Pharm Exec convenes a panel of biopharma executives responsible for the Latin America business to discuss investment, market access, and reimbursement issues in this key and challengingly diverse growth market for the life sciences industry

		Despite strong differences among individual countries in their approaches to healthcare and development, as a region, Latin America remains a key market of interest for the pharmaceutical industry. Local demographics are favorable to medicines due to a growing working age population with the disposable income to invest in improved health status.  Most of the region’s governments are committed to the principle of universal health 

coverage-although the details are often obscured by political conflicts over affordability, transparency, and rule of law. 

	Latin America also faces pushback against its longstanding commitment to global integration as the US and Europe pivot back toward an inward-looking policy agenda that could frustrate efforts to 

upgrade and harmonize national regulatory standards on issues ranging from drug safety surveillance to intellectual property IP.    

	To place these larger issues in the proper commercial context, 

, with support from Latin American thought leadership at CBPartners, recently convened a small group of company market access experts to review opportunities and challenges for this mission-critical function. The following Q&A covers principal conclusions from the conversation.  

Can each of you on the panel identify what’s top of mind in your job currently-and how we  might best address it in our meeting today? 

Hermilo Arturo Cabra, J&J Medical Devices: 

 I manage the health economics and market access group for J&J’s medical devices in the Latin America region. The bulk of my time is spent on five countries: Brazil, Argentina, Chile, Colombia, and Mexico. My current issue of concern is how best to make governments and payers understand the value that medical devices deliver to patients. What local institutional arrangements are optimal in building support for health innovation? In addition, how do we approach patients in a way that empowers them-to understand what our technology can do in managing their condition and to help them see what practices and policies are needed to ensure this technology will continue to be available in their communities.  

	One thing I am convinced of is incorporating best practices from other markets applicable to Latin America. Our companies are global and, thus, have broad exposure to ideas that work-or don’t work. We have observed a number of mistakes in securing access to our devices, which gives us a learning curve to share with colleagues in different countries.  

I lead the Patient Access function in Latin America and Canada.  I see patient access as the root and branch of what was called market access in the past, encapsulating activities like P&R, health economics and outcomes research, as well as the structured key account management relationships with payers and providers.  Patient access is the driver of a changing business model for Novartis, where we are moving from being only a drug company selling pills to more of a holistic disease partner co-creating solutions. The focus on more holistic solutions forces us to extend ownership of the process to many other areas of the company, beyond market access itself.  It is now an integrated approach, with the objective to influence how better care is actually delivered to the patient. 

	The issue that drives me is improving patient outcomes in the region. How do we do it? How can we show the results to the stakeholders? Each country has differing layers of influence and that in turn shapes the practice of health care.  Right now, we are a bit aspirational on this goal but up to the challenge because Novartis is convinced that the individual patient must be at the very center of the transition to an outcomes-based system of delivery and financing care.    

.: I am a member of the Global Health and Value group at Pfizer, where I am responsible for coordinating access priorities across the Latin America region. I am also responsible for optimizing the resources and capabilities of our in-market Health and Value function in order to address these key priorities. Top of mind for me in my role today are the impacts of health technology assessment (HTA) as an access decision tool; changes in local and regional tendering environments; and, critically important, recruiting, retaining, and developing local talent in the pricing and market access function.  

	Our function is still in its infancy in Latin America, so as an industry we continue to focus on evolving our access capabilities and our engagement in the access environment. The environment poses a unique and often complex payer environment requiring a deep understanding of the stakeholder landscape. Every community is different; there is no one pathway to success. 

	A final priority for me is fostering increased innovation, internally and externally.  I’d be interested in learning how the medical device business raises innovation and whether this might be applicable to the pharmaceutical sector. I see some opportunity in leveraging other sectors for good ideas around innovation.

Miguel Martin de Bustamante, CBPartners: 

 My interest is identifying short- and long-term steps that companies can take to help governments achieve sustainability in their respective national health systems amid the recent political turmoil and economic recession plaguing much of the region. The key question is how to bridge the performance and credibility gap among companies and major institutions of society, so innovative industries like biopharma can benefit from the assets they bring to the region.       

 I am Amgen’s global lead on payer relationships in oncology, with a focus on early stage assets. My company is only 35 years old, yet today we are the world’s number one biotech in annual sales. My issue of concern is a constant: to see the future. What will cancer treatment be in 10 years and what will be the extent of the region’s involvement, in terms of access to care as well as the progress in R&D? I am a Venezuelan, so I am acutely aware of the dips and curves in health status. Only recently, my country was the third-largest pharmaceutical market in Latin American.  Today, the health system is in a total state of collapse.  

	Our function is relatively new, but not so new that we cannot tap into some learnings. Because we have had approximately 15 years to understand the evolution of market access programs in Latin America, I am interested in the question of whether countries are allocating health resources wisely, in a manner that supports overall economic and social development.  

 I lead an access core team comprised of functional experts and representatives of several key markets, including Brazil and China, for the oncology therapeutic area. The access core team shares global/local responsibilities for global outputs to enhance market access for core brands and pipeline assets. In adopting this model, we aim to achieve meaningful value differentiation and practical solutions to expand access to our products in markets like Latin America.  

	One of my priorities is to explore different access models for innovative medicines in emerging markets where we have witnessed a rapid rise in demands for affordable, cutting edge healthcare led by a growing middle class. In my view, a common challenge toward this goal has been a tendency toward policy debates around a narrow band of issues, too often just on managing drug costs. 

	A more urgent question is how emerging markets such as Latin America can reform their national healthcare system to address a pending demographic shift toward an aging population.  I would like to understand how we can partner with governments and other stakeholders to prepare for this transition, knowing that any change would have to be flexible and accommodative to emerging markets’ unique economic cycles.

Many experts spotlight the importance of macro-economic trends in shaping the local environment for innovation in healthcare delivery and financing-after all, medicines are entirely dependent on investment, particularly in Latin America, from the private side. And you cannot increase investment with a strong positive macro-economic signal to investors. 

