Is value-based pricing an aid to market access?
Leela Barham explores whether pharma firms can use value-based pricing (VBP) to improve market access.
By on Jun 16, 2010Leela Barham explores whether pharma firms can use value-based pricing (VBP) to improve market access.
In theory, value-based pricing (VBP) means that the prices paid for products reflect the full value to consumers.
But theres a lot hidden beneath that idea: that consumers know what the full value of a product actually is; that they take into account the value not just to themselves but also to society as a whole; and that they, rather than clinicians, have the necessary information to judge a products full value.
And thats just on the consumer side. For producers, VBP means not charging above and beyond the actual value.
These issues apply across all healthcare systems. But value is highly context specific, reflecting local costs, who prescribes the product, and whether patients take the product apporpriately.
So the idea of VBP is attractive, but in practice it is complicated.
Fine-tuning pricing
There is already a degree of VBP in the UK via agencies such as NICE, which consider the value-for-money from products, says Julia Manning, director of think tank 2020Health and author of arecent report on VBP in the UK.
But reform of pricing and reimbursement in the UK could and should happen.
VBP has been put forward as a way to fine tune pricing in the UK and other European countries, including Sweden.
The TLV, the Swedish pricing and reimbursement authority, is currently looking at its own approach to pricing and reimbursement in the context of VBP.
The current financial climate means there is a need to look again at the reasonableness of individual product prices, according to Manning.
There is a balance to be struck between pricing and not exploiting the public purse.
Moving closer to VBP
In the UK, Manning believes the current pharmaceutical price regulation scheme should stay in some form, but there is a need to review the role of NICE, whether NICE is achieving what it was originally set up to do.
That review should cover factors ranging from the speed of appraisals to the quality-adjusted life year (QALY) threshold as well as looking at how pricing works and what influences it.
The goal: to find ways to introduce more flexibility into the whole paradigm.
2020Health suggests that moving to VBP in the UK would require changes to the current system, including incorporating a social perspective into NICE deliberations, implementing a more standardized approach across all UK agencies, and ensuring long-term incentives for innovation.
One way to achieve the latter, according to 2020Health, is to bring in an innovation council that can help balance the short-term need for cost containment with the long-term need for innovation to benefit patients, carers, the healthcare system, and the economy more generally.
What it means for market access
VBP would provide a greater degree of consistency across the UK, but a single no would then also apply across the UK.
VBP would also increase the chance of reimbursement for products showing social benefits.
Other products may lose out, however, especially if there is a dwindling budget.
In addition, getting a yes under a VBP regime could help achieve market access in other countries, too.
How likely is it to happen?
The idea of VBP isnt going away anytime soon, but there is likely to be considerable difficulty in moving towards practical implementation, not just in the UK but in every country grappling with value-for-money issues.
The debate needs to focus on getting earlier access to truly innovative products, says Michael W. Thomas, a principal at A.T. Kearney.
Everyone needs to be convinced that changes will be better than how we approach pricing and reimbursement now. And crucially, everyone has to recognize that uptake is an issue, and one that will not go away just by reforming pricing and reimbursement.
We should not lose the great strength of NICE in including the public and patients in its processes, Manning adds.
That differentiates NICE from counterparts in other parts of the UK and further afield. Reforms should also not overlook the importance of compliance and adherence by patients, to make sure that the potential value of products is realized in practice, whatever value and pricing structures are in place.
For more on VBP, see Market access and value-based pricing.
For a related story, on value-based selling, see Is VBS just plain BS?.