Abstract
The 14th Annual European Pharmaceutical Pricing and Reimbursement Conference was sponsored by SMi Group Limited, London, UK. The participants included industry, government and private professionals involved in pricing and reimbursement. The purpose, each year, is to share advances in the discipline with respect to policies and theory.
Current reimbursement challenges
Many speakers raised common issues faced by payers when making reimbursement decisions. Andrew Bell from CRA International Life Sciences Consulting (Boston, MA, USA) listed heightened pressure on healthcare budgets, limits on their expenditure, increasing demands associated with population changes and growing expectations.
Colin Wight from GalbraithWight (Kent, UK) presented the projected growth in healthcare expenditure between 2005 and 2010 for a variety of countries, which ranged from 4 to 13% according to the Economist Intelligence Unit Statistics of January 2007. His assessment was that the previous emphasis on budget setting has shifted to rationing and evidence-based purchasing. One of the reasons for this stricter control is that a number of European countries, such as France, are facing the Maastricht limit of 3% gross domestic product deficit in public financing. Moving public expenditures to private insurance is one way to address this constraint.
Salomé de Cambra, MD, MBA from RTI-Health Solutions Pricing and Reimbursement Europe (Barcelona, Spain) discussed a challenge that is present in a number of countries as it presents itself in Spain. The government must balance between the EU regulations, federal control of pricing and the funding responsibility of the autonomous regions. de Cambra showed that, while pharmaceutical per capita expenditure continues to rise, the rate of increase seems to have slowed since 2001 in Spain. On the other hand, real, inflation-adjusted expenditure has decreased over this period.
Similarly, Fabrizio Gianfrate of Luiss Business School (Rome, Italy) discussed Italy’s increasing efforts to stay within the Maastricht parameters with a focus on limiting pharmaceutical and device spending over the last 36 months through a new agency (the Association of Independent Financial Advisers) and additional resources and expertize dedicated to price controls. Italy continues to use a combination of methods, such as regional- and national-based formularies with reference prices for off-patent drugs and negotiations for the others and risk sharing (limited, until now, to oncological drugs). New caps of 14% for retail and 2.4% for medications used in hospitals have been introduced, with varying methods of payback for industries, wholesalers and pharmacies.
Echoing the pressures faced elsewhere, Slawomir Chomik from Solvay Pharmaceuticals (Weesp, Netherlands) discussed similar mechanisms that are affecting supply and demand in Middle and Eastern Europe, which are making the sales and marketing model of pharma increasingly obsolete. Attributable to the silo mentality, in which the consequences of reducing drug expenditure are not viewed as having wider implications, several countries in this region responded to the economic crises through across-the-board cuts in drug prices this fall.
Pricing pitfalls
Several speakers presented perspectives on how to be flexible and innovative in response to the current problems with setting prices. The perspective of Steve Carter from Campbell Alliance (NC, USA) was that pricing too high can curtail product utilization and reduce the product’s peak market share. It can lead to slow uptake during the critical post-launch period, reduced patient compliance and willingness to pay and, in some cases, attract negative attention from key stakeholders. On the other hand, pricing too low forfeits margin throughout the lifecycle of the product. It can send the wrong message about the value of the drug and reduce the value of the entire franchise. Carter’s message was to identify the key price stakeholders, develop a payer value proposition, consider the broader impact of the pricing decision, know the competitive environment and address pricing early in the product development cycle.
Susana Murteira from Lunbeck SAS (Paris, France) also discussed the importance of pricing in drug development. She touched on the same pitfalls as Carter and added the importance of understanding the flow of funds throughout the system as well as the patient pathway. As with de Cambra, Murteira emphasized the growing role of regional decision making. An example of the variation in drug availability, as a result of regional authority, was provided in Canada, where the percentage of cancer therapies available by province varied between less than 10% in British Columbia and Newfoundland to nearly 100% in Nova Scotia Citation[1].