 The regional economy is currently in a transition phase. The commodity-induced recession that began in Brazil in 2015 has spread to a number of other markets while significant currency fluctuations have persuaded several major pharmaceutical developers to write down some of their assets in the region. The economy in the fourth quarter of 2016 has stabilized; we see a good recovery taking root in 2017. A broad commitment to universal healthcare, combined with healthier growth in the private sector, will put spending on pharmaceuticals and vaccines back in the picture. Biosimilar investment looks especially promising along with new innovative device technologies like robotic surgery. The trend marks a dramatic change from 18 months ago, when companies were considering leaving some markets or restructuring their local presence as a purely distribution operation.   

Economic expansion may raise the ante on new biopharma investment-but is the IP system ready for it? IP has always been a cautionary grey zone for investors. 

: On IP, you have to distinguish between risk and the type of investment. I don’t see the big biopharma manufacturer avoiding local new product launches due to fears about losing control of the patent. Licensing deals remain a challenge, especially for smaller biotechs that lack the resources to register their IP and conduct strong due diligence on a potential local partner. Both tend to be costly to execute in most Latin American countries. But conducting thorough due diligence remains critical. 

	The most important policy issue in Latin America is the commitment in most countries to universal health coverage.  The debate is moving forward, but in a 

piecemeal manner. Little is known about what a basic benefit package would look like; in addition to the standard hospital services, would essential medicines and medical devices be included? This is not clear. 

	One thing we do know is that universal health coverage involves a difficult series of tradeoffs, accentuated by the tense debate in most countries over public debt and budget deficits. What percentage of the population will actually be covered by insurance?  When medicines and vaccines comprise upwards of 15% to 20% of total health spending, will this segment be singled out for the deepest cuts? Such benchmarking is time-consuming and threatens future industry investment risks in the region. 

A broad range of perspectives from private and public stakeholders need to be included in the dialogue on universal health coverage in order to create policies to that meet the needs of patients and society. Today, not all Latin American countries have inclusive or transparent forums for public policy.   

Countries also have their own definitions of what constitutes universal healthcare coverage, especially when it comes to equality in access to medicines. On one side, you have institutions similar to “Seguro Popular” in Mexico or the recently ratified “Cobertura Universal de Salud” in Argentina, which function similar to a safety net for those unemployed or informally employed but have arguably less access to innovative therapies. 

	On the other side, you have countries like Colombia which has taken steps to equalize access for all health plans of the EPS, contributory and subsidized, by making the minimum obligatory coverage list the same. These different approaches are often the result of political decisions driven by an interpretation of constitutional law and without much consultation with citizens.

The application of HTA policies in the region, including in Colombia, are not always clear and are often open to interpretation. In its best form, HTA is a helpful tool for payers to make allocation and investment decisions; however, without transparent and certain process and principles, HTA can become a cost-containment method and a barrier to access-contradicting a goal of universal health coverage and patient access to medicines.  Industry needs to be a partner to payers, governments, and stakeholders toward universal coverage goals. 

Universal coverage can only take place if the relevant power centers-in this case, the ministries of health and finance-are aligned around a specific definition of what universal coverage means. Are the two working together in your respective markets? 

 In Colombia, the health and finance ministries are working in concert to get this commitment done. However, the devil is in the details. Defining what it actually meant by universal coverage is going to require some parsing of the language. It’s not going to be simple or straightforward. I’d say this point applies to other countries as well.   

 In my experience, we don’t often see comprehensive, coordinated efforts to address economic and policy constraints that stand in the way of transparent, sustainable, and affordable healthcare systems. In response,  the country market access function often devotes a significant portion of resources toward putting out “fires” than on solutions that address long-term needs, unfortunately.   

There is one benchmark by which Latin Americans assess the commitment to achieving universal health coverage: what percent of country GDP is attributable to public and private health spending? Increasingly, however, the finance ministries may be challenging the health ministries on this score, contending that investments in health are not leading to higher productivity, better outcomes. In fact, much of the spend is actually wasted if it is not improving patient outcomes. Money is poured into an inefficient system that spreads itself thin trying to fulfill the expectations that universal healthcare is given to a growing number of patients. I think a message is that real reform of value-based care has to come first, before the government opens up their budgets; perhaps then governments will agree to more significant healthcare investments.   

The eternal dilemma in healthcare is the limited supply of care coupled with an unlimited demand for it. There is a need for precedent that can resolve this dilemma. One country must take a leadership role to take on the challenge of sustainable reform, and show the rest of the region it can be done right.    

 Is this not already being done in the private sector? There are models we can point to based on the region’s history of melding public and private resources to serve different stakeholders: the subsidized rural poor; urban, wage-based manufacturing workers; and the rich who pay out-of-pocket.   This model is actually a good one for countries with an expanding middle class, as there is a lot of choice for the consumer. China, for example, has an inflexible health system, with no widespread source of private insurance. Patients are still largely dependent on cash payments for care. 

	I think Latin America does better than that. The private sector is going to thrive here because its momentum comes from the growth of middle-class entrepreneurialism.  

 Private health is certainly a viable alternative to the inefficiencies that characterize public delivery. The problem is that access tends to be restricted to people with the ability to pay, which makes it harder to convince some quarters that

 the private sector can be a driver of innovation everywhere in the health system. 

We have to be realistic about what universal access means in Latin America compared to Europe. It’s fanciful that countries here can approach that level of access. Nevertheless, private sector care delivery is well established. It has served a good portion of the population relatively well. It’s a valuable part of the healthcare mix and has potential in advancing innovation in the system overall. 

 The value of the private sector healthcare is the opportunity it presents for partnership with the industry around a more innovative delivery model. Consider what has been done in China, with Roche joining with Swiss Re, the reinsurance giant, to support the establishment of private insurance coverage for patients with cancer. Similar efforts are underway now in Brazil as United Healthcare and Aetna take steps to enter the insurance market.  This is precisely what these markets need-more choice for patients.  

