A Conversation about Drug Pricing
With the pricing debate never far from public discourse, we reflect on the intricacies of drug pricing and what it is like to work in this heavily scrutinised, yet rewarding and vital function of the pharmaceutical industry. In this discussion, we hear from two thought leaders who share their passion for health economics, their thoughts on non-traditional models, and how they predict drugs will be costed in the future.
What attracted you to the field of pricing and market access?
Price: I first developed an interest in outcomes research when working as a hospital pharmacist, which prompted me to undertake a PhD in the area. From here, I studied health economics, patient-reported outcomes, and healthcare decision-making. This naturally led me towards a career in pricing and access, which turned out to be a good decision. I really love the interplay of science, economics, and health policy and what motivates me is the impact our roles have on patients. I am incredibly fortunate to have an interesting role which contributes towards societal efforts to tackle a range of serious illnesses.
Echauri: Pricing and market access is one of the most strategic areas to work in the pharmaceutical sector; it requires strategic thinking, anticipation, negotiation skills, and stakeholder management. Shaping the value of a brand starts with understanding the unmet need, analysis of the competitive landscape, the design of the clinical program, and the development of value for the various stakeholders: patients, payers, physicians, and society in general. Few areas are so demanding and critical for the success of an innovative medicine; the satisfaction you have when the medicine reaches the patient and you can see the impact in their life is so rewarding!
Drug development is a lengthy and costly process. What more could be done to educate the public on why drugs cost what they do?
Price: We need to engage more with the general public on this important topic. Although the costs of medicines are often in the headlines, latest OECD data shows the proportion of overall healthcare spend allocated to medicines is falling. We need to help people understand that medicines are priced according to the benefits they deliver to patients and health systems. Innovative medicines relieve pain and suffering, can reduce hospitalisation rates, and can help people live longer, healthier lives. We need a healthy, highly skilled, and well-resourced pharmaceutical industry to support the risky and costly process of discovering, developing, and delivering transformational medicines. The current pandemic has shone a light on how vital the infrastructure, capabilities, and skills of a healthy pharmaceutical industry are for the good of society.
Echauri: The pharmaceutical industry has historically struggled to communicate what it does and what it stands for, leading to low levels of trust among the public. Times are changing, but we need to do more to build appreciation of the value of pharma innovation. It is not necessarily the cost of development that drives a final price, rather it is the value that the innovation brings to patients. However, this is not necessarily widespread public knowledge, leading to recurring questions about why drug costs seem so high. One way to address this gap is to start reframing the discussion around understanding not only the effort to get a product to market, but what it means for patients and the healthcare system.
What has been the most significant shift in the pricing of drugs for broadening market access over the past decade?
Price: One significant move has been the emergence of managed entry agreements (MEAs): arrangements between manufacturers and payers that can help address payer concerns about the value and affordability of new medicines. They help accelerate and broaden patient access to innovative medicines, while also contributing to the long-term financial sustainability of healthcare systems. MEAs encompass both financial agreements and outcomes-based payment models that link reimbursement to the achievement of pre-specified clinical outcomes. Financial agreements have been common for some time, but recently we have seen increased interest in outcomes-based agreements that link payment to product performance. To accelerate these kinds of models, which are especially interesting for new technologies such as cell and gene therapies, we need to make sure we have a robust real-world data infrastructure to enable the tracking of outcomes in real time.
Echauri: Trends of the past decade come amidst a backdrop of an aging population, an increasing prevalence of chronic diseases, and growing pressure to fund rare disease treatments. Governments have introduced several aggressive pricing strategies and policies to change prescribing behaviours, such as generic substitutions and limiting medications to certain sub-populations. Additionally, the pharma innovation landscape has changed; no longer are companies bringing blockbuster small-molecule therapeutics using a volume-based approach. New targeted therapies and innovative biologic therapies are often intended for smaller patient populations and must be priced accordingly.
Out of the alternative pricing systems available, which do you think could drive the most equal value for pharma, payers, and patients in the future?
Price: There is not a one-size-fits-all solution here. Is the main issue clinical uncertainty, variation in clinical benefit, or how best to cover one-off costs of treatment? In the future, pricing systems will likely be more receptive to outcomes-based agreements, as we will have increasing amounts of real-world data at our fingertips. That means payers and clinicians could adopt a more holistic approach to disease management; moving from ‘saving the best treatment until last’ to a strategy where patients receive the most efficacious treatment first, with a view to delay or avoid the need for subsequent treatment. Different treatment pathways should mean that discussions between manufacturers and payers will shift from being about transactions or budget impact, towards how best to achieve value-based outcomes for a given disease.
Echauri: Prices for drugs should reflect their value. If price and value become disconnected, efforts to produce new therapies won’t focus on the treatments with the highest net benefit for patients and payers. Value-based contracting where the price of a new health technology reflects the benefit that it provides to patients, society, and the economy, offers the best value for manufacturers, payers, and patients. This approach represents a route to mitigating or sharing the financial risk associated with introducing new healthcare technologies without limiting patient access.
This article originally appeared on EMG Gold on February 25 2021.