The Department of Health published its initial consultation on value-based pricing

Dear All,

this was just released by the Department of Health in the UK.

best wishes

Patients to benefit from new drug pricing system
16 December 2010
Department of Health
Proposals that will in future enable more NHS patients to access innovative medicines were set out by Health Secretary Andrew Lansley today. The plans for pricing drugs according to how they benefit patients, the NHS and wider society were published in a consultation: A new value-based approach to the pricing of branded medicines.
The consultation looks at how a medicine’s value can best be measured and reflected in the price the NHS pays for it. The new arrangements would mean that more licensed and effective drugs will be available to NHS patients and clinicians at a price that reflects the value they bring.
While the current system of pricing medicines has tried to achieve a balance between reasonable prices for both the NHS and the pharmaceutical industry, it does not sufficiently promote patient access or innovation effectively.
Health Secretary Andrew Lansley said:
“I want to ensure patients have access to the right medicines and treatment. I do not want in future for the effect of the medicines pricing system to be the denial of effective and appropriate treatments to NHS patients. So we need to change the way drugs are priced and ensure value for money for the NHS. Doctors should be able to focus on what matters most – achieving the best health outcomes for their patient, not debating the relative value and price of a drug.
“Value-based pricing will ensure that the price the NHS pays for medicines are based on an assessment of its value, looking at the benefits for the patient, unmet need, therapeutic innovation and benefit to society as a whole.
“I look forward to working with the NHS and the pharmaceutical industry to develop a system that encourages medical research and rewards truly innovative breakthrough drugs.”
As an international leader in the evaluation of drugs and health technologies, the National Institute for Health and Clinical Excellence (NICE) will continue to have an important advisory role in the new system, including in assessing the clinical benefits of new medicines and giving authoritative evidenced-based advice to clinicians.
Value-based pricing will be introduced from 2014 following the expiry of the current Pharmaceutical Price Regulation Scheme arrangements at the end of 2013.
This consultation invites contributions from all interested parties towards the development of the future model of drug pricing.
Notes to editors
1. The consultation on the new drug pricing system, A new value-based approach to the pricing of branded medicines, can be found at:
2. The current Pharmaceutical Price Regulation Scheme runs for the period of 2009 to 2013.
3. NICE produces a range of evidence-based guidance on the treatment and prevention of ill health. Its appraisals of drugs and other technologies look at all available clinical evidence, including data submitted by the drug’s manufacturer and the most recent clinical research. Following evaluation, NICE provides guidance to the NHS on how a particular drug or technology can best be used in the NHS. Please see www.nice.org.uk for more information.
4. For further information, please contact the Department of Health press office on 020 7210 5221.


The year of change for Pharma

Dear Readers,

We are close to the end of a for sure turbulent year in the pharmaceutical sector, so it’s time for some reflection on the most important developments. Pricing professionals will remember what I called “The perfect pricing storm” in Europe in 2010. The crisis arrived via the CEC Region and other shaken markets such as Spain - almost all countries introduced new measures of cost containment and anti crisis packages throughout the year that resulted in significant price cuts and change in international price referencing rules and frequency. Some countries took an incredible hard stand in that regard by for example refusing to accept company pricing sources in their calculations coupled with other ad hoc changes. Greece was an entire mess, to say the least, and still certain rules have to be sorted out as for example the formula to price referencing of orphan drugs. Mr Witty, from GSK at a recent healthcare conference, remarked in that that regard: "We cannot address budget challenges and the impact of the financial crises using blunt tools such as international reference pricing. Such short-term responses will damage the innovative capability of Europe,".

The dawn of Risk sharing and alternative pricing
Risk Sharing, market access agreements, alternative pricing, or however we want to call it, is on the rise and many meetings and conferences took place on the matter throughout the year. It is clear that new concepts were required in order to overcome the problems caused by international price referencing – currency fluctuations during the year made things even worse – and to manage cost per QALY threshold issues in the UK. Italy simply made performance/outcomes based agreements mandatory for any Oncology drug. A lot of progress has been made but people are still not sure where this is all going. In my view it will be an important opportunity to do things different because one thing is clear after such a tough year, business is going to be very different from now on.