If the will is there, are national regulatory systems prepared to incentivize and support the partnering model? 

Unfortunately, no. There is a huge time lag for a new innovation to move from discovery to the patient. Consider that a curative drug like Gilead’s 

for hepatitis C, with a 90% plus efficacy rate, is still not available in some Latin American countries despite being on the market in the US and Europe for three years. In fact, the median time from regulatory approval to actual funding for a new product is also three years in the Latin American region. It takes that long just to find out if a product will be reimbursed. That’s demoralizing no matter how wonderful working with a local partner can be. 

 In this case, the issue may be a lack of courage and vision. The potential budgetary impact has stood in the way of access to a life-saving and potentially cost-saving treatment. Emerging markets will continue to struggle with funding and making available breakthrough therapies without significantly increased contributions from its middle class, which is not popular. No one wants to abandon the promise of a universal healthcare. However, enabling differential access in a market-that pricing and reimbursement adjusts to affordability-is worth considering, albeit a difficult choice.   

Given the reimbursement systems in most Latin American markets, government and the public health community is critical to our success in the region. The private healthcare sector is also an important area for our function, particularly in terms of partnership opportunities and innovative access pathways. The challenge of overcoming institutional inertia and limited transparency adds to the complexity of achieving access.  

According to some local trade associations, the success rate in obtaining access to national formularies in some markets for an innovative medicine to be listed, averages in the single digits – as low as six per cent.  

 Governments are raising the ante on cost-effectiveness. In Brazil, ANVISA’s decisions involving public sector pricing invariably trickle down to the private side. HTA is well-established in most markets, and the agencies are talking more frequently and sharing information.  

What is the response of big Pharma manufacturers to the slow integration of pricing and cost-effectiveness tools throughout the region? How do you protect against blowback from one market to another?  

 This is coming up in Colombia, which has launched international reference pricing and is moving to a more formalized approach to HTA. Will the low price you accept in another, larger market that you can make up through higher volume end up pushing your prices further down in Colombia? Good intelligence and strong data capabilities are vital to the assessment of what to do. Each company also 

has to begin with a frank assessment of their product portfolio. A diversified set of high quality products, in key therapeutic areas relevant to public health, confers advantage over those with more limited prospects.

Are decisions of the HTA authorities grounded in institutional reality? Is HTA seen as a “need to have” construct or just “nice to have?”  

The reality is a confusing mix of different approaches as well as sporadic follow-through that often leaves companies guessing what the relevant factors are behind a decision. Decisions in HTA range from positive to highly restrictive. In medical devices, the HTA process is complicated.  You must make your case first to one national agency, which then has to be ratified in practice by any number of local regulators  that don’t necessarily have to take the first decision into account. 

 HTA is definitely a “need to have,” and they will become even more essential in the future.  But HTA decisions today lack a clear linkage to decision making for key financial institutions.  It’s just one step in a long process.  Cost effectiveness or comparative effectiveness may be evaluated, but how these methodologies translate into decisions made in real world practice, are still  poorly defined.  It’s not the trigger point for access today.  It’s a starting point and that needs to change, perhaps using real world evidence in the HTAs could help show greater value.

Can we establish consensus on the elements of a sustainable healthcare system conducive to innovation in the delivery and financing of medicines? Is there a Latin America market example or best practice that should be endorsed as an industry standard or metric of performance? 

Our target ought to be the identification of waste in the health system and how GDP expenditure on healthcare can be better spent. Is the funding devoted to system administration yielding better patient outcomes? If not, where can we partner to change the dynamic? 

Industry starts the conversation on the premise that market access means access to drugs. Wrong. The first step is access to healthcare, founded on primary care infrastructure and the concept of preventive population health. This is where drug companies should engage.  Instead of a pill, the strategy-and the message-must center on the services and networks that bind us closer to the patient where he is. 

 Andrew Dillon, the former CEO of the UK National Institute of Health and Care Excellence (NICE), spoke recently to heads of many Latin America HTAs. The group asked him what the key success of NICE has been since its inception two decades ago.  Interestingly, Dillon pointed to the development of formal national clinical guidelines to standardize the way care is delivered and assessed, as its biggest achievement on patient outcomes. He did not mention cost-effectiveness decisions or patient access schemes to lower prices. This thinking ought to drive industry positions as well to help ensure a value-based healthcare delivered in a standardized way to all patients. Instead of a race to the bottom on prices, with bulk tendering and reference pricing, we must advocate for a system that recognizes the holistic value of a medicine to patients, in the context of multiple health interventions that can all be tracked and measured through independent evidence. 

I would offer a complementary approach. We need to upgrade the capability of our country market access function in stakeholder management and advocacy that in some situations are more effective in building access to breakthrough therapies. Part of the access core team’s focus at Bayer is on training country teams in negotiation

 skills, not just being able to adapt an economic model or develop a local submission dossier.  

	How to identify and engage the right people, connect with decision-makers on core issues and interests is equally important as health technology assessment that we neglect at our peril. 

Decisions on the reimbursement of medicines are made within a political context in most cases in Latin America. Market access leadership must keep this in mind when advancing objectives. For example, in Mexico, the community of decision-makers has undergone changes, and so in addition to developing meaningful access strategies and leveraging technical expertise, we must also engage and understand the needs of the political and government decision-makers and internalize these insights into our approach. HTA in general in Latin America is a good example. It’s layered on to the top of pre-existing-decision machinery, and so our strategies must be multi-faceted in nature.

If Dillon believes in the importance of clinical guidelines as a policy fundamental, shouldn’t industry highlight its contribution to raising the quality and scope of local clinical trials and post-marketing approval activities, including the supporting infrastructure? 

 I think our industry highlights often its contribution towards advancing science and care for patients and improving lives. Clinical research is the bread and butter of our business model. It takes a significant investment to undertake clinical trials. And, our investments in countries extend further out from this, including employment, physician education, investigator-initiated studies, manufacturing, distribution, and other facilities. Therefore, we expect a fair reward on new, meaningful, and innovative medicines which benefit patients and society. When a country is challenged to deliver this, it affects investment at all levels.  

