Managing market uncertainty: Is risk sharing the answer?
Peter Mansell explores how risk-sharing schemes can provide patient access and market exposure without undermining list prices
By on May 16, 2011Uncertainty is a governing principle of the risk-sharing schemes that in recent years have sought to resolve tensions between finite healthcare budgets and the costs of new medicines in Europe, the US, and other markets, such as Australia and Canada.
That uncertainty works both ways.
The risk shared is investment in new medicines both by the companies that market them in the hope of a viable return to keep profits and the R&D cycle ticking over and by health systems hoping to improve outcomes for patients as well as cost efficiency within those systems.
As Anant Murthy, Celgene’s head of market access, Europe, pointed out at a recent eyeforpharma meeting, uncertainty may stem from “high discordance” between a drug’s efficacy, as demonstrated in the relatively narrow and well-controlled setting of clinical trials, and its potential effectiveness in long-term ‘real-life’ use, where certain sub-populations may benefit more or less from treatment.
Equally, it may relate more directly to the cost of treatment, bearing in mind factors such as uptake, off-label prescribing, or drug concordance/persistence.
In this respect, Murthy noted, a risk-sharing scheme may largely be a matter of reducing costs “without the fuss” of having to measure effectiveness and potentially deny reimbursement through health technology assessment.
(For more on drug concordance, see ‘Compliance and concordance: Good for patients and for pharma’; for more on HTAs, see ‘HTAs go global: What it means for market access’.)
With pressure on governments to provide coverage for new ‘breakthrough’ therapies whose demonstrable benefits may look slender in relation to their cost, risk-sharing schemes can provide a politically acceptable compromise that allows manufacturers patient access and market exposure without undermining list prices.
Risk-sharing arrangements as warranties
As Joseph Cook, John Vernon, and Richard Manning observed in an article published by NERA Economic Consulting, risk-sharing arrangements are essentially a form of warranty.
Like other warranties, they reflect “asymmetry of information about product value or quality,” the authors argued.
But with pharmaceuticals, there are “substantial uncertainties about the economic and medical value of an innovation that persist well into the life of a product,” they noted. This may spread the risk more evenly.
Health systems might argue that, traditionally, they have borne the brunt of the risk for claimed innovations, be it a product not delivering intended outcomes, delivering them in only a limited patient population, or delivering them only over a longer (i.e., more costly) term than originally envisaged.
But it also throws into relief the question of how much these schemes actually benefit the manufacturer, given all the additional complications and costs that may accrue in terms of administration, monitoring, defining and measuring surrogate endpoints, and demands for matching arrangements in other markets.
“Contracts that seek to limit the exposure of a payer to unexpectedly valuable innovations by limiting payment to specific populations, or at given prices, put a limit on the attractiveness of the costly and risk-laden investment into new medical products,” Cook, Vernon and Manning wrote.
“When innovators are not able to reap the upside surprise (e.g., the discovery of a ‘blockbuster’ product) to compensate for the significant downside risk involved in discovery and development efforts, too few new interventions will be developed from the consumer point of view.”
Risk-sharing scepticism
The counter-argument is that the days of the blockbuster are over and today’s market—one in which the payer increasingly sets the terms—is all about defining, delivering, and demonstrating value in smaller, more responsive patient populations, differentiated by genetics or other markers.
Scepticism about risk sharing is by no means confined to the pharmaceutical industry.
For example, a review by professor of health technology assessment James Raftery concluded that the outcomes-based scheme set up in the UK to provide access to multiple sclerosis drugs (interferon beta and glatiramer acetate) was a success for the companies involved, which “sold at close to full price to the NHS,” but a “costly failure” for the National Health Service (BMJ, June 2010).
Disease progression in patients taking these drugs was not only worse than had been anticipated in the cost-benefit model used by the National Institute for Health and Clinical Excellence (which recommended against NHS coverage), it was worse than in the untreated control group, Raftery pointed out.
Nonetheless, a reduction in product prices—as envisaged under the scheme—was judged premature.
“It took three years rather than the planned 18 months to recruit 5,000 patients,” Raftery wrote.
“Around 120 extra multiple sclerosis nurses had to be hired to enable the scheme to operate at 73 centers. At a gross cost of £50, 000 for each nurse, this is £6m per year. The biggest cost was drugs, at around £40 million for 5,000 patients.”
Monitoring the scheme, Raftery added, has cost around £1m a year, “making the total annual cost close to £50m … This may well be the most expensive publicly funded ongoing health-related study in the UK, and probably anywhere, ever.”
In a paper on risk sharing published by BMC Health Services Research, a team of health officials, clinical pharmacologists, health economists, and insurers from across Europe and the US remained similarly unconvinced.
In most cases, they suggested, the uncertainty built into these schemes, together with their practical and cost burden, will be more than payers are prepared to take on board.
While a “considerable number” of risk-sharing schemes are already in operation worldwide, concerns about these schemes “need to be addressed before they should become a routine part of future reimbursement or contracting negotiations, especially given the suspicion among payers that a number of proposed schemes are extensions of pharmaceutical company marketing activities,” argued the authors of the BMC Health Services Research paper.
Leaving aside ‘classical’ price-volume agreement or budget-impact models, risk sharing might be an acceptable option for payers where:
- The objectives and scope of the scheme are explicit and transparent.
- The drug concerned is a novel treatment in a high-priority disease area that offers an expected net health gain and where there are currently few, if any, effective treatments.
