In a healthcare world that experiences a plethora of high-cost new therapies coming to market in parallel with price increases for existing speciality drugs, pharmaceutical companies are having to move away from traditional pricing models that are largely based on demand and what the market will bear. At the same time, they face an evolving access environment where reimbursement decisions are taken in different ways, on different criteria and with input from a much wider group of stakeholders. A central theme in this is value. European assessment authorities evaluate new drugs by assessing improvements in efficacy and safety in relation to price differentials, as a basis for granting access or not. Their aim is to achieve what they believe to be a fair price for the product by setting a price ceiling, negotiating a discount on the list price or entering into a risk-sharing arrangement whereby cost is limited when drugs do not work as promised.
In the United States, payers adopt a combination of rebate schemes and utilisation management techniques, such as pre-authorisation of patients and step edits, and these are all on the increase. Data from IMS Health suggests that average rebates to payers on drug prices nearly doubled between 2007 and 2014 . However, as prices for specialty drugs continue to rise, others have suggested that higher prices are purely implemented to feed the rebates that are now the norm.
This webinar showcases the Growth Direct System; an RMM (Rapid Microbial Method) that improves on traditional membrane filtration, delivering increased accuracy, a faster time to result, enhanced data integrity compliance, and more control over the manufacturing process.
Key learning points:
Understand the benefits of full workflow microbiology quality control testing automation in radiopharmaceutical production
Learn about ITM’s implementation journey and considerations when evaluating the technology
Find out how the advanced optics and microcolony detection capabilities of Growth Direct® technology impact time to result (TTR).
Don’t miss your chance to learn from experts in the industry –Register for FREE
Can’t attend live? No worries – register to receive the recording post-event.
Emergence of value-based pricing
All of these pricing structures are routes to reaching an agreement between company and payer that delivers adequate return to both parties. But now we are seeing the emergence of value-based pricing, where the price is determined as a function of measurable ‘value’ brought by the product to relevant stakeholders. Health systems or payers may impose a price on the manufacturers or manufacturers may adopt a more overtly reasonable approach to price setting, but in both cases, price is determined according to some empirical measure of value in the eyes of the people that matter. Value-based pricing is more transparent, but is still designed to maximise returns as measured by revenues or profits. As such, it can still result in a similar price paid to that negotiated through rebates or risk sharing, but the increased transparency helps to short-cut what can become a lengthy negotiation process. Value-based pricing is inherently focused on the impact the product is going to have rather than starting with a purely demand-based unit price.
But herein lies a challenge: how do you measure value? Is it just about improvements in patient outcomes based on efficacy and reduced safety risks, as a function of price? Or does it also include wider societal benefits, such as returning patients to the workplace and reductions in long-term social care costs? By assessing value in terms of benefits accrued throughout the use of the product, marketers can consider pricing variation over time that is consistent with the full value estimate. Here, things become more complicated, since the payers footing the short-term bills may not benefit from the wider societal impacts. The debate around hepatitis C is a good example of this, where new and highly priced therapies introduced in the past few years have effectively brought a cure, thereby potentially reducing long-term care costs. It is no surprise, therefore, that health technology assessment (HTA) bodies have approved these hepatitis C therapies as cost effective, but that does not make them affordable to payers who have to pay for the drugs and will not necessarily benefit from the longer term economic impacts.
Market understanding
To anticipate and address the inertia they are likely to face, pharmaceutical companies need to look beyond expectations of likely demand, patient outcomes and competitive landscape, and take an analytical approach to understanding each market they are interested in. In parallel, they need to be rigorous about assessing the stakeholder landscape for access to drugs in those markets – how decisions are taken, by whom, on what grounds, who influences whom – all as a basis for orientating market access strategy around external dynamics. This also relates to less easily defined but equally critical factors, such as the reputation of the industry and how this can determine attitudes to companies when they are bringing new drugs to market.
