The Truth about Pricing
Pharma and payers in South Africa need to change tack to find a middle ground.
South Africa’s health and pharma sectors are beset with frustration at present, as drug manufacturers and the companies which fund private healthcare packages remain at loggerheads over the way medicines – not least the vital anti-retrovirals (ARVs) that so many patients need - are paid for.
But that could change, thinks market access specialist Dr João Carapinha, Chief Scientist: Market Access at Carapinha & Consultants. Based in Boston, he will speak at next year’s eyeforpharma Commercial Excellence and Market Access Summit South Africa, which takes place in March 2016.
Dynamic – but antiquated
“The market in South Africa is very dynamic,” he begins. “But we are still working with some antiquated rules. There are certainly tensions in the private sector, particularly in terms of market access and reimbursement, between pharma companies and health insurers.”
There are a variety of reasons for this, which Carapinha divides into ‘price’ barriers and ‘non-price’ barriers. For instance, there is an obvious issue around the high costs of some products - but there is also a big problem in terms of price setting and negotiation in the first place.
It is illegal at present to offer rebates, discounts or other incentives in reimbursement packages, and this needs to change, he suggests: once prices are set they cannot be changed, which renders impossible any sense of give and take between parties. “This perpetuates the tension between providers and medical schemes,” Carapinha says. “The medical scheme will say: ‘We can’t fund it.’ Negotiation stops, unlike in a normal market where market value is negotiated to determine reimbursement. “The hidden hand of the regulator is here.”
Pharma companies are finding they are not making headway in terms of securing reimbursement for medicines. Responses are often not provided, criteria sometimes seem unclear as to why something failed a review process or how to add a medicine to the reimbursement list – if these were more transparent and publicly available then it would resolve some tensions.
Quite apart from the patient access implications, effective price competition can deliver significant savings for medical schemes and improve access for patients. “No-one in South Africa speaks about this sort of thing,” he continues. “Medical schemes say they are entirely transparent and all patients have optimal access based on cost-effectiveness criteria, but there is room for improvement. One would expect, like in normal markets, that a price negotiation would drive competition and improve access. It’s a healthcare system problem: regulating prices and how often changes are permitted does not stimulate competition.”
The government should step back and allow the market to set better prices, he believes. “In reality, what’s happening is that the law is a barrier to effective price competition and is hampering patient access,” he continues. “Pharma companies are finding they are not making headway in terms of securing reimbursement for medicines. Responses are often not provided, criteria sometimes seem unclear as to why something failed a review process or how to add a medicine to the reimbursement list – if these were more transparent and publicly available then it would resolve some tensions.”
Other problems also have less to do with price: clinical efficiency of drugs needs to be reviewed more effectively and gaps addressed, he says. This leads him on to the ways in which pharma can push its case in South Africa. First off, on the issue of guidelines, there is a need for a forensic attention to detail. “We need to capture the factual high ground,” Carapinha says. “We must make sure all the evidence is thoroughly reviewed, looking at the positive and negative aspects of a drug, and asking whether this represents good value for the South African market. If it’s great value, it should be reimbursed. This could be done a lot better in South Africa.”
Having got the information, it needs to be presented in a formal, methodical way, he continues. “We need to put it into a reimbursement dossier which can be shared with private health providers and public payers, in much the same way pharma in the UK does with NICE.”
Some people think that pharmacoeconomics is just a business development tool to project future income. It’s not. We all need to reduce uncertainty in the clinical and economic value of a new medicine through formal, quality pharmacoeconomic studies.
Market access language
Attention must also be paid to skills development in the industry, Carapinha believes. “The language in market access is being spoken at different levels of sophistication,” he explains. “Pharma and health insurers will be dragged behind until everyone is up to speed on this.” Examples of current issues include confusion over what should be included in cost-benefit and cost-effectiveness analyses, how clinical information is integrated and so on.
“Some people think that pharmacoeconomics is just a business development tool to project future income,” Carapinha goes on. “It’s not. We all need to reduce uncertainty in the clinical and economic value of a new medicine through formal, quality pharmacoeconomic studies.”
Getting past barriers
Risk-sharing agreements, where medical schemes are willing to pay for drugs in cases where they are proven to be successful, is one possible way to go. “But we’ve reached the point where things have to move forward,” he concludes. “That could be a more workable model for South Africa in the future. There has to be a way of getting past this barrier. We have to find a way past the current restrictions.”
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