 Governments in the region are aware of the importance of underpinning support for innovation with infrastructure. Many countries are making at least some effort: technology corridors that provide incentives for the location of physical plant are an example. Brazil negotiates directly for technology transfer commitments as an element in marketing approval and pricing. That said, few people are predicting Latin America will be the destination of choice for drug R&D. 

 Maybe not as many but there are world-class hospitals and academic centers that are very competitive in conducting top-notch research in Latin America. 

What about potential allies-like patients? What are the positives and pitfalls in relations with this crucial stakeholder? 

Patient advocacy is critical. Their only protection is the voice that carries. As the middle class grows and becomes more vocal on health, organized patients are poised to become the vehicle for change. We must do more to put the patient at the front of our effort on access. 

Today, the role of the patient differs by market. In Brazil, patient groups have a visible and engaged position in the decision-making arena. However, in general, patient groups and the range of their activities are less  advanced compared to counterparts in the US and Europe. In some markets, the voice of patient groups in the reimbursement of medicines is under developed due to policy or political frameworks or norms.  

Social media is having a positive impact on patient group influence, if only because it allows for more interactions between patients and caregivers.  Information about specific diseases is available to fuel local advocacy campaigns to demand better care.  Governments are responding with special funds or outlays to finance the cost of ‘essential medicines’ for diseases that attract social media attention.  Patient group cross-talk between markets has driven the creation of new networks of patient advocacy on a regional and global scale, Latin American patients are very active online and are sharing many creative approaches to increasing the patient voice   

How is market access in Latin America being deployed, from an organizational point of view? How are your companies set up in this important functional area? 

The leading edge of the market access funciton in Latin America has traditionally focused on government relations. The rationale? Better access to the national medicines chest is predicated on strong relationships with government and 

regulatory stakeholders,  as well as the industry trade association. Increasingly, however, the trend favors a more expansive strategy focused on stakeholder management covering a diverse array of interests.     

 Building close synergy between market access and the corporate affairs is critical for success in the region. We seek talented colleagues who are adept at both the technical aspects of the function and have the abilities to positively shape the evolution of the environment.

My company is on board with the idea that new voices must be incorporated in healthcare decision-making. There is room to negotiate common ground with many stakeholders on issues like defining value or fine-tuning the HTA process to ensure the right resource decisions are made. We are not perfect, but we are also not the same industry we were 20 years ago. I’d say that applies to the major institutions responsible for public health, too. One step at a time, our actions of trying to win for patients is putting us more into a position to bring these new voices into the process. 

 A good example is how, even at smaller companies, patients are being consulted about what they want and expect from a company’s next oncology or hemophilia product. The feedback chain works particularly well in rare diseases, where patients are highly motivated and easy to locate. 

There is still the obstacle course imposed by the poor transparency on the regulatory and HTA decisions. While methodologies might be laid out, the actual procedures in the decision-making process are often not transparent to the industry, which leads to lack of clarity in the decision rationale.  Additionally, most manufacturers dream of a more transparent, inclusive process, which includes within the process an opportunity to weigh in the patient point of view along with the providers’ and industry’s perspective, along with the robust evidence that is often generated by manufacturers. 

	A question arises on how to develop a transparent process that is sensitive to the bias of these other players: the patient wants everything and the manufacturer is only too happy to give it to them. The challenge in a multiple stakeholder environment is how to give these separate voices equal weight.  And to do that in a transparent manner.  A challenge not so easily solved.    

Stakeholders, including some in industry, are trying to mobilize patients to counter government controls by asserting a constitutional right to access-that it’s illegal to deny coverage when universal healthcare is a principle mandated by the law

Can this strategy be seen as an attack on physician autonomy? 

When such tactics suit the larger therapeutic interests of the patient, the answer is no. Alternatively, we can see instances where physicians are motivated by the desire to be able to apply the full catalog of expensive drugs, whenever they wish, and sometimes for personal gain. Physicians need to be sensitized to cooperate in making the supply chain of drugs more efficient. They are critical to system change. 

One way to improve the relationship with physicians is to continue emphasizing our value beyond the pill, with support services to patients that free the physician to focus on delivering better care. The potential is for us to serve as an intermediary between physician and the patient to help communication and increase efficiencies. 

We must be mindful of how the pharma industry is perceived by patients and physicians in emerging markets like Latin America, especially when discussing economic aspects of market access in conversations. In developed markets, there is a general perception of big Pharma that can be counterproductive when we want to engage in a value conversation. Given the region’s aspiration/commitment toward affordable universal healthcare, I am cautious of the approach that pits patients against their government. This can lead to the opposite, where we are on the defense.  

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Pharm Exec convenes a panel of biopharma executives responsible for the Latin America business to discuss investment, market access, and reimbursement issues in this key and challengingly diverse growth market for the life sciences industry








Region in Reform? Access Pains and Gains in Latin America

A look at a unique price-setting model for novel drugs and resulting pre-launch strategies 

	If you think of Câmara de Regulação do Mercado de Medicamentos (CMED), the regulatory chamber of the medicine market, as a gatekeeper for pharmaceuticals in Brazil, a resemblance to Curupira emerges.

Curupira, according to the mythology of the tribe Tupi-Guarani, is the protector of the Amazon forest. A red-haired dwarf with feet facing backward, to lose those who try to follow his trail. 

	Like Curupira, the CMED decisions barely leave any trail behind, despite being designed to establish rules for drug pricing in the pharmaceutical market.

	The chamber defines ceiling prices, benchmarks for wholesale and retail commercialization, and the minimum mandatory discount for purchases in the public healthcare system. Drug list prices are published, but the underlying assessment per drug is only communicated to the manufacturer, leaving most decisions a well-kept secret.

