Brendan Shaw
I don't always say this but spare a thought for the harried and hapless bureaucrats responsible for managing governments and other funders' price negotiations with pharmaceutical companies around the world.
As a former member of a national government’s pharmaceutical pricing committee, I can sometimes appreciate the policy and bureaucratic stresses these poor souls have to deal with.
You have your processes, policies and guidelines all nicely laid out ... and then they change.
In recent years, an important shift is happening in the way medicines funding agencies manage their costs and price negotiations.
Price negotiations and policies between payers and pharmaceutical companies are taking on new importance in the face of evolving issues in medical technology, budgeting and world politics.
Is HTA withering as a budget control mechanism?
For the last two or three decades, many funders of health systems around the world have relied on health technology assessment (HTA) to provide controls on their spending on medicines. Governments across Europe, Asia and Latin America have steadily introduced HTA as a process to evaluate the clinical and cost-effectiveness of medicines to help determine prices. This, in turn, has often provided a rationale for managing the uptake, use and costs of new medicines and vaccines as they are introduced into health systems.
In this kind of environment, a cost-effectiveness evaluation system like HTA that bases its price recommendations on the marginal incremental benefit of a medicine against other existing medicines makes sense. If you’re a government, private insurer, payer, or other health budget manager, this kind of approach may help you when scientific and technological development – and the demand for it – is slow and steady. HTA loves incrementalism.
The problem with HTA as a decision-making system is that the arrival of various cures and demonstrably better treatments is difficult to manage. New treatments may not be just incrementally better than existing treatments, but very much better. In an increasing number of cases such treatments are not just cost-effective, but substantially so.
When this happens, the result of HTA-based evaluations can be that payers should spend lots of money – millions and sometimes billions – on such new treatments.
The hepatitis C medicines that hit the market about a decade ago were an example of this, led by sofosbuvir. Because these medicines have high cure rates, few major side effects, and are easy to take, most HTA evaluations came to the obvious conclusion that governments could justifiably spend billions on the drugs all at once to rid the world of hepatitis C. From an economic and social standpoint, it made perfect sense.
From a budgetary standpoint, cures give health and finance department officials around the world heart palpitations. Big budget medicines that make substantial improvements in health care don't fit with HTA's budget management task or restful weekends for price negotiation officials.
More of this is coming. There are a range of medicines in the pipeline that are substantial improvements in treatments. Moreover, the 25-year wait since the sequencing of the human genome at the turn of the century is now starting to deliver more advanced cell and gene therapies that potentially are going to be one-shot cures for lifelong diseases.
Standard HTA approaches used by governments may not provide their traditional role in helping manage budgets, because the economics behind true cures is pretty convincing. Invest now and save billions in the long run.
The rise of cures has triggered new approaches in health funding: governments, insurers and other funders and their evaluation committees getting more directly involved in the post-HTA price negotiation process.
Sofosbuvir might have been the trigger for many national and international debates on this, but the trend is that more heart palpitations are coming.
Countries introducing new price negotiation systems
In recent years various countries have introduced new mechanisms to manage price negotiations with pharmaceutical companies. This is because budgetary pressures are growing and because governments still want to manage prices, even if HTA can't provide a solution. Some examples include:
The United States where, after decades of debate, the federal Medicare system is now starting to be allowed to negotiate prices with pharmaceutical companies for medicines funded through Medicare. This change is a result of the Biden Administration’s Inflation Reduction Act. An initial 10 medicines with large budgetary impact have been slated for price reductions through negotiations, with potentially more to come. Given the importance of the US as a major market in the world for new medicines, this could have significant global implications for the pharmaceutical industry and the development of future medical technologies.
In the last few years Canada has seen the introduction of new processes for collaborative price negotiation and determination by the Canadian provinces once the federal Canadian Agency for Drugs and Technologies in Health (CADTH) has made its recommendations from its HTA evaluations. This new price oversight has been introduced through the pan-Canadian Pharmaceutical Alliance. In part, the Canadian system has been upgraded to bring the provinces into federal decision-making systems, but also to insert greater budgetary and fiscal perspectives into the post-HTA decision making process.
