The price is right?

A famous economist once said that when the US sneezes, the rest of the world catches a cold. So what does this mean for the pharma industry at a time when the cost of medicines is enduring huge US scrutiny? Well on this occasion, the rest of the world got a runny nose first.

Drug pricing is currently taking centre stage in the lead up to the 2016 US Presidential Election. Hillary Clinton's pitch to become the Democrat candidate has majored heavily on tackling 'runaway prescription drug prices' - and the intensity of her crusade is only likely to increase should she win the nomination. Whatever the result, the Democrats' determination to prevent the Republican repeal of the Affordable Care Act will underscore political debate throughout 2016. Obamacare was the US's first recognisable sneeze of reform to control rising healthcare costs. However, if it is to develop a sustainable remedy, America may need to borrow a handkerchief from its European counterparts. The introduction of bodies such as NICE, IQWiG and HAS has challenged the old rules of pharma marketing and seen the incremental development of new approaches to drive access to medical innovation. As cost-effectiveness draws alongside clinical effectiveness in the appraisal of new treatments, making sure the price is right has become a key priority. But it isn't the only game in town.

The global fixation on price, whilst understandable, may be the reddest of herrings. Health stakeholders should focus not on the cost of drugs but on the value they provide. Pharmaceutical companies must therefore work hard to make sure that price doesn't become the dominant factor in the evaluation of medicines. They should instead focus on communicating demonstrable value that matches known stakeholder needs. As the debate intensifies, making that distinction between 'price' and 'value' will be a critical component of market access. But it's an incredibly complex process.

“Market access cannot be separated from price,” says Stuart Tutt, global head of ICON Pricing and Market Access. “For payers, price and market access are the two variables which allow control over the budget impact of a treatment. By finding the optimal balance of price and access, payers can optimise the overall health gain from the available budget. The focus on the budget tends to create a short-term focus for payers, meaning that it can be difficult to secure favourable funding for interventions that have a high short-term cost but can generate long-term savings by preventing future problems. Payers also have a strategic need to provide market access for breakthrough treatments at a price and speed that incentivises manufacturers to invest in the development of potential breakthrough medicines.”

The price point
Most European countries have a national evaluation process to determine the list price of a medicine and the eligible patient population - and a local budget holder who is responsible for implementing access restrictions. The ability to manage which patients gain access to a medicine varies across countries and also between treatment types, meaning price control at the national level remains the key lever in many countries. But the mechanisms in play differ dramatically.

Although there are subtle access nuances in every European market, Germany is perhaps the most complex. The passing of Arzneimittelmarktneuordnungsgesetz (AMNOG), the Pharmaceutical Market Reorganisation Act, in 2010 introduced new regulations around the reimbursement of drugs within the German healthcare system. “Upon receiving marketing authorisation, a pharmaceutical company can determine the price of a new innovation for the first year after launch - during which time, the G-BA will assess whether the product provides any additional benefit,” says Hubert Kumper, director/head of market access, DNA Communications. “The company is obliged to submit an application for the assessment of potential additional benefit, providing the G-BA with a value dossier to be evaluated by IQWiG. A comparative assessment of the additional benefits will be conducted within six months. If additional benefit is established, the price will be determined by negotiation between the association of health insurance funds and the marketing company. If no additional benefit is found, the new medicine becomes part of the fixed price system according to its pharmacological profile.”

IQWiG evaluations often focus on different patient populations from those used in the clinical trials

However, despite the apparent simplicity of the legislation, the price finding process in Germany is highly complicated. “IQWiG evaluations often focus on different patient populations from those used in the clinical trials. Moreover, whilst the G-BA always asks for observational data, IQWiG remains largely sceptical of real-world evidence and therefore puts greater emphasis on evidence-based clinical trials. The dynamic between the G-BA and IQWiG makes pricing and reimbursement an extremely complex process.”

