The impact of value-based pricing on market access and patience compliance
Leela Barham explores the potential effect of value-based pricing on pharma—in the UK and beyond
By on Aug 2, 2011
Value-based pricing (VBP) has been a buzzword in the UK since 2007 when the Office of Fair Trading (OFT) first looked at the Pharmaceutical Price Regulation Scheme (PPRS), the current profit-cap approach to managing the overall drugs bill in the UK.
The government has now taken the concept of paying by the value delivered from a product a step further, setting out proposals for VBP that will apply across the UK from 2014.
VBP will “shake the foundations of everything we’ve known,” says Omar Ali, a formulary development pharmacist in an NHS Trust in England.
Instead of companies being paid according “the investment made and ensuring a return on that investment, companies will be paid on the basis of the value products offer to the NHS and patients.”
VBP is intended to help overcome the problem of agencies like the National Institute for Health and Excellence (NICE) in England and the Scottish Medicines Consortium (SMC) in Scotland, which advise the NHS, saying ‘no’ to expensive drugs.
“Instead, NICE is now going to tell companies at what price they would say yes,” notes Ali.
The new scheme will essentially move to a price-making approach; the price that the NHS is willing to pay will be much clearer and companies will need to either accept that price, provide evidence to convince the NHS to pay more, or justify why they won’t lower their price to the public.
No more me-too products
The effect, Ali suggests, is that pharma will “adapt toward products that meet unmet needs, away from ‘me-too’ products, and toward those that bring societal benefits.”
These products are going to be the drivers of value assessment under the new approach.
“Some companies are already adapting,” according to Ali. “Some are also investing in early payer involvement, at phase II, for example, and looking at patient-reported outcomes and QALY factors.” (For more on patient-reported outcomes, see ‘The importance of patient reported outcomes in compliance’; for more on QALY, see ‘HTAs go global: What it means for market access’.)
Those firms that have not, or will not, make these changes will get a wake up call: “Some companies still have the same old model, with six-week placebo studies. But those days are numbered.”
Making changes to the company strategy, Ali points out, is as much an “internal sales job” as anything else.
The proposals for VBP are “out for consultation, and crucially what matters is how the principles translate into practice,” says Chris Easley, senior consultant at advisory firm Pope Woodhead.
He thinks few will find the principles of recognizing and rewarding value difficult to accept.
But the reality could be somewhat challenging, not least because “innovation itself is of limited benefit; it’s what outcomes result from that that count.”
Proving outcomes
Proving outcomes in the messy world of the NHS—or any healthcare system, for that matter—is complicated by a whole host of confounders: the appropriateness of the medicine, whether the clinician prescribes it appropriately, if patients are compliant, and whether the system as a whole provides access and support to get the best from medicines.
Easley says that, given the existing price referencing framework, UK list prices need to be compatible with those in the EU, but this is something the current proposals “are simply silent on.”
Setting value-based prices “is not just about the balance of benefits but also ultimately about affordability,” according to Easley.
Given the almost constant budget predicted for the NHS over the next few years, “there will be winners and losers. Companies that already have a strong portfolio in therapeutic areas where there is still unmet need, potentially large benefits to carers, and the opportunity to help patients back to work or a normal life will do well.”
The proposals don’t foresee a role in the future for patient access schemes, which surprises Easley, given that there will always be cases where the NHS and manufacturers disagree over the ability of innovative products to deliver real-world outcomes at an acceptable cost.
“Some patient access schemes can be thought of as a VBP guarantee,” he suggests, “setting a price and then linking that to the achievement of outcomes in practice.” (For more on patient access schemes, see ‘Market access and patient access schemes’ and ‘How early access strategies affect market access’.)
When is the price right?
This change in the way products will be priced will also be accompanied by wide-ranging changes in the broader National Health System (NHS) in England.
That means companies need to build relationships with new general practitioner (GP)-led consortia, which will have control of close to 80 per cent of the NHS budget and will be paying for medicines in the future.
But, according to Ali, “some of the same people will just be re-employed in these new organizations.”
So the challenge is to keep up those relationships without losing sight of the new opportunities to work with more private providers entering the market.
“Since not all services will be commissioned locally, companies need to liaise with the new National Commissioning Board,” points out Steve Williamson, consultant pharmacist in cancer services in the North of England Cancer Network.
This board will oversee purchasing in specialist areas, and that could mean, for example, keeping broadly the same cancer networks.
But there is a missing link in VBP, according to David Thomson, lead pharmacist for the Yorkshire Cancer Network: “Unfortunately, while NICE will no longer be able to say ‘no’, it will also no longer be able to say ‘yes’. There is nothing in the proposals which says that GP consortia have to pay for drugs priced at the VBP price.”
That could mean that, even if a price is agreed, access is not guaranteed.
There could even be local negotiations on top as “GP consortia might not agree with the central assessment of the value of a product,” Thomson notes.
“There is a danger of continuing the disconnect between the perception of value at central level and at local level, where affordability becomes a stronger factor. This could result in a push from local level for an even lower price to ensure access.”
This is just one scenario though.
Williamson suspects that while the current proposals are silent on how the link between the central assessment and local decision-making will work, that link will be made.
“If we assume that there is a requirement for GP consortia to fund VBP-ed drugs,” he says, “then companies will need to focus on the patient pathway and clinicians’ decisions within that to prescribe.”
Easley also highlights the efforts companies are making to understand and meet payer needs.
In the UK, payers already include national (e.g., NICE), regional, and local players; patient groups can be influential, too. (For more on patient groups, see ‘The power of patient groups’ and ‘How patient advocacy groups can boost patient compliance’.)
Easley notes that companies can’t just take a UK view; they need to ensure that they go as far as they can to meet the needs of multiple payers from across countries.
“Companies must balance and prioritize the needs of different countries, since they can’t satisfy everyone fully, especially when you consider the very substantial costs of generating data both pre- and post-launch,” he says.
(For more on VBP, see ‘Is value-based pricing an aid to market access?’ and ‘Market Access and value-based pricing’.)
To discuss VBP and other crucial market access issues, join the sector’s key players at Sales & Marketing Excellence Australia on September 14-15 in Sydney, 3rd Annual Market Access Canada on November 1-3 and eMarketing Canada on November 8-9, 2011 in Toronto, and Marketing Europe in November in Berlin.
For the latest on patient compliance issues, join the sector’s key players at Patient Adherence USA on October 24-25 in Philadelphia.
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