	CMED defines pricing rules according to drug categories. Innovative drugs with a patent may achieve Category I or II. Category I is attributed depending on either one of the following three factors: (1) the ability to demonstrate efficacy superiority; (2) safety improvement; or (3) cost reduction over treatment comparators. If none of these criteria is met, then patented drugs are assigned Category II.

	Achieving Category I is nevertheless very difficult: the only report disclosed by CMED shows that less than 7% of the 209 new patented drugs, assessed from 2004 to 2011, achieved Category I.

	According to CMED rules, Category I drugs are priced based on the lowest international price in a basket of nine countries plus the country of origin. For Category II drugs, international price reference may also apply, but only if prices are lower than local treatment comparators. The average price reduction between the price requested and final approval was 18% for Category I drugs and 37% for Category II. 

	However, one thing is what is written on paper, another thing is what we will discover once you embark on the adventure of exploring the actual decision-making based on clinical studies and historical prices at launch for 12 selected innovative drugs.

	In order to offer a view on different clinical and economic aspects, Simon-Kucher selected four Category I and eight Category II drugs among chronic retail and oncology indications (see Figure 1). Pre-defined criteria on efficacy, safety, and treatment cost provided a comparable framework to assess the performance of each drug among indications.

	Finally, a retrospective assessment on clinical studies, historical prices from reference countries, and local treatment comparators identified the most common factors driving CMED pricing outcomes.

Gain in efficacy, safety, or cost reduction?

	The most common factor driving CMED Category I designation is a clinical study showing superior efficacy vs. standard of care. However, if there is no efficacious standard of care available for an indication, then achieving Category I is also possible, though difficult, for placebo-controlled studies.

In any case, all drugs achieving Category I demonstrated superior efficacy based on “hard” endpoints in their indications, like survival data for oncology or mortality for cardiovascular diseases (see Figure 2). There was no clear threshold in performance to achieve Category I, as this varied according to the level of unmet need per indication, comparator arm, and selected endpoints in the trials.

	However, a few questions still remain. Arguably, no drug analyzed by Simon-Kucher showed significant improvement on safety. CMED most likely only sees this criterion as relevant for drugs showing a clear benefit over established treatments with frequent or severe adverse events. 

	CMED enforces the lowest international price reference for both Category I and Category II drugs. Category II drugs are also constrained by the prices for local treatments (see Figure 3). However, in a few cases, CMED provided flexibility to accept the highest price among different comparators, e.g., the first-in-class direct thrombin inhibitor, awarded Category II, launched with a 10% higher

	However, the benchmarking of local price comparators for Category II is still the most common, and has resulted in the past in large discounts to chronic retail products. The only exception was an oncology agent for multiple myeloma that obtained the lowest international reference price (from the US) because the only local comparator for its same indication was a generic.

	Finally, there is no evidence that generics have been used as local price comparators for Category II drugs. CMED has not set the price for any innovative drug studied at the level of generic comparators. The chamber seems to consider R&D costs for new patented drugs and, thus, compares these with other branded drugs.

	Just like the tribe Tupi-Guarani learned how to respect Curupira in the forest, manufacturers can benefit from some practical advice for price negotiations with CMED. This is important as the price will have a major impact on the long-term revenues of any new drug. Therefore, we recommend to carefully examine the three following items in order to increase the chances of a successful launch in Brazil: 

Optimize Brazil’s position in the international launch sequence.

 CMED accepts the price for an innovative drug once it is available in at least three reference countries, with no reassessment after launch. Additionally, Brazil is not a price reference for any developed country or major emerging market. Consequently, launching fast in Brazil after countries with high price potential can optimize the price negotiations with CMED and does not pose risks to any large market.

Target Category I only if required evidence is available.

 CMED mostly grants Category I for drugs showing superior efficacy over the standard of care. Drugs with placebo-controlled studies may achieve Category I only if no other efficacious treatment is available. Safety improvement and treatment cost reduction might only be fair Category I criteria for drugs bringing a large benefit for the indication. Otherwise, forecasting for Category II achievement is the most reasonable strategy, despite potential upside scenario of successful application for Category I. 

Justify the highest price benchmark versus an acceptable comparator.

 Regardless of Category   I or II, innovative drugs may achieve price parity to the highest price benchmark between the lowest international reference and selected local comparator, if it demonstrates strong clinical advantage or if only old treatment alternatives are available. Manufacturers must communicate and demonstrate with robust evidence the unique value proposition of the drug to convince CMED not to enforce the lowest price benchmark.

	CMED’s price decisions, despite being secretive, abide by the rules. The gatekeeper for pharmaceuticals in Brazil has allowed for few exceptions. On the one hand, there is little room for high premiums, but on the other, outcomes are possible to anticipate. Given how relevant the list price is for the commercialization strategy of innovative drugs, manufacturers should conduct a pre-launch study on the therapeutic value and international prices of their products to explore the full price potential. 

is Consultant; all with Simon-Kucher & Partners, São Paulo, Brazil 

Outlining one country’s unique price-setting model for novel drugs-and the resulting pre-launch strategies for manufacturers.

CMED: The ‘Curupira’ of Brazil’s Pharma Market

	Partnerships enable pharmaceutical companies to gain expertise, leverage more resources, and reduce risk. By sharing expertise, resources, and profits, such business ventures have the potential to return significant value. In a 

 conducted by the CMO Council, 85% of those surveyed said partnerships and alliances are essential or important to their business. Yet almost half reported failure rates of 60% or more.

	With so much at stake, pharma companies have developed detailed governance models with joint steering committees and escalation procedures to try to keep the peace between partners. Unfortunately, these structures and procedures are often flawed and are akin to a pre-nuptial agreement. They don’t help the partnership maintain alignment and stay together; they simply attempt to pre-define how to resolve expected conflicts and in the worst case, determine who gets what when a breakup occurs. 

