pricing market access

PMA Perspective March 2016


Hello and welcome to Remap Consulting’s March 2016 Newsletter. We hope you had a great Easter.

Topics discussed in this issue include: Will the recent changes to the UK’s Cancer Drug Fund require earlier HTA submissions to NICE?; The impact ICER has been having on drug prices and HTAs in the US; Our perspectives on an EU commission report on how international reference pricing can be used to lower drug prices.
The start of 2016 has been very busy. We had the pleasure to present at the Swiss HLG conferences in February, where we presented on the importance of Patient centricity and Payer needs: increase the value of your BD projects. Also, we have relocated our Swiss office from Bern to a new base in Zug. Additionally, we are actively searching for talented people to join our team for a number of open positions. Please do contact us if you have any recommendations.
Looking ahead, we will be attending the US ISPOR conference, Washington DC in May and the BIO International Convention, San Francisco in June. We hope to see you at those events.
Paul Craddy & Graham Foxon
Managing Directors – Remap Consulting

Will the CDF proposals force pharma to prepare for NICE at the same time as EMA submission?

In February, NHS England announced that the UK Cancer Drug Fund (CDF) will get a new lease of life from July 2016 as a ‘managed access’ fund with a fixed annual budget of £340 million. Currently, the CDF can choose to pay for new cancer drugs even if NICE has rejected the drug for widespread use on the NHS. Come July, NICE will gain decision power by saying yes, no, or maybe to cancer drugs entering the UK market. Drugs in the yes category will be offered on the NHS while those given a maybe rating will be considered to enter the CDF. Those drugs rated with a no will be denied access to the NHS in England.

So what’s new?

One of the most important aspects of the revised CDF is that new cancer drugs or significant new licence indications will now undergo an evaluation by NICE and receive draft guidance before receiving regulatory approval in the UK. This process is aimed at accelerating patient access for cancer drugs that are rated cost-effective by NICE. Sir Andrew Dillon, NICE chief executive said of the changes: “Patients in this country will now have access to clinically and cost-effective, innovative new cancer drugs faster than ever before. In a first of its kind approach, NICE will issue draft recommendations on the use of cancer medicines before they receive their licence, with funding from NHS England available if approved. No other country in Europe does this.”

Drugs with a promising clinical profile, but for which the evidence is not strong enough for routine use, will be given a conditional recommendation by NICE. These drugs will be available to NHS England patients via the CDF. Conditional recommendation is granted for up to two years during which time the manufacturer must gather more evidence on the cost-effectiveness of the drug. NICE will then use the new evidence to determine whether to move the drug out of the CDF into routine NHS funding, or if insufficient evidence was provided to make the drug only available on an exception, individual patient, basis. 

Drugs currently funded by the CDF will stay on the list but will undergo a new appraisal by NICE in the near future. Any patients currently receiving those drugs will be entitled to complete their treatment.

Not everybody is happy
As in the past, pharma companies will need to show cost-effectiveness for their novel cancer treatments either at time of market entry or two years down the line. Alternatively, pharma companies might engage in a patient access scheme with the Department of Health in order to obtain patient access for their drug. Pharma companies are not happy with the new plans and many think this is a repacking of the past. Dr Paul Catchpole of the Association of the British Pharmaceutical Industry, said pharma companies were ‘disappointed’ by the plans. He believes that “this carries the very real risk of significantly setting back patient access to cancer medicines, now and for the foreseeable future” and that “turning the clock back five years just doesn’t make sense”. It is feared that “we will largely get the same answers as before – the majority of medicines will be turned down”.

The Cancer Research UK is more positive and likes the faster initial recommendation and the introduction of a ‘maybe’ recommendation with subsequent data collection. However, they feel uncertainty about how the new CDF will fit with the established Early Access to Medicines Scheme (EAMS). The latter allows unfunded earlier access to promising products before marketing authorisation, which has previously included new cancer drugs such as Keytruda.

What does this mean for pharma?
The change to the funding of cancer drugs in the UK will have two major impacts on pharma companies. Firstly, the CDF will only be used for generating new ‘real world’ evidence to support the cost effectiveness of the product. This means that pharma companies need to provide a real world evidence plan at product launch, to ensure that the necessary data can be collected within two years. Implementation of a real world evidence program is a resource intensive initiative and developing the right real world evidence plan for launch (when commercial teams are focused on a global launch) will be challenging. The second major consideration is the early NICE evaluation for novel cancer treatments prior to regulatory approval. This means that the NICE dossier should be ready ~ 35 weeks prior to marketing approval. Consequently, the pharma company must start preparing its NICE submission and health economic model at the time of making the regulatory submission to the EMA. This is likely to put significant additional pressure on already stretch commercial teams.

Utilising international reference price to generate drug price savings: Perspectives on an EU Commission report

The European Commission has recently published a report investigating ways EU member states can recognise savings through improved international reference pricing (IRP) practices. The study also considered the feasibility of introducing differential pricing across the EU whereby price would be based on the GDP (or other parameter) of individual EU countries.

