Access Matters: The rise of the payer and implications for pharma

Market Access

In a two-part series exclusive to Pharmafield, Neil Grubert and Mel Walker, Managing Director at Biopharma Futures, explore key trends in international market access. In this first instalment, they provide an overview of how payers approach access and the implications for pharma.

Marketing authorisation is the key milestone in a drug’s lifecycle: without it, the product cannot be commercialised. Understandably, companies focus enormous effort on securing regulatory approval. Access, by comparison, is not consistently integrated as a key outcome. Indeed, it is often an afterthought, particularly for companies that lack commercialisation experience. Yet, these companies have the greatest need for understanding and meeting payer requirements.

Analysis by IQVIA[1] of launch excellence has found that the critical success factors are a powerful and pertinent value proposition, effective and efficient stakeholder engagement, and good organisational alignment and preparation. IQVIA has also observed the evolution of access requirements over the last decade, highlighting that the payer is now the dominant stakeholder.

Health technology assessment—the cornerstone of access

In recent years, many countries, particularly in Europe, have adopted rigorous health technology assessment (HTA) processes as the cornerstone of their pricing and reimbursement procedures. Methods vary, but there are broadly two approaches, based on additional therapeutic benefit or cost-effectiveness. The first approach links pricing negotiations (not always explicitly) to the degree of clinical improvement a new therapy offers relative to a designated comparator—often the current standard of care. The second approach is essentially binary in nature, determining whether a proposed price is acceptable or not, based on whether it falls below a cost-effectiveness threshold.

The growth of HTA has substantially increased the requirement for evidence. Payers routinely demand proof of superior efficacy or tolerability, patient-relevant outcomes (especially health-related quality of life) and health economic data. Payers’ specifications in terms of acceptable comparators, endpoints and types of data are often extremely exacting and can be quite different from the requirements of regulatory authorities. Reassessment of products is increasingly common, requiring companies to collect post-marketing evidence to maintain reimbursement over the lifecycle.

To avoid duplication of work and accelerate access, the EU has sought to promote pan-European relative effectiveness assessment. This exercise has been voluntary, but there are ambitions to make it compulsory.

Fundamentals of drug pricing

Countries set the prices of prescription drugs in a variety of ways (see Table 1 for main methods). Combinations of these methods are also used, sometimes at different points in the product lifecycle.

One of the most common approaches is external reference pricing (ERP)—in essence, relying on other countries when setting prices. This practice is becoming more challenging for manufacturers in terms of the number of countries that use the mechanism, the number of countries they reference, the methods they use and the frequency with which they review prices. Interestingly, pricing pressure in the United States has led politicians from both the Democratic and Republican parties to propose adopting some form of ERP—a development that could have a seismic effect on the global pricing environment if it became a reality.

Implications for pharma: Companies need a robust pricing strategy, especially for European markets, and must also ensure they have the capabilities needed to execute it operationally and manage it carefully over the product lifecycle to preserve value.

Access delays: a growing problem

Completing HTA procedures and then negotiating pricing and reimbursement terms can be very time-consuming. Access delays of more than a year are common, with some drugs waiting four years or longer to gain effective access.

Figure 1 shows the mean delays in time to access in the five major European markets in 2019. Disturbingly, delays were generally longer for cancer therapies and orphan drugs than for other product classes, reflecting the increased level of evidence uncertainty at launch that is often associated with these products.

Price differentials across Europe

Because of ERP, as well as parallel trade, companies generally try to manage prices within a narrow price corridor. In practice, however, pricing levels vary substantially across Europe. A recent study by the RAND Corporation found that, in 2018, branded originator drug prices in the five major European markets averaged less than 40% of US list prices, but there were wide variations among those other countries.

Low prices can make some markets—especially smaller ones with limited sales potential—relatively unattractive to pharmaceutical companies, potentially prompting them to delay, or even avoid, launching new drugs in those countries. In extreme cases, companies may even decide not to market certain drugs in large markets because of pricing pressures. For example, 30 drugs have been withdrawn from the German market in response to low net prices.

Implications for pharma: Faced with price differentials, ERP and the impact of parallel trade, companies need to plan their launch sequencing carefully, especially in Europe. Incorrect sequencing can lead to price erosion and a potentially significant reduction in revenues. The reputational damage of not launching, or withdrawing, products should not be underestimated—long-term value creation is not only about money.

Growing pressure for change

International variations in prices, the increasing use of confidential rebates and discounts, delays in launching products and decisions to avoid certain markets have given rise to increasing dissatisfaction with the current pricing environment. More than ever, companies must ensure they have the right capabilities and plan much earlier if they want to deliver on patient access and commercial aspirations.

Make sure you check back next week for the second instalment of our market access series, which will consider how one extremely effective drug triggered a debate around international drug pricing and how recent trends, including the COVID-19 pandemic, are contributing to the challenges faced by manufacturers bringing innovative therapies to market.