	Most companies in partnerships employ alliance directors who are responsible for maintaining their partnership. The first problem with this structure is that most alliance directors are not dedicated to one brand, making it difficult to be sufficiently engaged with all aspects of the brand to maintain alignment and prevent issues. The second problem is that these alliance directors are personally and professionally aligned to their respective company, so when problems become serious enough that they get involved, they do so through the lens of what’s best for their company as opposed to what’s best for the partnership. 

	Instead, what’s needed is an approach that puts communication and trust at the center of the partnership. One critical component of this approach is the appointment of a “partnership ambassador” who is aligned to the partnership rather than to the individual companies involved.

	Pharma organizations are incredibly complex. Partnering firms, and the different departments within them, often have their own unique agendas. Often the objectives of different functions and departments within a single organization can be at odds with one another. Add another company to the mix and the risk of misalignment of objectives grows exponentially. 

	Drugmakers invest enormous amounts on their key brands, but invest surprisingly little to keep their partnerships healthy. If steps aren’t taken to keep the objectives of the partnership aligned, fissures that develop in the relationship through the natural breakdown of alignment grow into serious cracks. These result in a breakdown in trust-and without trust, any partnership is guaranteed to fail. 

	Many of us who have been a part of partnerships have experienced how a breakdown in trust can tear a partnership apart. I experienced this with one of the brands that I co-managed. The brand was nearing the end of its patent life and, therefore, the end of the partnership agreement. Through a technicality, we believed that we could extend the life of the brand beyond the partnership. This set up a misalignment of objectives in that we received higher value from continued investment in the brand while our partner received higher value by cutting investment. As the dominant partner, we insisted on continued high investment.  

	The misalignment of objectives, combined with other complexities, led to a termination of the partnership in one of the key countries when the partner failed to deliver on our dictated level of investment. This caused the partner to lose about $25 million.  Six months later we suffered a loss of reimbursement in that same country, which caused us to incur similar losses. One of the areas of strategic value that our partner had brought to the table was  its strong relationship with the payer authority in that country. That relationship would likely have helped us retain reimbursement for the brand.   

	In the above example, the losses could have been worse. We were able to keep the partnership together in the remaining countries, despite this traumatic event. That said, we could have avoided significant loss of value if we had trusted each other, understood each other’s changed objectives, and worked toward a solution that was in the best interests of the partnership while still amicable to both organizations. 

	Partnership agreements do try to anticipate changes in advance by incorporating adjustment clauses. These recognize that the value each company brings to the partnership can change over time. When the partnership gets out of balance, an adjustment-usually financial-can be made. More difficult is when the objectives of the respective partners change and are no longer aligned, like in the example described. If the partners cannot adjust and align on new objectives, the partnership is likely to fail. 

	At pharmaceutical companies, significant events might include a drug coming off patent, product portfolio changes, and divesting or merger and acquisition activity that contracts or expands the available sales and marketing staff. In such situations, company objectives are bound to change and the partners may no longer be aligned. Yet, instead of addressing the change, teams tend to focus on the day-to-day issues of their brand with little attention to keeping the partners in sync. 

	Partnerships, like any relationship, require attention and trust to thrive. It is best practice to bring stakeholders together when a partnership is formed to ensure alignment on key objectives, establish ways of working, etc. We have seen great success in multi-day immersive sessions where team exercises generate dozens of actionable ideas, then the participants take the ideas further by developing clear action plans: identifying, agreeing on, and assigning next steps. What might otherwise take months to accomplish can be done within days.

	What pharmaceutical companies have failed to recognize thus far is that these initial sessions are a great start, but not nearly enough. Achieving success requires that partnership sessions be held on a regular basis. It also requires that the partnership have a strong independent voice that is not conflicted by the pressures that arise from each company’s broader organizational objectives and shifting agendas. 

	A new approach to achieving and maintaining a successful partnership includes appointing a partnership ambassador. This person must be independent of the respective companies and embedded as an active member of the team and report to the partnership’s joint steering committee.

	The ambassador must be from outside both companies in order to successfully represent the partnership. Not an expert in a therapeutic area or in sales and marketing, this person’s role is to cultivate a healthy and thriving relationship. The ambassador must be trusted by both partners to act in the best interests of the combined entity. 

	Trust is the operative word. Free from hidden agendas and favoritism, the ambassador’s role is to ensure that open communication fosters understanding and allows for effective decision making. He or she is an independent voice that regularly 

takes the partnership’s temperature, communicates back and forth effectively, clarifies issues, and facilitates compromise. 

	Like a preemptive marriage counselor, the ambassador can help the parties make adjustments that enable the partnership to grow despite changing objectives. This individual must have a slot on the agenda at face-to-face meetings over the lifetime of the agreement. By maintaining a focus on the relationship, the ambassador ensures alignment and that issues are addressed early on and continuously. The role is not empowered to make changes, but is a facilitator to move things forward, with a vested interest in the health of the partnership.

	But what if your company has a partnership that is already at risk due to diverging objectives and a lack of ongoing alignment?

	It is possible to reset a partnership with much of the same principles as outlined. 

	Companies spend huge sums of money to develop and market new pharmaceutical brands through partnerships. It is simply shortsighted not to invest a modest amount on the relationship to keep their partnerships aligned and thriving. 

 is a Principal in the Life Sciences Division of Capgemini Consulting. He can be reached at 

Columns

A new approach to reviving industry collaborations.

The Trouble with Pharma Partnerships ... And How to Fix Them

	Pharma and medtech companies are spending more management time and resources on compliance than ever before, but compliance problems continue to grow. Noncompliance warnings in the healthcare industry have risen sharply over the past ï¬ve years, as have medical device recalls and drug shortages due to quality problems. And those issues add significant cost and risk to the business.

	What’s changed? Compliance requirements around the world have multiplied since 2000. At the same time, pharma and medtech product portfolios and organizations have grown rapidly and become more complex. That combination has created a perfect storm in compliance for many leadership teams.

