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  3. > Innovations in Drug Pricing and Reimbursement (2016)

Is the drug pricing bubble about to burst?
Drug costs are becoming unaffordable and draconian cost containment strategies are being employed.

The pharma industry is winning few friends when it comes to drug pricing.

Public, health professional, political and payer hostility is growing worldwide as the prices of new drugs for chronic disease, specialty medicines and even generics grow excessively. How are payers in the US and Europe responding and what cost containment strategies are being – and could be – employed to cap rampant and increasingly unaffordable drug bills?

The pharma industry is winning few friends when it comes to drug pricing.

Public, health professional, political and payer hostility is growing worldwide as the prices of new drugs for chronic disease, specialty medicines and even generics grow excessively. How are payers in the US and Europe responding and what cost containment strategies are being – and could be – employed to cap rampant and increasingly unaffordable drug bills?

“It's pretty discouraging, unfortunately. It makes you think these companies are not really involved in healthcare. I don't think they are…They just are profit centres.”


Answering key questions:


A Fundamental Driver: Why, and to what extent, is the pharma industry’s focus on orphan diseases and high-end biologics creating such an issue for payers?

The End of the Wild West? Freeing Medicare to negotiate drug pricing and PBMs utlilising competitive pressures to lower costs are just some of the solutions to controlling US drug prices– what else is on the table and how extreme might regulators get?


European Variance: Reference pricing, price-volume agreements, tendering, early benefit assessments, HTA cost/benefits assessments, risk-sharing and whole system product value are all being employed – but where and with what success?
Stakeholder Buy-In: Why, and how, might early and open dialogue between industry and payers benefit both parties?
Positive Message? Why is industry failing to get its societal and cost-benefit message heard, and what more could it do to win support?
Same Old, Same Old: In the face of solid profits does industry’s narrative of justifying high drug prices to fund innovation and development need an overhaul?


Risk Sharing: Are risk-sharing, value-based pricing and pricing by indication the best schemes moving forward?
Local Market, Local Problems: Each country has gone its own way in controlling cost – what could they learn from each other and is drug pricing now a regional rather than just a national issue?


With this report you will be able to:


Understand the fundamental research trends that are driving payer concerns and disquiet
Learn which reimbursement strategies are being employed
Assess the multi-country alliances that are forming to negotiate better prices
Appreciate how cost-containment measures vary from country to country
Understand why and how cost containment measures are likely to intensify
Address the pressing need for companies to explain their pricing policies better and support brands with outcomes evidence
Know what payers want and formulate better communication strategies in healthcare. I don't think they are…They just are profit centres.”

Key Topics explored

Is the pharma industry digging its own grave? Price increases above and beyond any economic indicator, price gouging and products which bring little clinical advantage but big cost are creating much ill will and leading to wider and more severe cost containment policies.

Cash strapped payers cannot afford to meet all the demands of aging populations – how can industry positively respond to these concerns?
Even the hitherto free market of the US is now actively seeking ways to control cost. Moves to liberate the negotiating hand of Medicare and a range of other control measures will limit the industry’s scope to act. How far could these developments go?
European countries share the same problems but each has taken a different approach – will consensus emerge and what are the key market variables that pharma should know about?
Drug intervention plays a critical role in controlling disease. Effective medicines and good adherence can improve the patient’s quality of life and significantly reduce overall health expenditure. But these benefits often go unrecognised. Is there a communication issue pharma needs to address?
Biosimilars hold the prospect of lower prices for biologics, but will this sector ever really gain traction in the market?

Expert Contributors
The report is informed through in-depth interviews with payers responsible for drug budgets in the US and EU5 leading economies. To ensure open and critical responses all contributors are anonymous but include:<


Chief pharmacist at NHS Foundation Trust in England
Drug-reimbursement manager for German health insurers
Head of pharmacy at French university hospital
Advisor to Spanish hospitals on pharmacoeconomics and formulary inclusion of new medicines
Director, department of clinical pharmacy in Italy


Table Of Contents

Innovations in Drug Pricing and Reimbursement (2016)
1 Executive Summary
2 Research Objective and Methodology
3 Introduction
3.1 Pricing concerns are here to stay
4 The challenge to payers in the US
4.1 Losing sight of the patient
4.2 Government payers are suffering too
5 The challenge to payers in Europe
5.1 New strategic alliances to manage costs
5.2 Payers should collaborate, says WHO
6 More pressure from drug pipelines
7 Budget impact for payers in the US
7.1 Speciality prices for chronic diseases?
7.2 Debranding and price-gouging
8 Budget impact for payers in Europe
8.1 The need for targeted budgets
8.2 Lack of leverage in the UK
9 The price of innovation
9.1 Pharma profits are healthy enough
9.2 The real value of RandD investment
9.3 Benefits can be highly subjective
9.4 Short budget cycles are a problem
10 Cost-management strategies in the US
10.1 Traditional strategies will persist...up to a point
10.2 Support from doctors, cost-benefit assessments
10.3 Independent cost-benefit assessments have limited influence
10.4 Prospect of price controls
11 Cost-management strategies in Europe
11.1 Selective economic modelling in France
11.2 G-BA influence in Germany
11.3 Spain's therapeutic-positioning reports
11.4 Registries are key in Italy
11.5 “Appropriately costed” medicines for UK hospitals
12 Strategies that work (and don't work) in the US
13 Strategies that work (and don't work) in Europe
14.1 Pragmatic response to hepatitis C
14.2 Tenders have their limitations
14.3 Some adjustments needed in Germany, Spain
15 Learning from other markets
15.1 G-BA steers clear of cost
15.2 The US looks to NICE
15.3 Cost-benefit assessments
15.4 Lack of real-world data
16 What payers want to see
16.1 Product-by-product comparisons in Europe
16.2 Talking to manufacturers
16.3 Payers look to concerted action
16.4 Shared HTA experience
17 How industry is responding to pricing pressures
17.1 Some companies recognise US constraints
17.2 Responses vary in Europe
18 Help from biosimilars
19 Innovations in drug pricing and reimbursement
20 New strategies in cost management
20.1 Generating value with adherence programmes
20.2 Restricted by tendering in the UK
21 Risk-sharing and value-based pricing
21.1 Case study 1: European risk-sharing schemes
21.2 Case study 2: Complications with UK schemes
21.2.1 Technical and logistical obstacles
21.2.2 Movement towards value-based pricing?
21.2.3 Personalised medicine: a step in the right direction
21.2.4 Pricing by indication
21.2.5 Payers remain sceptical
21.2.6 Time to embrace disruptive change

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