What will shape the global pharmaceutical pricing environment in 2018?
One of the advantages of working in a global consultancy and technology solutions firm such as Global Pricing Innovations (GPI), which specializes in pharmaceutical pricing, is the wide exposure one receives to the many different challenges across disease areas, companies, and geographies. This forces us all at GPI to keep on our toes and gives us a welcome chance to gain insight into the latest developments and factors that are shaping and changing the future pricing environment within global markets. For 2018, we would like to share some of our thoughts, based on recent experiences, of those factors which will present challenges and opportunities for pricing specialists within the pharmaceutical industry in the coming year.
It is no surprise to pricing professionals that many factors have been placing increased downward pressure on prices for quite a few years now. It has been well documented that payers use many different “tools” to try and reduce spend on drugs as a way of reducing overall healthcare expenditure. Some of those are relatively blunt techniques (internal or external referencing) or more complex and sophisticated, such as Health Technology Assessment (HTA) and the associated calculation of a drug’s value-based price for a healthcare system. However, even those traditional approaches are evolving and will continue to change throughout the coming year.
For example, one pointer towards the direction of change occurred in 2017- Austria changed its referencing rules to include visible NET prices when historically list price had been the standard measure for calculations. International Reference Pricing (IRP) which was previously the preserve of European countries, is now being considered and implemented by other nations. Evolving markets, (which are now being expanded into by pharma companies) have increasingly higher healthcare expectations from their economically richer populations, and payers are learning from mature market experiences and techniques of price control to help deal with this pressure.
We are also seeing a move by payers towards an increase in the use of tendering as a way of increasing competitive pressure within the market and to ultimately reduce costs.
Furthermore, HTA is expanding and evolving also- a gradual homogenisation of processes (although not there yet, as we can see from obvious Germany, France and UK differences) means that price is a critical part of the value argument and can make or break uptake of a product in a market even after marketing authorisation has been granted. The threshold for affordability is being re-evaluated by HTA organizations such as NICE, and more complex negotiations are having to take place to overcome this issue to gain access, whilst achieving a price acceptable to companies that incentivize future innovation in new treatments (and does not adversely affect other blunt price control mechanisms e.g. IRP). Similarly, in Germany, the concept of a single “economic” value-based price across patient sub-groups and indications (Mishpreis) has been challenged in 2017, bringing back concepts of indication-specific pricing and leaving pricing experts wondering as to whether a new year may see revisions to the pricing framework in this key market.
This situation is becoming even more complicated by the recent move towards assessing the effectiveness of combination therapies -often using products from different manufacturers- in the treatment of some cancers. (e.g. Melanoma). This is a trend which is likely to continue and will require novel approaches to think about regulations, pricing and collaborative strategies.
There are other geography specific circumstances which will also influence the global pricing landscape. We are seeing a move towards even greater price control within the USA. (Generally, the most expensive market where list prices go up in direct contrast to most other markets). There is political movement with future legislation changes likely at national (and even individual state level) to grasp more control of this. Drug prices appear to be a political football right now, and this is one area to watch closely.
Closer to home, Brexit has caused a few uncertainties and will likely continue to do so for some time. We have already seen the movement of the European Medicines Agency from the UK to the Netherlands. What other economic impacts of Brexit will affect local UK drug prices and the global market, as a direct result of the UK being a reference country for many others?
However, it is not all doom and gloom. Whenever one is faced with a challenge, one is often presented with new opportunities. Pricing professionals are used to this scenario and 2018 will be no different. New treatment innovations will continue to challenge current pricing thinking for both companies and payers. Pricing professionals will be keeping a close eye on 2018 developments to see how the new opportunities will help to shape a deeper understanding of pricing and value.
The Global Pharmaceutical market is growing. One area of significant growth is that of biological treatments which are high value and relatively high cost. I think any shareholders of Abbvie stock would agree. Whilst launches of such products will continue, the pending increase of biosimilar launches presents another opportunity for companies. The potential size of the market makes it very attractive for industry. However, there are still some issues to overcome. There may still be perceived production capability issues, some payer and clinician reluctance to switch from existing treatments and concern about levels of evidence for biosimilars. With those points in mind, the innovative pricing specialist who can use price as an incentive to test and overcome some of those issues may be able to make a significant difference to his or her organization and biosimilar product uptake within different countries. This will not necessarily involve purely traditional pricing strategies. Innovation will be key to success and it may involve tenders, rebate schemes, confidential discounts etc. Understanding how different payers see a biosimilar entry into a country is key to getting the price and market access strategy right.
Gene Therapy and CAR-T cell treatments which are offering “cures” for previously chronic and often untreatable diseases are really challenging the current status quo. So far, we have seen price tags of $0.5m dollars and above for such treatments. This will continue to push the current thinking of value and funding. The future launches of more such treatments may have additional impact on many ”typical” pharmaceutical product launches and their eventual price attainment. In effect, the price tag of such treatments is bringing future chronic disease expenditure into the current year’s budget if no innovative payment approaches can be leveraged to spread costs. This could put additional pressure on current in-line products and new product launches for a fair share of fixed drug budgets.
At the end of 2017, we saw the approval of the first digital pill- taking monitoring and patient-centric treatment to a new level. Now is the moment to shape payer perception on value and cost-savings through use of new technology to challenge the perception of product enhancement and me-too or pro-drugs.
Early Access Schemes have contributed to a speeding up of new drug approvals (Indeed the FDA had a new historical high for drug approvals in 2017). Early Access schemes, Patient Access schemes (e.g. pay for performance and confidential, negotiated discounts from list price as seen commonly in the UK) will also continue to play an important role in 2018. The move away from traditional pack price setting/monitoring towards price by indication or a specific patient population will continue in 2018.
Use of Technology really presents the modern pricing professional with the greatest opportunity. We are well versed in the use of “big data” within clinical settings to understand better how drugs perform in the real world. However, use of the same increase in computing power allied with the ability now to source different types of reliable data is providing exciting opportunities for pricing professionals heading into 2018 and beyond. If quality data and computing power are combined with modern analytics and software, then it can improve the ability of pricing professionals to plan new launches more effectively and track performance versus analogue treatments or competitor drugs treatments in real time. This will give pricing professionals the tools to understand, predict and mitigate risks whilst understanding the impact of any corrective action in all markets. Better, informed decisions will be made much more quickly and confidently in 2018 than ever before. This will serve to improve access to treatments for patients at an optimal price and ensure continued investment in treatment innovation and help to counter the political football kicking that drug pricing is becoming. Win-Win all round.
The author, Alan Stewart, is Commercial Director for Global Pricing Innovations (GPI), has 24 years pharmaceutical industry experience and has specialized in Global Pricing for the last 7 years.
If you would like to discuss any of the topics raised in the article above or to find out how GPI can help you with strategic or tactical price and market access requirements from a consulting or technology solutions perspective, please email firstname.lastname@example.org, or visit www.globalpricing.com for more information.