Over the last decade the healthcare ‘payer’ has rapidly become the key customer in many markets as the pharmaceutical industry has witnessed a shift towards more consistent decision making on the economic benefit of medical interventions, driven by the need to control spiralling budgets. In truth, expenditure on drugs represents typically less than 10 per cent of such spend, but it is seen as an easy target for cost reduction.
This has led to the rise of increasingly elaborate cost containment systems, designed to blend the challenges of managing national budgets with the ability to meet local patient needs – a difficult balancing act that blurs the lines between prescriber and payer. As a result, we are now seeing complex interactive networks of local, regional and national payers emerge in many countries, which heavily overlap with clinical experts in making key decisions on the use of new medicines. Defining who the payer is and how he makes his decisions has never been harder.
Within these networks and across regions the relative influence and evidence requirements for each payer can also vary significantly, resulting in more complex and protracted multi-step engagement processes for pharma. Critically, new medicines are no longer being assessed on the basis of just clinical attributes, but are scrutinised for cost-effectiveness and longer term outcomes – the ability to reduce the disease burden on society financially, rather than simply raising the treatment bar medically.
England exemplifies the emerging payer networks
As all markets develop towards blending cost-effectiveness assessment at both the national and regional level, involving both clinicians and traditional payers, the new NHS structure in England serves as a good reference case for the type of complex engagement processes pharma must master for effective market access. The key components of the new NHS structure for England are made up of NICE, the new NHS Commissioning Board and its substructure, including the new Clinical Commissioning Groups (CCGs), who between them jointly coordinate access to medicines.
The majority of new medicines will be subjected to the NICE HTA process to determine cost-effectiveness (although lower priced treatments may not be assessed), through review by one of its expert Technology Appraisal Committees. These groups typically combine pharmacists, commissioners, specialist consultants, nurses and health economists with expertise in the relevant therapeutic area, who will assess data provided by the drug manufacturer as inputs into modelling the cost-per-QALY benefit to patients. In 2013, NICE is also taking on greater responsibility for assessing orphan drugs and certain drugs prior to launch through the Evidence Summaries: New Medicines (ESNM) process.
In the new commercial reality of cost-constrained healthcare environments, the payer is everywhere
In theory, high level recommendation by NICE should encourage use by local prescribers, but implementation of such guidelines is not guaranteed and has, historically, been variable. The new NHS Commissioning Board is focused on addressing this challenge, in addition to supervising more consistent delivery of overall healthcare at the local level.
The developing picture of the UK when it comes to drug market access is therefore one where prescribers and payers are virtually indistinguishable, with expert clinicians providing input into the national HTA process and local prescribers also becoming budget holders as part of the CCGs. In addition, the complex decision- making processes open the gates to the patient voice, through vocal charities and disease organisations that can sway decisions around access to new medicines.
Global trends towards outcomes and multi-level payers
Looking beyond the UK an interesting picture emerges that suggests the UK model could pave the way for the future.
In Germany, healthcare is funded very differently (around 90 per cent of the 70 million population are covered by statutory health funds paid into by employers and employees), but it is following the UK’s lead in embracing a strong centralised focus on outcomes. Until 2011, pharmaceutical manufacturers could freely price new drugs, but the Act on the Reform for the Market of Medicinal Products (AMNOG), introduced at the start of that year, launched a new system of assessment whereby only new treatments demonstrating significant therapeutic benefit compared to existing therapies could command premium prices. Such decisions may be supported by the Institute for Quality and Efficiency in Healthcare (IQWiG), which uses an evidence-based statistical assessment process for evaluating cost-effectiveness, which is comparable to NICE’s techniques. Interestingly, the German Federal Joint Committee has started to apply such analyses retrospectively to older drugs already on the market.
However, local hospital-based and primary care prescribers within Germany still retain considerable autonomy in their treatment decisions, working within fixed budgets. For hospitals these are based on diagnosis- related group (DRG) codes that specific appropriate costs by indication, whereas primary care physicians have a budget determined by their patient numbers. Pharmacists, heads of departments and consultants make hospital formulary decisions designed to best meet the DRG restrictions and therefore remain key secondary care payers, while primary care physicians retain flexibility on treatment choice while keeping one eye on their budget.
