May You Live in Interesting Times

May You Live in Interesting Times - a Curse or a Blessing?

“May You Live in Interesting Times” – this old saying might suggest a blessing or a wish for good fortune but in fact is widely believed to be an ancient Chinese curse. It was popularised by Robert Kennedy who said in a speech in South Africa in 1966:

“Like it or not, we live in interesting times. They are times of danger and uncertainty; but they are also the most creative of any time in the history of mankind.”

These are certainly “interesting times” for pharmaceutical companies. In 40 years of writing about the industry, I’ve rarely seen an upheaval in the pharmaceutical market such as we’ve witnessed in the past four or five years – “uncertainty” certainly and perhaps also “danger” for the future of pharma as we know it.

I’ve recently been writing about two countries – the UK and the Netherlands. On the surface, the two healthcare systems and pharmaceutical markets are very different. But look closely and you can see more common trends starting to emerge, trends which demonstrate some of the major challenges for pharma and why that ancient Chinese curse comes to mind. For example:

  • An even tougher approach by payers to prices of innovative new drugs.

  • Joint procurement and greater collaboration amongst payers within countries and across borders to identify discounts and push down prices.

  • Horizon scanning by payers at both local and regional level to identify possible high-cost drugs at a very early stage.

  • Increasing emphasis on value-based healthcare.

  • Much greater emphasis on health promotion and disease prevention.

  • Patent expiries on major biologicals

Commercial access/managed entry agreements are becoming an integral part of the pricing and reimbursement process and they are increasingly being negotiated at a higher level of payer. The pricing environment has been getting tougher over the past decade, but more recent trends in negotiating access to market pose another challenge for manufacturers of innovative medicines judged to be of exceptionally high cost. In the Netherlands, any new hospital drug identified as being a high financial risk (a threshold of €40 million has been set) will be placed in a ‘lock’ (sluis) to enable a cost-effectiveness evaluation to be made before the product can be reimbursed. This usually results in a deal to reduce the price, or an offer of some form of risk agreement. The Dutch health ministry is now directly involved in these negotiations. In the UK, NHS England, which has taken over most of the responsibilities of the Westminster government’s health ministry, has intervened to negotiate access agreements directly with manufacturers of high-cost drugs. At the same time, managed entry agreements will continue to be negotiated by Dutch insurers and UK’s NICE for most other new drugs.

Horizon scanning is being adopted in the UK and the Netherlands to identify at an early stage new drugs that pose a high financial risk. Initiatives include the launch of a joint project on horizon scanning under the BeNeLuxA collaboration involving the Netherlands Belgium, Luxembourg, Austria (and recently Ireland). Identifying potentially important pharmaceutical innovations before they come to market will enable payers to forecast the impact on budgets and prepare for pricing negotiations. The pharma industry needs to make sure it is not left out of this process and is as well prepared as the payers.

Joint collaboration. Collaboration on pricing and procurement is becoming more common within individual countries and also across borders. In the Netherlands, hospitals and insurers plan to collaborate more closely on procurement of high-cost medicines, which will give them a stronger bargaining position with companies. The BeNeLuxA agreement will encourage the exchange of information and real-world evidence on new drugs and collaboration on joint health technology assessments and negotiations. At EU level, companies are already facing new demands for transparency and collaboration in pricing, with the EU Council having recommended greater cross-border collaboration in this area (see Column of February/March 2017). This would include proactive sharing of pricing information (as has already happened with Sovaldi in some countries) and joint price negotiations in groupings of EU member states.

Value-based healthcare, with emphasis on outcomes, is not a new concept. In many countries it is already a major consideration in new drug evaluation for reimbursement purposes. Now, pharma companies will have to address the increasing availability of real world evidence/real world data (RWE/RWD) along with demands from regulatory and HTA bodies for inclusion of these in reimbursement applications. It’s clearly a good thing for the industry if payers stop thinking of pharmaceuticals simply as a cost centre and start to base reimbursement on the quality of care provided. For companies the challenge will be ensuring that they are on the same page as the payers and regulators in respect of the data required. Also, digitisation of healthcare services will make outcomes data much more accessible to health providers, who will be able to use this in pricing negotiations. The outcomes-based approach will encourage companies to work more closely with health and care providers on total care pathways. For example, the UK’s Cancer Vanguard, which is led by three NHS health providers, is developing new models of cancer care in partnership with several pharmaceutical companies and IQVIA.

Health promotion/disease prevention. Payers are at last taking a longer-term view and acknowledging that more investment in disease prevention can save on future health costs. In the UK, the new Health and Social Care Secretary has just announced a major policy aimed at revolutionising the government’s approach to health promotion and disease prevention, with extra funding expected to follow next year. In the Netherlands, the government says it will invest €170 million over 2017-2021 for preventive care and the promotion of healthy lifestyles. Prevention is an area where there is much scope for pharma companies to partner with health providers and payers – for example in the provision of education materials for health professionals and patients in areas such as diabetes, lung and heart disease, cancer, obesity etc.

Patent expiries on leading biologicals could result in the hospital market, now a major driver for the industry’s business, witnessing the type of scenario seen in primary care some years ago with the demise of blockbusters such as Lipitor. After a period of holding back, payers and regulators are now actively encouraging uptake of biosimilars at a time when some of the world’s top-selling products are exposed to biosimilar competition. In the Netherlands, the regulatory agency has expressed the view that there are no relevant differences between original biologics and approved follow-on products in terms of quality, safety and efficacy, while in the UK NHS England has made several recommendations aimed at encouraging biosimilars in the belief that use of what it describes as “better value biologicals” could generate savings of £200-300 million a year. The biosimilar revolution looks set to change the face of the pharma industry. Companies taking a hit will pin their hopes on their R&D pipelines and, if these are found lacking, will look for acquisitions to boost these pipelines, or ways to reorganise in order to increase productivity.

Yes we do live in “interesting times”. But when applied to pharma they may not be too far removed from Robert Kennedy’s description of the ‘60s – “times of danger and uncertainty; but also the most creative of any time in the history of mankind.” Pharma is a creative industry that has innovated its way out of difficulties in the past and I’m sure it can do so in the future. So that Chinese saying may in the end be seen as more of a blessing than a curse.

Brexit and R&D. I’ve got this far without touching on other major challenges such as R&D, where returns on investment are on the decline, and Brexit which is a particular threat to the industry in the UK. These will have to wait for another column.

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