy and finally in Spain. The impact of reference pricing is clear, says Bose; in the years 1986 to 1999, there has been a convergence of pricing across Europe.
In Part II of this article, we’ll look at Bose’s thoughts on the PPRS (Pharma Price Regulation Scheme), the reactions and reforms the PPRS stimulated, risk-sharing strategies and suggestions on how pharma might respond to the challenges of the modern-day marketplace.
Author: Shannon Perry, journalist, eyeforpharma