The report identified four areas where IRP schemes could be improved:

1.  Use of an extended centralised pricing database

Whereby a centralised pricing database (EURIPID) is used by member states to obtain prices for their IRP analysis. It is currently unclear if pharmaceutical companies will be allowed access to EURIPID to monitor the prices of their products to determine if they are correct. The EURIPID pricing database would offer a number of benefits to member states such as providing comparability of standard price information across countries in an efficient way, from a time and cost perspective.

However, the pricing database does have drawbacks in that some countries (such as Germany) pricing data is owned by third parties and it may not be possible to share such price information within EURIPID. The database will also only focus on public prices and the discrepancy between published prices and net prices may undermine the relevance of the database. Finally, the participation in EURIPID will be voluntary so the validity of the data within the database may not be accurate or up to date leading to incorrect pricing information potentially being used in IRP analysis.

 Remap Consulting’s perspective: Quick win. The database already exists and additional funding has been made available to continue with the development of the pricing database. It is important for pharmaceuticals companies to lobby for access to the EURIPID pricing database to ensure that the pricing information for their products is accurate and up to date. There is also potential for increased price transparency from markets which have historically not made their prices publicly available

2.  Regular price monitoring and price revision

Undertaking regular price reviews (other than just at launch) can be a very effective tool in the way of savings. However, the cost and resources from administering regular price reviews are also significant. The report states that minimizing the country reference basket or only performing a price re-assessment when a price change occurs in a reference country are potential ways of minimising the administrative costs and maximising cost savings.

Remap Consulting’s perspective: Quick win. It is an easy approach for countries to recognise savings especially if price re-reviews are only conducted when a price change occurs in a reference country (which could be monitored through the EURIPID pricing database).

3.  Incorporation of price discounts into IRP calculations

The report states that significant savings could be made if statutory (and potentially confidential) discounts were incorporated into the IRP calculations. The report states that the disclosure of confidential discounts is a sensitive issue that is likely to be opposed by the pharmaceutical industry. Some member states fear that removal of the confidential discounts would increase pharmaceutical spend in their country, which may prevent patient access for patients who are unable to afford the full price of the medicines.

Remap Consulting’s perspective: Longer term. It is unlikely that countries will provide the level of confidential discounts that has been negotiated as it may impact the ability for future confidential discounts to be negotiated. However, mandatory publically available discounts, such as those in Germany may well be incorporated into IRP analysis.

4.  Incorporation of ability to pay within IRP formulae

This refers to adapting the IRP formulae to account for individual countries economic situation (e.g. based on GDP). It has been hypothesised that this approach would make pricing more fair in individual countries as the price will take into account the economic situation of that country and will therefore facilitate patient access. However, in order for such a scheme to work, there must be a universal agreement on the methodology used to incorporate GDP into the IRP calculation. Such an approach may actually decrease patient access if pharmaceutical companies are concerned about the impact of parallel trade and decide not to launch in countries with low GDP due to the relatively low price achievable in that country.

Remap Consulting’s perspective: Unlikely, due to the high administrative burden of calculating such prices and the potential negative impact it could have on patient access in smaller markets.

In addition to IRP, another topic the report investigated was the concept of adopting differential pharmaceutical pricing across the EU. The report defined differential pricing as ‘the strategy of selling the same product to different customers at different prices’. In the case of reimbursable medicines, prices vary according to member state’s ability to pay. The report identified a number of significant challenges with regards to implementing differential pricing across the EU that would need to be addressed, namely:

  • A mechanism to avoid leakage of products from lower-priced to higher-priced countries
  • A strong political will and commitment
  • common understanding of the scope and mechanisms of the differential pricing
  • An administrative structure (secretariat) and clear, transparent mechanisms for sharing information and decision-making
  • The involvement of the member states and a dialogue with the stakeholders

Given these challenges and the political will required to achieve a framework for differential pricing the authors conclude that differential pricing is unlikely to be adopted across the EU.
Governments across the EU are still of the opinion that pharmaceutical prices are too high and need to be reduced. This report has highlighted some ‘quick wins’ that member states can easily adopt to decrease the cost of pharmaceuticals in their country. As a result Remap Consulting believe that those countries who have a formal IRP mechanism in place are likely to adopt some of the report’s recommendations, such as participating in the EURIPID pricing database, conducting more regular IRP evaluations and including formal discounts in IRP analysis. It will be important for pharmaceutical companies to ensure that the prices in the EURIPID database are correct and that the IRP analysis is conducted properly to ensure that prices across the EU are maximised. Other concepts, such as differential pricing, are nice in theory, but unlikely to be implemented due to the political and logistical challenges.

The future of ICER in the US: Are HTA assessments here to stay?

The Institute for Clinical and Economic Review (ICER) in the US has been making headlines, with its recently published “value based” Health Technology Assessments (HTAs) of newly launched drugs, such as Repatha and Entresto. These reports suggested that the current drug prices are too high and that the ex-factory price should be reduced by 17 ­- 85% to justify the broad label population according to the label. How did ICER gain such prominence and what are the future implications for US HTAs and drug prices in general?