Value based pricing on the horizon
The other major development is the announcement of the UK government to reform the PPRS and to introduce value based pricing by 2014 and to “depower” NICE to some extend. The industry proceeds with caution with respect to VBP - i.e. engages in further discussions with various parties but not necessarily taking a strongly proactive/driving approach at this time as it seems. There appears to be a lack of consensus on what payer goals with respect to VBP. The primary obstacle for moving forward with VBP would appear to be not the concept but the implementation - i.e. the methodology. Therefore being aware of and wherever possible involved in further discussions regarding methodology will be key to the manufacturers having a good understanding of, and ideally influencing, this debate.

Relative efficacy/effectiveness assessment
In November an interesting meeting took place on the topic in London. It was a debate over the issue of relative efficacy/effectiveness assessment at launch and the role and process of the various stakeholders. EMEA supports a further collaboration between regulators and HTA agencies and somewhat expressed that they could play a role in rel. efficacy assessments whereas the industry speakers made clear that they see no role for EMA in the assessment of relative effectiveness and that it should remain a national matter as this requires a consideration of country specific factors: relative efficacy and effectiveness assessments must be separate from regulatory approval. It seems that in short term a movements towards a pan EU relative effectiveness assessment are not very likely, however central relative efficacy assessment might become a possibility. HTA agencies, namely NICE, outlined that the assessment for relative effectiveness is of course key as part of a drugs cost effectiveness evaluation however that methods need to be further developed. In that regard it was interesting to hear from a German representative of a regional health insurers association that Germany is not expected to do much economic evaluation as there will be an assessment of added therapeutical value done by IQWIG institute, it appears that the ministry of Health not GBA is now charged with the responsibility to develop a methodology. Orphan drugs will not be exempted form that evaluation if the expected sales volume is more then €50 million. Drugs can be priced freely in the first year than the assessment of added therapeutic value takes place. A product deemed not to offer additional value will automatically be put into the therapeutic reference price system, if additional value is assessed manufacturers can negotiate price with sickness funds, if no agreement is reached sickness funds will apply international reference pricing (average of the 5 major EU markets)

It is quite clear that some HTA agencies struggle to find their role in a changing environment, especially NICE - value based pricing will be implemented by 2014 - depending on the system and methodology that maybe an opportunity or further complication the business in the UK, Risk is that such a system however set up will be "exported". Belen Garijio, European President Sanofi Aventis, stated that the problem is much bigger, one of financing problems and decreasing R&D productivity of pharma. She also sees innovative pricing and risk sharing as a viable business strategy however fundamental question are not resolved in her view, such as how will society fund high cost, step by step innovation medicines in end of live situations?

Market access - revisited
The new concept – or shall I say buzzword – of Market Access has now arrived even in the smallest company. In fact it all started with a varying terminology around one single problem: Scarce healthcare resources and their allocation over competing treatments/technologies/drugs: “access”, “payer relations”, “health economics assessments”, “pricing and reimbursement issues”, “HTA”, “relative effectiveness” , “cost-effectiveness”… are the words we heard a lot... So in the end it is a new name for an essentially “old” thing. Today 'market access' is more than ever about real life evidence creation such as clinical data, at and after launch (relative effectiveness) as well as cost-effectiveness and value based pricing (if we want to use that term alreday). Therefore to me nothing is really new, apart from implementing a more coordinated approach that entails: Go/no go (early payer engagement); Reimbursement with evidence development; Risk Sharing, Alternative Pricing and Bilateral Agreements and last but not least an “orchestrated” approach of functions such as Pricing, Health Economics, Patient Advocacy, External Affairs & Communications etc..
I am sure a lot of reorganizations and title shuffling will be continuing in 2011 coupled with announcements of further workforce reductions in order to meet the challenges of the future healthcare environment. What is imperative however is a stronger focus on the science front and better ways of creating an environment that allows to create the R&D productivity that is needed to sustain an industry that has already brought so many benefits to patients. Capabilities to look at, and build, the pipeline from an early stage for distinctive value and being able to create the data that substantiate that value will be as important as the ability, on both sides - industry as well as health authorities, to come to more innovative commercial and/or performance based agreements. The companies who will master these points through intelligent and modern organizational and capability building exercises will be at the forefront, regardless of what you name that “baby”.

With that I thank all the readers for their time and interest, your loyalty to the blog – we have grown quite a bit this year, for the many encouraging comments, articles, news etc that you have sent.

I am wishing everyone a wonderful and relaxing holiday season and a fresh start in 2011.

Keep in touch!