The economic crisis in Europe continues since our first article in May, Turbulent times, with the economic slowdown now spreading to Germany. This has fuelled talk of more economic stimulus, but given the dire fiscal straits of most EU governments, spending cuts will continue in healthcare and on pharmaceuticals in particular.
In our second article, Just des(s)erts, we characterised government responses into two broad approaches to healthcare reform. Proactive countries, such as Germany and the Nordics, usually in better economic shape, are attempting to re-allocate healthcare resources to their highest-value use, for example by increasing use of health technology assessments, risk-sharing and real-world evidence (RWE). While reactive countries, such as Greece, Spain, Italy and Ireland, struggling with tough economic conditions, focus on pure cost containment, through price cuts, generic prescribing, prescribing restrictions, co-payments and de-reimbursement.
In this third and final article in the series, we explore how pharmaceutical companies can behave in both types of markets to preserve the value of their portfolios and position their products for future success. To do so, companies need a clear strategy in three key pricing and market access areas in both types of markets, but how they implement it will depend on the market type.
Understand PMA stakeholders
Companies need to identify and understand new pricing and market access (PMA) stakeholders and roles, especially at the sub-national level. In response to reduced funding from the federal government, and reduced receipts from regional taxation, budget holders are becoming PMA decision makers.
This happens most often at the regional level (eg, German Krankenkasse) and sometimes at the hospital level (eg, the transfer of high-cost drugs to hospital budgets in the Netherlands). These budget holding payers are increasingly negotiating rebates and discounts, and turning to procurement methods such as tendering to force drug prices significantly below list prices.
Increasingly, the internet offers users the opportunity to come together as a group and effect change …
In addition, some regional payers are conducting their own independent drug assessments with local HTA and scientific bodies (eg, Spanish and Italian regions, Swedish county councils).
Unlike NICE or IQWiG, these less visible institutions, prescriber monitoring and HTA bodies are driving perceptions of new products through evaluations that directly influence prescribing behaviour. Their decisions impact regional and local level pricing, reimbursement and access decisions, with some also influencing national decisions. Examples include the ISS in Italy which influences Agenzia Italiana del Farmaco (AIFA), and Centro per la valutazione dell'efficacia dell'assistenza sanitaria (CeVEAS) and Agencia de Evaluacion de Tecnologias Sanitarias (AETS) in Spain which influence regions.
These groups have typically not been priority stakeholders, but their growing power makes it important that companies translate value arguments in favour of adoption and use to this level, through tailored evidence packages that meet local needs.
While engaging these stakeholders is important, companies should also consider how to segment sub-national payers across countries based on needs for evidence and engagement.
Generally, payers in proactive countries have increased the threshold for evidence to enable them to invest in value selectively, while payers in reactive countries need to be engaged to inform – and sometimes correct – their choice of cost-containment tools. However, this division hides important differences among regions within countries, creating situations where a one-size-fits-all regional plan satisfies few stakeholders. Consequently, smart companies are identifying regional payer archetypes and creating common approaches to meet their needs, then implementing plans across national borders, to gain scale and efficiencies that would not be possible in a single country.
These companies coordinate needs by payer segment, for example by identifying common demands for evidence from local formulary managers or by grouping RWE requests across markets to ensure coherence and synergies. Without such efforts, individual demands appear too costly to meet, and risk creating incoherent or contradictory evidence.
In countries where sub-national payers have procurement systems, smart companies also create pan-European tendering toolkits, which guide affiliates on the use of evidence, provide payer-tested arguments and contain practical tools such as cost calculators to help them navigate the tendering process.
While in the past, affiliates would prepare for an important, typically one-off round of national-level negotiations, they now prepare to engage regional payers through mock negotiations and role playing. This may recall the sales rep training of yesterday, but now the consequences are not whether the doctor prescribes, but whether the region buys.
Rethink evidence generation
Companies must rethink evidence generation and accept the need to commit to additional investments in this area. A globally-generated evidence package is suitable for regulators at the FDA or EMA, but seems very abstract to a cash-strapped regional payer in Murcia. There are important evidence generation considerations, both pre-launch and once in the market.