The French market is perhaps the most disparate with regards to local versus national control of medicines access, as it operates a two tier system. A ‘free pricing’ segment covers over the counter (OTC) drugs and certain hospital drugs that are viewed as the least innovative, whereby pharma companies negotiate on price directly. But the ‘regulated’ segment, covering pharmacy-prescribed drugs and more innovative hospital treatments, adopt a more rigorous approach.
In the first of two stages, the Commission de la Transparence (CT) (under the supervision of the Haute Autorité de Santé, or HAS) reviews the benefit offered by new medicines in order to determine a suitable reimbursement level. This assessment is based on two scales – the ‘Rendered Medical service’ (SMR), which reviews the efficacy and safety of the medicine in the context of disease severity, other treatment options and public health issues and the ‘Improvement in the Rendered Medical Service’ (ASMR), which places each medicine into one of five categories based on expected impact on disease management. Subsequently, the Comité Economique des Produits de Santé (CEPS) conducts price negotiations with the pharmaceutical manufacturer, with the ASMR rating being a key consideration alongside broader economic factors such as pricing in other European markets.
While CEPS is very much an organisation of governmental decision makers, determination of SMR and ASMR at the earlier stage involves assessment by medical experts such as pharmacists, doctors and specialist physicians. These groups also play a role in a final hurdle presented by the Commission du Médicament et des Dispositifs Médicaux Stériles (COMDIMS) – the Formulary Committee of hospitals where medicines are subjected to an additional review on use.
Market access in the Italian and Spanish markets is much more decentralised, being driven by the decisions of regional payer committees (20 within Italy and 17 in Spain), which operate on a semi-autonomous basis. Of the two, Italy arguably retains more centralised control, with its regulatory body Agenzia Italiana Del Farmaco (AIFA) making national decisions over pricing and reimbursement levels for new drugs. However, the regional committees (PTORs) can then make independent decisions on local formulary inclusion and adjust the level of patient co-payment. Here, pharma engagement at the national and regional level is important.
Spain has seen a gradual decentralisation of decision- making around healthcare provision over the last decade, away from the Sistema Nacional de Salud (SNS), its national health service. While national reimbursement and pricing decisions are still made initially by the SNS, separate negotiation with the 17 autonomous regions is then critical for effective access. Outcomes play an increasingly important role here as Spain has both a central HTA decision-making body in the guise of the Instituto de Salud Carlos III (ISCIII) and regional equivalents.
Overall, there remain key differences in how countries categorise medicines, the balance between national and local pricing and reimbursement decisions and the relative stakeholders involved in such decisions. However, there is a clear trend towards more rigorous assessment of cost-effectiveness based around HTA type processes, with the major differences being in the geographic level of control as all countries look to blend national consistency with local flexibility.
Essential pharma adaptation for successful market access
There are four clear global trends emerging around a focus on more rigorous, centralised cost-effectiveness analysis for new medicines combined with ensuring local prescribers can adapt such guidance to meet their specific patient needs. In order to be successful in the future, pharmaceutical companies must take on board a number of lessons from markets like the UK, where such payer networks are most advanced.
- Factor outcomes into clinical development: Securing regulatory approval can no longer be viewed as the sole endpoint of the clinical development process – securing market access must be factored in early on
- Ensure continuous assessment of real-world evidence: National and regional payer decisions are beginning to be challenged over time as new real-world evidence emerges and becomes ever easier to capture and analyse
- Identify and understand payer networks: Pharma’s traditional key opinion leaders are either becoming payer influencers or are increasingly irrelevant
- Align communication skills around cost-effectiveness: Pharma’s commercial infrastructure needs to include specialised teams that can engage with payers and provide the cost-effectiveness evidence required.
In the new commercial reality of cost-constrained healthcare environments globally, the payer is everywhere, imperceptibly intertwined in all clinical discussions. Failing to adapt to this new environment could leave the pharma industry locked out, but understanding and engaging with these new payer networks provides the key to a new door, behind which lies better prescriber engagement and improved patient outcomes.