	For decades, growth has been the industry’s top priority, and many companies have assumed that every dollar of revenue would fall to the bottom line. Instead, growth has brought complexity, and along with it, many hidden costs. As our colleagues state in the recently published book

, “Complexity is the silent killer of growth.” It slows innovation, time to market, and impedes decision-making across the entire organization. In fact, for many healthcare companies, unfettered investment in growth actually creates a drag on the core business. Complex product portfolios, organizations, processes, and geographical footprints also increase a company’s vulnerability to compliance delays and oversights, including late ï¬lings and failure to update critical registrations.

	Complexity is not the only cause of noncompliance, but the more complex a pharma portfolio or organization, the more difï¬cult it is to maintain a rigorous approach to compliance. One of the best ways leadership teams can manage that risk is to routinely review and simplify the business wherever they can, pruning product portfolios and streamlining the organization, processes, and geographies. Simplifying has a triple beneï¬t: It improves patient safety, reduces the likelihood of compliance problems, and creates healthier portfolios that can grow faster.

	The cost of noncompliance can be substantial: Taking a Corrective and Preventive Action (CAPA) can total up to $10,000; addressing a warning letter may cost $2 million for a simple ï¬x or up to $20 million if it requires changes to production; and resolving a consent decree can top $100 million. Complexity 

can also lead to increased capital investments, higher operating costs on legacy products, supply chain distortions and inefï¬ciencies, and surging costs to address compliance problems in real time. In the worst case, regulators can demand that companies pull products from the market.

	Many pharma and medtech companies know the downside of complexity all too well. As steady growth expands compliance requirements, it can overwhelm the people and systems responsible for maintaining up-to-date licenses, labels, and ï¬lings with national authorities. At the same time, increased complexity makes it harder to effectively manage surveillance systems that monitor complaints and inquires, including pharmacovigilance (PV) and post-market surveillance. That can create delays in responding to health authorities.

	A more complex product portfolio also creates a much higher level of noise in the system. Companies spend more time tracking and ï¬ling reports on legacy products with low sales and proven safety records, detracting from the ability of quality, regulatory, and PV staff to focus on the important signals affecting patient safety.

	Finally, rapid growth generates greater variance and complexity in the manufacturing process. That, in turn, can lead to problems with outsourcing partnerships, including quality control, handoffs, and reliability of supply. It can also produce a mismatch in equipment or process capabilities between R&D and operations, limiting process standardization and impeding quality control when transferring technology.

	One natural response to complexity is adding people to manage compliance functions. That approach, however, addresses the symptoms of complexity without tackling the underlying issues. It’s a costly reaction that, in our experience, rarely reduces compliance risk. In fact, large, resource-intensive compliance departments often struggle with efficiency. 

	Complexity increases the underlying risks of noncompliance. The consequences can include interruption of the drug-substance supply chain, late filings, or out-of-date registration, which often lead to pulling products from the market. Both medical device recalls and new-drug shortages linked to quality problems have risen sharply over the past ï¬ve years.

	What are the warning signals that noncompliance is reaching a danger point? There are many, but a couple of key indicators are worth watching closely. One is an increase in errors in tracking, ï¬ling, and updating of registrations. A company’s regulatory department in any given country typically spends more than 50% of its time just keeping the portfolio in compliance. An ever-expanding portfolio can put constant strain on in-country resources and processes. When a portfolio is complex, even small changes can lead to a cascade of required updates. These constant, incremental additions can overwhelm local systems, especially IT and document management, increasing the risk of expensive work-arounds or errors in ï¬lings.

	A second warning signal is product code proliferation, which often arises when companies enter new markets with unique label language or regulatory requirements. A surge in product codes can undermine manufacturing quality in two ways. First, additional country-specific batches can sharply increase production activity. For many manufacturers, increased production alone heightens the risk of noncompliance. On average, the number of batches produced at each site accounts for 30%–50% of the quality. Second, changes to testing and labeling can undermine quality. With product code proliferation, simple or routine changes suddenly can become difï¬cult to implement by the required deadlines.

	Another red ï¬ag: frequent variations in test methods, equipment, and raw materials, and especially the introduction of nonstandard production requirements. Each time a company alters these factors, it can slow the production process and add signiï¬cant risk.

	Finally, frequent policy changes can signal risk. Companies may need to implement policy changes to accommodate local health authorities when entering new markets or update policies to reflect nuanced requirements of individual products, even those with very small volume. When companies change policies frequently, due to internal or external factors, managers often don’t pay enough attention to implementation, which increases compliance risk. Local ofï¬ces may require corporate support in drafting local policies, infrastructure investments, additional resourcing, and capability-building. In a worst-case scenario, complex policies can result in conflicting guidance at local sites. 

	Companies that fail to read these warning signs and understand the link between complexity and compliance may take steps that improve a single function, but not consider the aggregate impact of their actions, setting off a doom loop that leads to ever-increasing compliance risk and cost.

	Leading companies reduce the risk of noncompliance by simplifying across the spectrum of products, organization, processes, and geography. Their approach typically includes ï¬ve steps:

 Collect data on complexity using the quality, supply chain, PV, and other surveillance systems to analyze the primary causes of compliance risk.

Develop an action plan for transforming the portfolio, including stock keeping unit (SKU) reductions, geographic footprint restructuring, and policy changes.

Identify the cost of complexity and build the business case.

 Assess the cost and revenue opportunities that can reduce complexity, and use facts gathered on complexity, compliance, and risk assessment to make the business case for change.

Create alignment across the organization.

 Ensure experts from each part of the value chain coordinate openly to determine the right balance of complexity, proï¬tability, and compliance.

 Make sure the underlying surveillance systems monitor complexity across the company, including product portfolio, quality control, and compliance.

	The most effective way to reduce compliance risk is to simplify the portfolio and organization, eliminating the root causes of complexity. Companies that take action before problems surface will create significant value, improve patient safety, and manage growth more effectively.  

is a partner with Bain & Company based in New York. She can be reached at 

is a partner in Bain’s Chicago ofï¬ce. He can be reached at 

. Both are members of the ï¬rm’s Healthcare practice.   