Pricing innovations
The reimbursement challenges have led to innovations in pricing. Flexible pricing, risk sharing and value-based pricing were three of the innovations observed. Bell proposed flexible pricing. The bases for establishing flexibility were:
• According to the quantity being purchased, such that large-quantity purchasers are charged a lower price-per-unit;
• Separate prices for the core product and its components (e.g., one price for a blood-glucose-testing monitor and separate prices for disposables);
• The willingness to pay; however, this assumes the ability to segment the markets, such as across countries;
• A two-part price, comprising a fixed fee and a variable fee based on consumption.
No pharmaceutical examples were provided for these concepts.
Risk-sharing agreements, more simplistic flat pricing regardless of size, and per-patient pricing were presented by Wight as options to address payer concerns regarding both economic and clinical outcomes. Risk sharing is an agreement to achieve a specific outcome. If the outcome is achieved, the payer will pay, but if the outcome is not achieved, the payer does not pay. Wight argued that payers want predictability in terms of both outcomes and their costs. Risk sharing addresses both of these concerns. Two of the problems with creating these agreements are that:
• Prior to launch, little is known regarding a medicine’s performance in the delivery of health outcomes outside of clinical trials;
• Dosing and compliance can change in the real-world setting.
There are three types of risk-sharing agreements:
• Outcomes guarantee – where the payer pays for all patients, but if the outcome is not achieved, the company refunds the payer for the patients who do not achieve the outcome;
• Risk bearing – where the payer only pays for responders after a response;
• Discounted risk bearing – where the payer does not initially pay but if the patient starts to respond after a set period, the payer pays for continuing treatment.
These agreements are used when either the manufacturer wants to get a foothold in the market or wants to improve the cost–effectiveness results in relation to a health-technology assessment.
Improving effectiveness to increase the perceived value of healthcare spending was also raised by Deborah Williams from Baxter Healthcare Corporation (IL, USA). She explained that there is limited use of comparative effectiveness in the USA, unlike the heavily health technology assessment-dominated European environment. She discussed the initiatives in the legislative arena, which are strongly supported within the government and with private health insurers, to replicate what is viewed in the USA as the more preferred European governmental agencies, such as NICE or the Canadian not-for-profit model for comparative assessments Citation[2]. One key difference that may affect the outcome in the USA is the strength of the patient organizations who may not wish to see access to some products for rare diseases – viewed as a European problem – replicated in the USA.
Orphan drug pricing
Two speakers discussed the particular case of orphan drug pricing. Donald Macarthur from Global Pharmaceutical Business Issues (London, UK) reviewed the EU definition of orphan disease and the benefits that this designation provides manufacturers. Since 2000, when the regulation was implemented until the end of 2007, 777 applications have been submitted, of which 528 were positive, and this has led to 44 orphan drugs to treat 38 different conditions. Jenifer Ehreth from The Medicines Company (NJ, USA) described the issue for industry of pricing for such small populations. The costs of development do not differ from large populations, the risks are greater and less is known about the disease in general. This leads to prices exceeding standard pricing and cost–effectiveness ratios that do not consider the economic environment of the manufacturer. Macarthur discussed how several countries are attempting to comply with the EU’s directive by providing special funding processes or funds.
Parallel trade
The variation in pricing schemes across Europe continue to provide opportunities for the form of arbitrage known as parallel trade, according to Duncan Curley from Innovate Legal (London, UK). The European Commission has a history of vigorous enforcement of the competition rules and has taken a dim view of efforts to stifle parallel trade through contractual measures in distribution arrangements. In the Glaxo–Wellcome case, the Commission condemned the arrangement by which Glaxo attempted to set two prices in Spain – one for internal use and one for export, which is now on appeal to the European Court of Justice. Janice Haigh of Astellas (Staines, UK), in her presentation on supply management, remarked that, despite efforts from manufacturers to reduce pricing differentials, recent significant fluctuations in exchange rates have promptly led to new arbitrage opportunities out of one country to another.
Financial & competing interests disclosure
Jenifer Ehreth is employed by The Medicines Company. No products from this company are reviewed in this article. Deborah Williams is employed by Baxter Healthcare Corporation. No products from this company are reviewed in this article. The authors have no other relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript apart from those disclosed.
No writing assistance was utilized in the production of this manuscript.
Websites
- Cancer Advocacy Coalition of America 2006–2007 www.canceradvocacy.ca/about.html
- Congressional Budget Office www.cbo.gov/publications