In England, the National Health Service (NHS) is getting more directly involved in price negotiations with pharmaceutical companies after the HTA agency, the National Institute for Health and Care Excellence (NICE), has made its recommendations on cost-effectiveness. While the arrival of sofosbuvir on the market was the trigger for the NHS to get more directly involved in price negotiations after the completion of the HTA evaluation, this has become a more regular feature in England with an increasing number of highly effective medicines and cures coming to the NHS.
After many years of allowing 12 months of free pricing of medicines before the HTA and price negotiation process starts, Germany has reduced this time to 6 months, largely to manage budgetary pressures in health funding. Germany has proposed a range of pharmaceutical pricing reforms over the last few years, both to manage budgetary and fiscal issues, but also to encourage the listing of new medicines, introduce confidential pricing and support local clinical trials in the country’s post-HTA pricing negotiations.
Australia has changed its post-HTA price negotiation system in the last decade and, in some ways, has gone in the opposite direction. Over the last 10 years its national government abolished formal bodies that oversaw post-HTA price negotiations and instead brought them in‑house into the health department. Non-HTA-related pricing factors have gradually been dropped from price negotiations in the last 20 years. At the same time, greater responsibility for pricing and budget management has been put on to its HTA evaluation committees. The report of a recent major HTA Review was recently released by the Australian Government which may have implications for the post-HTA pricing system in the future.
Problems for HTA evaluation in pricing going forward
The other problem for officials relying too much on HTA to set prices is that there are a growing number of other policy issues that are becoming more important in payers’ funding decisions that go beyond the straight up and down health outcomes and clinical cost-effectiveness usually seen in HTA. These include:
Overall budgetary pressures on payers in the aftermath of the Covid pandemic, growing geopolitical tensions, rising spending on defence equipment and warcraft capabilities, and high levels of debt and associated interest payments resulting from past high levels of spending. Such pressures may require payers to look above the parapet, beyond the drug-by-drug, step-by-step evaluation process to have provide longer-term fiscal, economic and budgetary perspectives when looking at health budgets.
A new-found interest by many governments around the world in maintaining sovereign national and regional manufacturing, research, clinical trial and industrial capability in their jurisdictions. Whether due to policy requirements for national champions, industrial policy goals, a desire to grow local investment and technology development, or wanting to build stronger localised supply chains, governments are becoming keener to develop national production capability. These are all industrial policy factors that outside the bounds of HTA.
Growing recognition that price negotiations in health care and medical technology need to take into account longer-term commercial, product development and supply chain viability issues. The biggest recent example of this is in antimicrobial resistance (AMR) and the urgent need for payers to incentivise the development of new antibiotics and other antimicrobials. Decades of neglect in this area has meant that there has been few, if any, new antibiotics developed in years. Arguably, HTA evaluation systems have not coped well with these longer-term structural and intergenerational issues.
A realisation that the environmental impacts of health systems and medical technologies are important and need to be factored into purchasing decisions. Whether it is trying to address climate change by factoring carbon emissions into pricing decisions, or accounting for water pollution from manufacturing, or the waste impacts of plastic packaging of products, there is a growing push to adjust payer purchases to incentivise ‘green’ health systems. England’s NHS has adopted a green strategy across its system, while several of the Nordic countries are also introducing environmental criteria into their health system purchasing decisions. Again, these factors have typically been beyond the scope of HTA.
The question is whether HTA committees are equipped to deal with all of this. These sorts of broader policy and political questions typically don't sit well in the carefully structured methodologies and systems of HTA. It’s debatable whether clinicians, patient representatives, and experts in clinical trials and cost-effectiveness evaluation have the remit or expertise to incorporate such factors into their decision making. Or, indeed, whether they should be the ones being asked to do it.
What does this mean for pharmaceutical companies and bureaucrats?
Pharmaceutical companies are going to have to get smarter at this and become more aware of post-HTA pricing systems.
For years companies have tended to focus on HTA systems as the way medicine prices and budgets are determined, in part because governments and payers told them to. However, increasingly other policy factors are entering payers’ decision-making frameworks.
For the bureaucrats and experts who run pharmaceutical price negotiations, it means more work. Countries and payers are considering these other pricing factors into their procurement decision making. This means that, as part of their product development and pricing strategies, companies will have to consider these policy factors in their strategies.
This all means it’s likely to get more complicated, not less.
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