ICER was founded in 2007 as a not-for-profit organisation dedicated to improving the interpretation and application of evidence in the US health care system. It gained widespread attention with its assessment of the hepatitis C drugs in early 2015, where it encouraged payers to negotiate prices vigorously by leveraging the availability of multiple comparable treatments. Shortly afterwards, ICER launched a new program called the Emerging Therapy Assessment and Pricing (ETAP). ETAP received a $5.2 million grant to develop another 15 -­ 20 reports over the next 2 years. The treatments to be assessed will be selected based on the potential to significantly change patient care and healthcare budgets. The PCSK9 inhibitors, Repatha (evolocumab) and Praluent (alirocumab), were the first drugs to be assessed.

The ETAP program aims to produce authoritative assessment and price benchmark reports at or near the time of FDA approval. The reports will include rigorous analyses of evidence on clinical effectiveness, cost-effectiveness, and potential budget impact. These analyses will also be combined, through the ICER value framework, to calculate in an objective, transparent fashion a “value-based price benchmark” for each therapy. Specifically, there will be assessments of two different types of value: “care value” and “provisional health system value.”

Care Value

Care Value consists of four different parameters:

Care Value
  • Comparative clinical effectiveness undertakes an assessment of the net health benefit and evidence base of the new treatment.  
  • Incremental costs per outcomes achieved calculates the Quality Adjusted Life Years (QALYs) gained from the new treatments, with the following thresholds:
    • <$100,000/QALY = High care value
    • $100,000 – 150, 0000/QALY = Intermediate care value
    • >$100,000/QALY = Low care value
  • Other benefits or disadvantages focuses on benefits to patients, caregivers or the health system that would not have been consider in the comparative clinical effectiveness assessment.
  • Contextual considerations give importance to the disease severity and the current treatment options available.

Provisional Health System Value

The provisional health system value aims to assess the impact of the long-term care value of a new treatment with an analysis of its potential short-term budget impact.

Care Value 2

The budget impact is the estimated net change in total health care costs over an initial 5-year time-frame. ICER considers that a budget impact would be too high when the net cost increase per individual new treatment would contribute to growth in overall healthcare spending greater than the anticipated growth in national GDP plus 1%. The Care Value and Health System Value outcomes are discussed and voted on at a public meeting resulting in high, intermediate or low classification. This contributes to the value-based price benchmark, which is typically in the $100,000 – 150,000/QALY range. For a more detailed explanation of ICER methodologies, see

ICER’s assessments of PCSK9 inhibitors Repatha and Praluent proposed a price of $2,177 per year, as opposed to the current price ~$14,000 per year ex-factory list price. ICER stated that the treatments delivered “moderate certainty that PCSK9 treatment provides a substantial or incremental net health benefit”, but the price would have to be reduced by 85% to justify the broad label population that had been approved. It also recommended insurers use prior authorisations or retry patient on statins if price discounts for the PCSK9 inhibitors were not forth coming. Since then, reviews have been conducted for Entresto in heart failure and Nucala in asthma, with ICER suggesting a 17% and 76% price reduction respectively to achieve a value-based price. Both reviews received significant media coverage, but the actual impact of ICER’s review on health insurers is harder to gauge. Repatha, Praluent, and Entresto have all agreed outcomes-based pricing deals with major US insurer, but whether ICER’s analysis had any impact is unclear.

What is the future for ICER in the US?

Whilst HTA is a relatively new discipline in the US and ICER’s advice is non-binding, ICER does have some major advantages in being non-profit and gaining significant media coverage. The methodology used by ICER’s is less robust than that used by other HTA institutions (such as NICE), but the reports come at an opportune moment, given the highly politicised pharmaceutical pricing discussions that are ongoing. Whether insurers will utilise ICER’s reports is an ongoing debate, but given that the reports are widely available and broadly applicable, it would be surprising not to see them added to insurer’s armoury. 

Also, whilst ICER’s assessments do consider QALYs (similar to NICE) it is not the defining metric, with the value-based price benchmark being preferred. This can help manufacturers move the pricing discussion forward to focus on areas of unmet need and sub-populations, where value is easier to demonstrate and price should be less of a topic. It will be interesting to see how this is reflected in future ICER reports, particularly the class reviews of relapsed multiple myeloma, non-small cell lung cancer, and multiple sclerosis that are scheduled for 2016.

Whether ICER will become an integral part of the US healthcare landscape in the future remains to be seen, but the signs are encouraging. It has demonstrated that there is a need for HTA in the US, that methodologically HTA can be undertaken and that health economics can be utilised. For manufacturers, this is not necessarily the end of free pricing, but another step along the road towards a potentially more regulated price environment.

Interesting articles that caught our attention

Italy recoups €200M from cancer risk sharing schemes: AIFA has been refunded over €200M for ineffective treatments in 2015, highlighting the value of risk sharing schemes if effectively monitored. Read the full article here

US to test new Medicare Part B payment models: CMS has announced a 5 year program to test new payment models for Medicare, which include risk sharing schemes, payment by indication and incentive changes. Read the full article here

Waste in Cancer Drugs Costs $3 Billion a Year: Too large pack sizes are responsible for $3 billion in wastage, according to a recent study. Read the full article here

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