Elsewhere, many countries have some form of early access scheme that allows access for patients with the highest unmet need even before regulatory approval. “In most countries the manufacturer has to provide the product for free, but in France and Italy it's possible for use, in accordance with early access scheme rules, to be funded by the healthcare system,” says Stuart. “Once approved, several countries use some form of risk share scheme for innovative medicines, where the manufacturer is required to repay some or all of the cost of the treatment if an agreed clinical target is not achieved in a particular patient. In practice these are often a form of disguised discount rather than a true sharing of risk. Payers in some countries have talked about provisional pricing schemes under which a provisional price is set that can be revised depending on results obtained in the real-world setting. Proposed changes to the Cancer Drugs Fund in England include provision for access at a provisional price that is considered potentially cost-effective. A programme of data collection would also be agreed and a cost-effective price could then be revised based on new data. The use of RWE is likely to become increasingly important. Moreover, the ways in which manufacturers approach both the collection of evidence and the design of provisional pricing schemes will be critical to market access.”

Even when a product is in early development, companies need to consider how it's going to be received once it's on the market

Global implications
So what do these complexities mean for pharmaceutical operations in terms of market access? “Today, companies have more of a global focus,” says John McDermott, VP, Covance Market Access Services. “In the past, the pharma business was frequently segmented by geography, but today country silos are being removed. Companies are taking a global approach. It's no longer about looking, for example, at what's happening in the US - it's about looking in all the other markets and trying to develop a common evidence platform that can be adapted within each country. Typically, larger companies are setting up global structures that delegate responsibility for local regulatory and HTA submissions to their affiliates. The overall direction for evidence generation is set and developed centrally, but that evidence is then made available through online dossiers and libraries so that individual countries can customise the message for their local authorities. This is a relatively new approach. In a global marketplace, having global market access capabilities is becoming ever more important.”

Market access thinking, however, should not focus solely around launch. Early engagement with stakeholders is imperative to ensure that trials generate evidence that resonates with both prescribers and payers. “Even when a product is in early development, companies need to consider how it's going to be received once it's on the market,” says John. “This can often be overlooked by smaller companies who are planning to license their product to a partner after Phase IIa. Sometimes such companies don't consider market access issues at all. This is a missed opportunity. In early development, you can modify the evidence you're collecting cheaply and efficiently to make sure that the full package of evidence is available once it gets to market - regardless of who is selling it. This increases the value you can show your licensing partners and lowers the risk of market failure, meaning that you can command a higher price for your company as well as for your drug.”

For payers, price and market access are the two variables which allow control over the budget impact of a treatment

The value of market access
Certainly, pharma companies are recognising the value - not the price - of developing robust market access strategies. “They know the old rules no longer apply,” says Hubert. “The demands of market access are having a major impact on communications pathways as companies seek to develop better and earlier engagement with payers. Companies now realise that before they write their brand plans and clinical dossiers, they need to know the views of payers, medical societies and medical associations. These are important influencers, so understanding their needs through comprehensive stakeholder mapping is essential. The insights they achieve will inform not only their dossiers, but also their communications pathways. But companies should be careful in how they engage these communities; some will step away if they are approached directly by the industry. Independent third parties are often better placed to facilitate that dialogue. Best practice is to engage a specialist partner around 1.5 years prior to EU approval - and to take a collaborative and transparent approach to developing an agile market access strategy.”

In a global environment where price is in danger of becoming the main metric for evaluating medicines, the development of proactive and responsive market access strategies will be critical to brand success. It's now clear that payers are increasingly reluctant to pay for incremental innovation - they will only pay for products that are proven to make a difference in areas of unmet clinical need. This alone should sharpen industry thinking and reinforce the need to think beyond regulatory approval. “Clinical development teams often consider regulatory approval to be the end game - but it's not,” says John. “The real endpoint is how your evidence package is going to play out with the key stakeholders. To understand that effectively, companies need to focus on it from the very beginning. Payer engagement doesn't need to be expensive, but failing to do it properly might be the most costly exercise of all.”

Pharmaceutical companies are gradually ripping up their old operating models and investing heavily in market access infrastructure. Such reorganisation may, in the short term, appear an expensive exercise. But for once, the price is right. And the value will be even greater.