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Ed Schoonveld is a Managing Principal at ZS Associates.
Recent developments in the pharmaceutical industry give the strong impression that both payers and industry are struggling to understand what represents “value” to customers, writes Ed Schoonveld.
Recent developments in the pharmaceutical industry give the strong impression that both payers and industry are struggling to understand what represents “value” to our customers. The epicenter of many value discussions has been the United Kingdom, where three years of intensive discussions have sought to quantify the value of prescription drugs through Value-Based Pricing (VBP). However, the discussions halted abruptly over a rejection of the concept during a public consultation process, leaving the health economist community wondering what is next.
Value by numbers
Value is often said to be in the eye of the beholder. Perception of value can be very different between individuals with different functional perspectives (physician, patient, payer or other) and even between individuals with the same functional perspective. Value of health is very emotional and personal. Under the VBP concept, National Health Service (NHS) England and the National Institute for Health and Care Excellence (NICE) have been trying to essentially represent drug value in a single number in order to calculate a price. The initiative was intended to modify the existing cost per quality-adjusted life years (QALY) metric to incorporate a societal perspective. Arguing that one member of society qualifies less for treatment than others, on the basis of, for example, age, may remind some of the U.S. discussion of death panels.
After an initial broad discussion over the implementation of VBP (who would disagree with the concept of pricing on the basis of value?), the discussion evolved to building an analytical algorithm. Although scientifically perhaps sound, it has become very apparent that many of our customers will not accept an algorithm to decide on value and patient access to treatments in life-and-death situations. This has been the issue in many countries with cost-effectiveness cutoffs in the first place, as evidenced by rejection of this principle in the United States and Germany, and continuing challenges in France to making it a central component of coverage decision making. Adding an even more complicated multiplier further disconnects decision making from what we emotionally feel as important.
What does constitute value to patients, physicians and payers? Particularly, the value to patients should be a critical driver in decision making. Payers and physicians should ideally have only patient value in mind when they make trade-offs in allocation of resources. They usually consider long-term outcomes the most significant measure of value. Surrogate end points, such as complete response rates in solid tumor treatments, are generally not proven a reliable predictor of overall survival. Payers therefore tend to insist on specific longer-term evidence of patient improvement, such as reduction in cardiovascular events for diabetes patients and LDL-lowering treatments or overall survival for cancer treatments. However, long-term outcomes data are not always easily obtained with the strict clinical trial guidelines from the Food and Drug Administration (FDA) and European Medicines Agency (EMA).
Value demonstration at launch
At launch, we usually have only efficacy and safety data from randomized controlled clinical trials, rather than real-life effectiveness data that demonstrate actual value and cost-effectiveness. Most payers are fairly comfortable to judge value on the basis of head-to-head efficacy and safety data, but questions with respect to longer-term outcomes often remain. For example for anticancer drugs, median overall survival data supporting strong improvements may be only available several years after launch. Simply speaking, it is hard to provide data on the average survival of your treatment cohort when more than half are still alive! In few cases, payers are willing to provide market access on the basis of compelling surrogate end-point data, usually linked with agreements on further data collection. However, most payers are concerned that they will not be able to reverse availability of an expensive treatment when conclusive evidence of long-term effectiveness fails to materialize.
Pharmaceutical companies face significant challenges in meeting evolving and sometimes sudden new payer evidence requirements, which can result in suboptimal launch or even failure to launch in some markets. One of the more public examples of industry frustration has been the withdrawal of Trajenta by Boehringer Ingelheim and Lilly from the German market after introduction of Germany’s price control law AMNOG. However, there have been many less prominent examples in Germany and other global markets. A lack of mutual understanding between industry and payers drives much of this. What can payers and industry do to resolve this?
What can industry and payers do to reach out and improve the situation, so that patients get access to the most innovative proven treatments within a reasonable time frame?
Value and the drug industry
Payers often criticize drug companies for failing to generate meaningful evidence of health improvement claims. Many payers have recently tightened evidence requirements, for example the insistence of head-to-head clinical trials versus a meaningful treatment comparator in France and Germany. What can and should drug companies do to address this?
Payers have seemingly reasonable evidence requirements, but often also a very poor understanding of the drug development process and the implications of their demands on the likelihood of a new drug reaching their market. Many research organizations have a relatively poor understanding of payer perspectives and requirements, as well as strong incentives to ignore them as they may hurt timing to the next development gate and the probability of clinical success.
Based on the above, the drug industry would benefit from the following changes:
Value and payer decision making
Given the limited health-care resources available, how should payers make their trade-off decisions? Payer systems and priorities are very different from country to country and region to region. It is probably unrealistic to suggest a single solution, but I would propose some principles that allow for value to be included in decision making:
The suggested solutions in this article are not all easy to achieve. However, perhaps it will contribute to a much needed discussion between industry and the payer community.
Ed Schoonveld is Managing Principal at ZS Associates.