This is especially critical when addressing payers in proactive countries. These groups are increasingly demanding head-to-head (H2H) data and comparative effectiveness (CE) studies before granting access or negotiating a price. In this case, France has taken a strong stance, increasingly finding 'SMR insufficient' when comparative data is lacking. This was the root of the decision to not reimburse Votrient until comparator data is available.
Similarly, IQWiG in Germany did not find additional benefit for Tradjenta given the lack of data against appropriate comparator. Given this, Boehringer chose not to launch in Germany rather than accept a discounted price.
Where possible, companies should provide comparative studies, but there are situations where this 'gold standard' may be undesirable or impossible in practice, due to differing market demands, and the product and market situation.
Companies should invest in such costly trials only where 'payer-accepted' comparators are common across markets and premium priced; the product has a strong point of differentiation and there is limited risk of failure on the endpoints chosen. Companies can resist payer pressure for H2H trials when product efficacy is of clear benefit to patients and it would be unethical not to reimburse, or when trials cannot be performed due to a lack of comparator or suitable trial design.
Overall, proactive payer demands for comparative evidence are strong and companies must either meet them, or accept that not satisfying payer demands may lead to exclusion from key markets.
… the need to engage payers and governments at all levels as partners … has never been greater
In addition to H2H trials, companies should also consider incorporating patient oriented outcomes (POOs) into trial plans, as demand for these measures will grow. Recent evidence in Europe shows that payer expectations of POOs is higher when the budget impact is high and when there is a low level of unmet need in the therapeutic area. Providing POO evidence at launch can improve the chance for positive pricing, reimbursement and access decisions in markets such as France and Germany but in the cost-effectiveness markets such as UK, they can also expose a product to risks.
Furthermore, coverage with evidence development (CED) is an increasing requirement in markets with strong appraisal systems, particularly the proactive markets that understand the value of RWE, such as Sweden. This is especially true for high-cost products where either the benefits are not clear at launch or when payers are not sure about the true utilisation of a product and the consequent budget impact.
The generation of evidence should not only be in response to CED demands, but also a proactive investment in proving and augmenting the value of the product over time.
If payer expectations are that prices will fall for the same amount of value delivered, the appropriate response is to show that more value is being delivered.
Inform payer choice and use of tools
Companies must engage with payers on their use of appraisal tools and healthcare budget management – not exclusively limited to cost containment. This is true for both sets of countries, but particularly relevant to payers in reactive countries.
Payers will continue to 'innovate' in their efforts; companies cannot only react to or oppose such moves. Enlightened companies actively engage with payers to inform and shape such efforts, especially when such efforts can have outcomes contrary to payer objectives.
In Turbulent Times, we mentioned how reductions in off-patent drug prices in Ireland had resulted in generic drugs becoming more expensive than originals and discouraging their use. Examples like this show that companies should examine the impact of reform proposals, and advise governments where efforts are most likely to be effective.
Rather than further cuts to branded medicines, governments might save more by rethinking reimbursement policies, streamlining distribution chains or shifting care to the outpatient setting.
Companies should also continue to propose outcome-based agreements (OBA), despite risk-sharing having become mostly about discounting and fallen into the Trough of Disillusionment (see Gartner's Hype Cycle). OBA link payers and companies through shared commitments to evidence generation and hold great promise, as long as they are managed in a neutral and transparent manner.
In addition, companies can also explore more innovative healthcare delivery practices, such as offering total care solutions for specific patient types, linking drugs and services, or undertaking healthcare delivery outsourcing. This can also be pursued through partnerships with other providers, in some markets this may even include insurers. For example, in diabetes, companies could offer total disease management solutions to payers and price on a per patient or per outcome basis, with overall benefit to the payers as well as to the manufacturer who can gain higher market share and access to other parts of the healthcare budget.
This series has looked at how the economic crisis in Europe is impacting healthcare stakeholders, evidence requirements and cost-containment tools. It is certainly a lot for a busy commercial team to manage! Yet the need to engage payers and governments at all levels as partners in delivering health outcomes within the healthcare system has never been greater.
We are privileged to work with clients who have taken the lead in these areas and every day we see that engagement, not defensiveness, is the only route to success.
Steven Flostrand and Raja Shankar are principals at IMS Consulting Group