- Translational science suggests good effectiveness “in reality” and that delaying treatment before all the outcome data are available may not be in key stakeholders’ interests.
- A new drug is regarded as effective in priority disease areas but there are potential concerns about long-term safety.
- The drug could have a substantial beneficial impact on service delivery and patient safety, but this has been difficult to prove within the confines of a Phase III trial.
- The likely health gain can be determined within a limited time frame.
- The proposed scheme can substantially lower health service costs and consequently widen reimbursement, once all the administrative costs have been factored in.
The paper included a number of other provisos, from ensuring that schemes have a robust evidence base together with unambiguous and easily measurable effectiveness criteria to addressing transparency and ethical considerations around, for example, administration costs or data ownership to providing the necessary personnel to fully evaluate risk-sharing schemes and develop follow-up registries where applicable.
The authors also stressed that evaluations “must be built into future schemes based on good science, given the paucity of published studies to date and concerns with many current schemes.”
Any such assessments should include “the overall costs involved with implementing and conducting the schemes as well as their outcome.”
What’s in it for industry?
For manufacturers, suggested Murthy, the advantages of finance-based schemes such as price-volume agreements or price caps (e.g., the manufacturer foots the bill once expenditure or dosing exceed a predefined ceiling per patient) are that they are usually quick to arrange and confidential; the potential to maintain a high list price; and the efficacy data used to set the volume or expenditure cap may be underestimated.
Potential downsides include a painful ‘claw back’ if the drug really takes off, and problems with label expansions that can push up prescribing volumes.
Cost-based agreements (e.g., discounting) are one-off, predictable deals that also protect higher list prices, Murthy noted.
They can incentivize drug use and may be applied at different levels (nationally, regionally, per customer).
On the other hand, these arrangements are not always confidential.
They may limit the ‘upside’ of future indications and label expansions and their impact on net price can be hard to gauge.
Outcomes-based schemes offer the public relations fillip of a genuine ‘payment by results’ claim.
They allow the manufacturer to maintain a high list price, may drive adoption, and can substitute for lack of an appropriate biomarker or good patient selection criteria.
At the same time, they demand clarity of evidence.
“You really need to know what you’re talking about,” Murthy commented.
Moreover, there are issues around measuring effectiveness and who will pay for tracking outcomes.
Murthy’s overall conclusion was that risk sharing presents a feasible alternative to “brute-force” cost-effectiveness assessments, particularly for orphan drugs in which determining cost-benefit ratios may be problematic.
Smaller companies may not have the budget or resources for complex submissions to agencies such as NICE, and these submissions may be muddied by limited efficacy data, even more limited effectiveness data, and an over-reliance on models and simulations, Murthy said.
He warned, though, about the pitfalls of information asymmetry.
For example, in-market outcomes for new drugs are likely to be worse than in clinical trials.
And risk sharing may jeopardize a product’s future value, especially that of new indications, through acceptance of effective discounting at launch.
Design consensus
In March 2010, the journal PharmacoEconomics published a consensus statement on design principles for ‘access with evidence development (AED) approaches’—an umbrella term for innovative reimbursement mechanisms such as risk-sharing schemes—agreed by experts from the US, the UK, Australia, and Canada who took part in the February 2009 Banff Summit on evidence development.
These principles were:
- The underlying decision problem the AED approach is designed to address should be clearly specified.
- The objective(s) of the AED should be stated (e.g., generating new evidence on a technology’s safety, effectiveness, costs or impact on quality of life; targeting treatment at patients who meet pre-specified criteria; managing the budget impact of a new technology).
- The objective(s) of the AED should inform the design of the study. These objectives of the AED scheme should be met within a specific time frame, should incorporate specific outcome measures, and be “fiscally conscious while maintaining a high level of internal validity.”
- The design of the AED should reflect the organizational characteristics and objectives of the healthcare system in which it operates.
- The AED’s governance should ensure the independence of the scheme from any parties with a vested interest in its outcomes. (This was one of the problems identified with the MS scheme in the UK.)
According to Chris Carswell, editor of PharmacoEconomics, there has been a good deal of interest in the Banff Summit consensus statement, especially from the UK, Spain, France, and Germany.
But the statement and associated conference papers are seen more as the start of an important debate than any final word on risk sharing.
Carswell is wary about how much and how soon risk-sharing schemes could roll out globally.
There is “still a long way to go” in designing effective schemes, he commented.
There are cultural and political barriers to negotiate, too.
The US, for example, is witnessing a strong push behind comparative effectiveness evaluations and moves to optimize treatment with drugs such as warfarin through genetic testing. (For more on comparative effectiveness, see ‘Health data and comparative effectiveness’.)
Yet there is still reluctance, at least explicitly and in the context of federal healthcare schemes, to allow cost into the equation, Carswell pointed out.
He does see a role for risk sharing in bridging the data requirements of regulators and payers in drug assessment.
Placebo-controlled trials are a poor reflection of real-world usage, where physicians may stray from the authorized labeling and treatment is complicated by co-morbidity and multiple drug regimens, Carswell noted.
Nonetheless, he added, “the jury is out” on the evidence of current schemes and it is unclear whether risk sharing offers any kind of panacea for managing uncertainty in the reimbursement of medicines. (For more on risk-sharing schemes, see ‘Market access: Risk sharing and alternative pricing schemes’.)
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