Not only do markets and geographies differ in their handling of drug reimbursement, there is a wide range of stakeholders such as medical societies, advocacy groups and policy makers who have a growing influence on decisions, how they are implemented and to what effect. This is not just about communication with stakeholders: it is also about constructing a market access and pricing strategy to address their priorities and concerns, and thereby deliver value in their terms. Value-based pricing as delivered by manufacturers is a relatively new concept, where the company effectively does the work of an HTA body to determine a reasonable price for a new drug. But how can companies appropriately select and prioritise value metrics for a therapy, given the varying priorities of decision makers and their influencers? To be effective, value-based pricing must address the needs of the wider group of stakeholders as well as the payers, and go beyond the simple measure of increase in efficacy divided by increase in cost as compared with current standard of care. This means value-based pricing must be based on economic and scientific evidence as well as accommodating inputs from the wider stakeholder community. In this way it will:
Capture value perceptions from all stakeholders who have an impact on product reimbursement and utilisation, including payers, physicians, patients and pharmacists
Assess the trade-offs stakeholders make to determine the value of a drug, including clinical, pharmaco-economic and societal impacts
Allow for the relationship between value and financial incentives, such as rebates or discounts received by prescribers and payers
Factor in the incremental, often significant, value-added features such as dosing frequency, mode of administration and innovative drug-delivery mechanisms
Pricing new drugs requires company and pay to reach agreements that deliver adequate return to both parties
This approach relies upon recent advances in measuring and modelling how stakeholders make decisions to offer coverage, and to reimburse and utilise pharmaceutical products. Key advantages of the approach are as follows:
The value of a feature of a product and its competitors can be estimated
Value estimates are based on key stakeholder priorities and therefore may vary accordingly. For example, oncologists put disproportionately more value on longer overall survival of 40 months compared with overall survival of 12 months
Value estimates for each stakeholder are obtained independently of price, enabling the use of an estimated value model to develop alternate pricing and market access strategies throughout the life of the product. This can help focus short- and long-term commercial activities to increase stakeholder understanding of, and positively enhance perceptions of, value
The method can be used to model the minimum and maximum price a product can command in the market, based on a measurable understanding of its relationship to value and with reference to market expectations.
Buy-in to value needs to start early
Manufacturers need to commit to understanding, engaging and involving a wider group of stakeholders well before a product nears launch. In this way, they can secure the insights and priorities of the people that matter during the product development cycle and in ways that ensure these stakeholders have contributed to and bought into the product profile and what it delivers.
Clearly this interaction mainly relates to payers or HTA bodies, but also includes influencers such as professional groups, patients and their representatives, care providers and policy makers, all of whom may have different priorities from the ultimate decision makers.
Multi-faceted external relations is a discipline the industry often finds hard to get right because companies comprise discrete functional groups who are rarely aligned. In addition, stakeholders take a lot of shifting from their position on issues, especially if they feel pressurised by people they see as having a vested interest when it comes to launching a new product. This is why success depends on cultivating long-term relationships rather than short-term communication around key commercial milestones.
This requires leadership and coordination across multi-disciplinary teams, both globally and at an affiliate level, so that stakeholder engagement becomes part of the psyche of the whole team associated with the product.
External focus is vital
Critical to a successful approach to engagement is planning the approach around the most influential stakeholders’ interests rather than the company’s interests: who are the most influential targets? What are their personal priorities? What will drive them to take action themselves? Who ‘owns’ the relationships with them? How do stakeholders interact with each other and how likely will they want to engage, if at all? If we consider value as the ultimate driver for success, we need to redefine it in terms of benefit to the stakeholders in relation to their perception of cost, which may be wider than drug price. This value measure might only concern patient outcomes or economic impact, but it could relate to wider societal benefits, operational support for practitioners, political pressures, etc. And all of these need to be conceived in ways that make stakeholders feel comfortable and secure with the position they take, possibly requiring evidence and weight of opinion among their peers to protect them from criticism. This is a far cry from a manufacturer-driven paradigm where price is determined by demand potential.
In conclusion, there is no reason why reimbursement decisions and drug prices cannot be made on an empirical assessment of value, either on an economic level or a wider societal level. And yet, because health systems are so big and so complex, with input from so many stakeholders with different priorities and areas of influence, it is the ‘people side’ of the problem that presents such a significant challenge to both manufacturers and decision makers. As a result, it is vital to ease the process by committing to building better relationships, better understanding and genuine transparency among all those involved. This is not just a problem for the industry to solve, but it is in companies’ best interests to initiate a more professional and sustainable approach to engaging with stakeholders, both for setting price and for subsequent access discussions.
About the author
Andrew Butcher is a Vice President in the Life Sciences Practice of Charles River Associates, in the firm’s London office. The views expressed herein are the views and opinions of the author and do not reflect or represent the views of Charles River Associates or any of the organisations with which the author is affiliated.
This website uses cookies to enable, optimise and analyse site operations, as well as to provide personalised content and allow you to connect to social media. By clicking "I agree" you consent to the use of cookies for non-essential functions and the related processing of personal data. You can adjust your cookie and associated data processing preferences at any time via our "Cookie Settings". Please view our Cookie Policy to learn more about the use of cookies on our website.
This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorised as ”Necessary” are stored on your browser as they are as essential for the working of basic functionalities of the website. For our other types of cookies “Advertising & Targeting”, “Analytics” and “Performance”, these help us analyse and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these different types of cookies. But opting out of some of these cookies may have an effect on your browsing experience. You can adjust the available sliders to ‘Enabled’ or ‘Disabled’, then click ‘Save and Accept’. View our Cookie Policy page.
