Pricing of pharmaceutical products has been at the centre of the debate on how to contain the rapid rise in healthcare costs for several years. But underneath the surface of the debate is the larger issue: What is the value of a particular new therapy? This article proposes a framework for understanding value and outlines practical recommendations for how biopharmaceutical companies can not only understand and communicate the value of their therapies better, but also ensure that their approach to commercialising the product is geared towards maximising that value for all stakeholders.
Value defined
The value of a new therapy can be defined as the improvement in benefits relative to cost versus the standard of care. However, there is variability in product performance and therefore in value – this is one rationale behind value-based arrangements. The benefit of a therapy is often multidimensional, ranging from better medical outcomes to more convenient dosage forms or regimens. On the cost side, beyond how the cost of the product compares to existing treatments, one needs to consider the broader societal cost. For example, finding a better treatment for Alzheimer’s disease would free up substantial societal resources consumed by the disease, from the tangible cost of nursing homes to the enormous burden on the family caregivers.
We propose assessing the value of a therapy through three lenses: the unmet patient need, the existing standard of care and the dynamics of the individual healthcare systems.
The first layer: Focusing on the unmet patient need
The unmet patient need goes beyond the medical point of view. Beyond efficacy (the capacity of a particular therapy to produce an effect for those enrolled in a clinical trial), one needs to consider the specific benefits for specific patients as well as the overall patient and caregiver experience (assessing effectiveness).
What is clear is that we need to understand which patients we believe will benefit, eg all new patients or only as a third-line treatment. Understanding the variability for specific patient groups and building the value argument accordingly is critically important, as the actual need and the numbers to be treated significantly affect the value and also the price.
Advances in precision medicine will eventually enable a shift in perspective from average outcomes for those participating in a clinical trial towards a stratified view of specific patient segments that will benefit most from a particular therapy. In the long run, companion diagnostics will enable targeting the patients most likely to benefit from a particular therapy.
Beyond the clinical impact, understanding the overall patient and caregiver experience can help to unearth other unmet needs. Some of these unmet needs can be obvious, such as time saved from using an oral dosage form instead of requiring site-of-care infusions. Others are less obvious and require a deep understanding of the burden of illness. The work of PPMD (Parent Project Muscular Dystrophy) to influence the FDA guidance on Duchenne disease shows the importance of factors often overlooked in clinical trial design.
The second layer: Comparing against the existing standard of care
There is almost always an existing treatment that addresses some degree of the patient need already. The value of a particular therapy depends on the difference between the standard of care and the new intervention. In order to assess this, both direct and indirect comparators should be developed to support the expected change in the disease burden.
The third layer: Understanding the healthcare system
Healthcare systems around the world differ in their general philosophy and approach and use different mechanisms and tools such as HTAs and tenders to allocate scarce resources. It is important to understand and take into account how the system treats the disease and how it is paid for or reimbursed.
The ability to work with the mechanisms and understand the underlying philosophy is crucial to assess the value a particular therapy can create. Not only does the prevalence of a particular disease vary significantly by country or region – but also, the way the respective healthcare system has evolved to address the disease burden is a significant factor that determines the value of a particular therapy.
Putting it all together
Analysing and understanding these three layers and their interdependencies is crucial to understand and communicate the value of a potential new therapy. This work needs to start in the early stages of product development. Doing so requires an integrated approach that aligns not only the stakeholders inside a pharmaceutical company, but also establishes linkages to external stakeholders.
One size does not fit all
If one agrees that the value of a particular therapy varies for specific patient groups, using value thresholds becomes counterproductive. Applying the same threshold to a rare disease therapy that delivers a 50% improvement for a small patient population versus a therapy that delivers a 5% improvement for a large patient population is a disincentive to develop innovative therapies. Given the constraint on resources, to keep innovating we need to shift towards a value-based approach to direct funding towards the unmet need. The concept of a value threshold is about the value of a life, and ultimately, we have to accept there is no single threshold value for life – there are many.
The need for an agreed-upon methodology
Moving forward from the current focus on price, which is counterproductive in the long run, will require a methodology that stakeholders can agree on.
Given the complexity of healthcare, there is probably not one method to determine which factors to include or not. Societal value needs to be taken into account. In the example of Alzheimer’s disease, one should consider the broader picture beyond the medical cost. There is no direct medical offset for the cost of nursing homes, but we should consider the value of keeping somebody out of a nursing home when deciding the value of a therapy for Alzheimer’s.
In order to understand the full picture, real-world evidence (RWE) will be crucial. The ‘Get Real’ programme, a joint effort by payers and HCA bodies, is an important first step towards incorporating RWE gathering into drug development processes.
Four recommendations for pharmaceutical companies
- Invest in understanding the patient journey to discover unmet needs of specific populations with the disease: Mapping the patient journey helps to understand the specific issues patients (and caregivers) face, and identify opportunities to address currently unmet needs. Addressing these needs often requires moving beyond a product focus.
- Adopt a multi-stakeholder approach: Considering the different perspectives and needs of patients, policymakers, providers, payers and professionals (P5) throughout the product development and commercialisation process is critical. This requires strong alignment of R&D and marketing, as well as medical affairs and market/patient access resources. Consider moving from a focus on the target product profile (TPP), which is function/feature focused, towards a P5-focused approach based on value and TPVP (target patient value profile).
- Integrate real-world evidence and patent focus into clinical development plans: Considering how payers will determine the value of the product in the design of phase III trials is often too late. Biopharmaceutical companies need to have a plan for understanding and measuring value beyond clinical development. Increasingly, payers, policymakers and providers are looking beyond the clinical data and asking for real-world evidence (RWE). Clinical development plans (CDP) need to evolve from delivering the data required for filing for approval and negotiating for reimbursement towards considering how to generate RWE that will support the value proposition beyond product launch for the entire product life cycle and towards a holistic understanding of how the treatment will impact the patient and caregiver experience.
- Invest in understanding the dynamics of the various healthcare systems: While in theory each healthcare system is unique in how it responds to the challenge of protecting its population from illness, there are more commonalities than differences. Understanding these archetypes and developing a framework for how to understand and communicate the value of a particular product simplifies the task and leverages best practices.
A better understanding
Focusing on value can help create a common language that everybody can understand, assuming openness of all parties involved to shift their focus away from pricing. To make the transition, all the stakeholders have to align on the definition of value, agree on a methodology and commit to capture the outcomes (and not just the inputs of cost).
In the short run, value-based agreements are a good first step to share the risk of costly new therapies. What ultimately needs to happen is to collect outcomes systematically – which will be possible given the rapid spread of technology. Once that happens, the need for individual, one-off value-based arrangements will go away.
Shifting the conversation from price to value will not only take time, but will also require new business models, collaborations, regulatory frameworks and financing vehicles. Biopharmaceutical companies are not the only ones that will need to undergo fundamental change – but they will be well advised to lead the way towards developing a framework that everybody can agree on. A better understanding of a particular therapy’s value is imperative to align the interests of the various stakeholders towards the needs of patients, ensuring those patients who benefit have access to innovative medicines while providing incentives to innovate.