The key steps to easing rising complexity and cost factors.

Reducing the Risk of Noncompliance

	"Surround yourself with people smarter than you,” is attributed to businessman Russell Simmons. Sometimes, when you are starting a new profession, or prepping for a new sports team, or maybe if you are a seasoned veteran coming against a new problem, it can serve you well to seek sound advice. I have a big job filling my predecessor’s shoes. Though I’m an editorial veteran, this side of pharma is one I’ve only watched from afar as Editor for 

. But if there is one thing I know is that you have to surround yourself with smart people. I’ve done that

 for years at ACT. Our Editorial Advisory Board, as well as regular contributors and internal colleagues are my go-to experts.

	The Editorial Advisory Board is the saving grace of our fine reputation and second to none in providing guidance, leadership and insight to our content direction.

 Editorial Advisory Board members have been graciously acclimating me to the current and future environment that shapes “this side” of pharma. The executives in the C-suite and just below the suite, that need to keep up on pricing and reimbursement, market access, technology solutions, strategy, portfolio decisions, marketing, launches and so much more. Their expertise is formidable and more than helpful.

 on Latin American access, Christopher Ngai, Global Market Access Lead, Late-Stage Oncology Assets, Bayer, said, “I think our industry highlights often its contribution toward advancing science and care for patients and improving lives. Clinical research is the bread and butter of our business model. It takes a significant investment to undertake clinical trials.” 

	On the clinical trials side, organizations have highlighted the need for study participants, and are actively seeking ways to educate physicians and patients on the clinical trials process. On the other hand, the industry as a whole doesn’t seem to have a coherent investment or system to bring attention to those contributions in advancing science as Ngai mentioned. 

	But that seems to be changing as PhRMA announced late in January an advertising and public affairs campaign. Named GOBOLDLY, it “will showcase the industry’s unsung heroes driving cutting-edge advances in science and highlight the tremendous opportunity that exists to tackle our most complex and devastating health conditions.”

	While PhRMA has offered previous campaigns, most recently “From Hope to Cures,” featuring positive patient stories, this direct-to-consumer initiative is broader. It includes TV, print, digital, radio and out-of-home advertising, in a three-year campaign, which highlights the following three distinct initiatives:

: An initiative convened by the scientists at America’s biopharmaceutical companies to foster a national dialogue on bold advancements in science.

 An effort to engage stakeholders across the healthcare system to advance policy solutions that will enable the private sector to lead the move to a value-driven healthcare system.

A public outreach and education campaign around critical public health issues facing America today.

	If nothing else, the members of PhRMA are acknowledging they need an image improvement after the EpiPen and Martin Shkreli public opinion disasters of last year. But in reality, pharma has long suffered from a public perception problem. In 1998, the industry scored high in a Harris Interactive Poll. But by 2004, that 73% dropped to 44%. In the most recent 2016 Gallup Poll, the pharmaceutical industry was second to last in public opinion, between the healthcare industry and the federal government, with a net positive rating of -23. 

	Both EA Boards’ members say the same thing-the driving change in industry now is the patient. Whether it’s a patient-driven clinical trial; patients using social media and wearables; what outcomes patients want in the drugs they take; what benefit/risk are they willing to accept in a treatment; what regulators are doing about patients; how governments are pressured by patients...the patients...the public...are more than ever in the center of the pharmaceutical dialogue. 

	Personally, I hope PhRMA succeeds in its public education efforts. There is a lot to be gained by a fair, transparent and accurate dialogue about healthcare and treatment decisions. But I also hope they did their homework when creating this campaign, and got some real people in the room to test their messaging. Because in this court of public opinion, the people are the experts.

From the Editor

Here's to hoping that PhRMA's new public education campaign advances the voice of the patient in its messaging.

When You Need Experts, Use Them

	There has been no let-up in the campaign to curb prescription drug prices, both for product launches and marketed therapies. While payers have adjusted to high costs for new hepatitis C cures, they continue to question expensive cancer and multiple sclerosis therapies and new treatments for rare conditions. Former vice president Joe Biden aims to challenge high prices through his new organization

 promoting oncology therapies. The latest shocker is Biogen’s ultra-orphan 

, which launched in January at a record $750,000 for the first year of treatment, and $375,000 thereafter. 

	Now price-control efforts are shifting to the legislative stage, as enthusiasm grows on Capitol Hill for proposals to permit Medicare price negotiation and faster FDA approval of competitive generic drugs. Democrats tried, and failed, to add drug pricing provisions to the 21st Century Cures Act, and they sought to amend last month’s Senate budget resolution with measures to curb price hikes by ending tax deductions for drug advertising expenditures and brand-generic “pay-for-delay” deals. Bipartisan efforts now are more likely to add pharma pricing provisions to must-pass bills to reauthorize FDA user fees. 

	Some pharma CEOs seek to hold off price regulation by pledging limits on annual price hikes. Allergan chief Brent Saunders led the way in September with a promise to keep price increases under 10%. Novo Nordisk and AbbVie followed suit. But Allergen’s recent 9.5% price hikes raise skepticism about voluntary industry efforts.  

	A prime target of reformers is the established industry practice of jacking up prices on older,  off-patent drugs with limited competition. A December 2016 

Congress is poised to tackle exorbitant drug prices through health reform and FDA legislation.

Pharmaceutical Executive-02-01-2017

Region in Reform? Access Pains and Gains in Latin America

CMED: The ‘Curupira’ of Brazil’s Pharma Market

The Trouble with Pharma Partnerships ... And How to Fix Them

Reducing the Risk of Noncompliance

When You Need Experts, Use Them

Pricing Pressures and Policy Changes

Not Your Typical Pharma Dateline

Market Access: Current and Future States

Market Access: A UK Perspective

Country Report: Singapore

Pharmaceutical Executive, February 2017 Issue (PDF)

Obstacles to Europe's HTA ambitions