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Cookie
Description
cookielawinfo-checkbox-advertising-targeting
The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Advertising & Targeting".
cookielawinfo-checkbox-analytics
This cookie is set by GDPR Cookie Consent WordPress Plugin. The cookie is used to remember the user consent for the cookies under the category "Analytics".
cookielawinfo-checkbox-necessary
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance
This cookie is set by GDPR Cookie Consent WordPress Plugin. The cookie is used to remember the user consent for the cookies under the category "Performance".
PHPSESSID
This cookie is native to PHP applications. The cookie is used to store and identify a users' unique session ID for the purpose of managing user session on the website. The cookie is a session cookies and is deleted when all the browser windows are closed.
viewed_cookie_policy
The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
zmember_logged
This session cookie is served by our membership/subscription system and controls whether you are able to see content which is only available to logged in users.
Performance cookies are includes cookies that deliver enhanced functionalities of the website, such as caching. These cookies do not store any personal information.
Cookie
Description
cf_ob_info
This cookie is set by Cloudflare content delivery network and, in conjunction with the cookie 'cf_use_ob', is used to determine whether it should continue serving “Always Online” until the cookie expires.
cf_use_ob
This cookie is set by Cloudflare content delivery network and is used to determine whether it should continue serving “Always Online” until the cookie expires.
free_subscription_only
This session cookie is served by our membership/subscription system and controls which types of content you are able to access.
ls_smartpush
This cookie is set by Litespeed Server and allows the server to store settings to help improve performance of the site.
one_signal_sdk_db
This cookie is set by OneSignal push notifications and is used for storing user preferences in connection with their notification permission status.
YSC
This cookie is set by Youtube and is used to track the views of embedded videos.
Analytics cookies collect information about your use of the content, and in combination with previously collected information, are used to measure, understand, and report on your usage of this website.
Cookie
Description
bcookie
This cookie is set by LinkedIn. The purpose of the cookie is to enable LinkedIn functionalities on the page.
GPS
This cookie is set by YouTube and registers a unique ID for tracking users based on their geographical location
lang
This cookie is set by LinkedIn and is used to store the language preferences of a user to serve up content in that stored language the next time user visit the website.
lidc
This cookie is set by LinkedIn and used for routing.
lissc
This cookie is set by LinkedIn share Buttons and ad tags.
vuid
We embed videos from our official Vimeo channel. When you press play, Vimeo will drop third party cookies to enable the video to play and to see how long a viewer has watched the video. This cookie does not track individuals.
wow.anonymousId
This cookie is set by Spotler and tracks an anonymous visitor ID.
wow.schedule
This cookie is set by Spotler and enables it to track the Load Balance Session Queue.
wow.session
This cookie is set by Spotler to track the Internet Information Services (IIS) session state.
wow.utmvalues
This cookie is set by Spotler and stores the UTM values for the session. UTM values are specific text strings that are appended to URLs that allow Communigator to track the URLs and the UTM values when they get clicked on.
_ga
This cookie is set by Google Analytics and is used to calculate visitor, session, campaign data and keep track of site usage for the site's analytics report. It stores information anonymously and assign a randomly generated number to identify unique visitors.
_gat
This cookies is set by Google Universal Analytics to throttle the request rate to limit the collection of data on high traffic sites.
_gid
This cookie is set by Google Analytics and is used to store information of how visitors use a website and helps in creating an analytics report of how the website is doing. The data collected including the number visitors, the source where they have come from, and the pages visited in an anonymous form.
Advertising and targeting cookies help us provide our visitors with relevant ads and marketing campaigns.
Cookie
Description
advanced_ads_browser_width
This cookie is set by Advanced Ads and measures the browser width.
advanced_ads_page_impressions
This cookie is set by Advanced Ads and measures the number of previous page impressions.
advanced_ads_pro_server_info
This cookie is set by Advanced Ads and sets geo-location, user role and user capabilities. It is used by cache busting in Advanced Ads Pro when the appropriate visitor conditions are used.
advanced_ads_pro_visitor_referrer
This cookie is set by Advanced Ads and sets the referrer URL.
bscookie
This cookie is a browser ID cookie set by LinkedIn share Buttons and ad tags.
IDE
This cookie is set by Google DoubleClick and stores information about how the user uses the website and any other advertisement before visiting the website. This is used to present users with ads that are relevant to them according to the user profile.
li_sugr
This cookie is set by LinkedIn and is used for tracking.
UserMatchHistory
This cookie is set by Linkedin and is used to track visitors on multiple websites, in order to present relevant advertisement based on the visitor's preferences.
VISITOR_INFO1_LIVE
This cookie is set by YouTube. Used to track the information of the embedded YouTube videos on a website.