The pandemic is creating an environment that will focus decision makers on measurable healthcare outcomes as they try to balance shrinking budgets with increasing demand. To reach this goal, all stakeholders will have to start speaking openly and plainly about how pricing and reimbursement decisions are made.
Recently, 3D Communications asked a panel of experts whether they think COVID-19 will affect the way the value and prices of medicines are determined in the longer-term. The take-away was clear. COVID IS accelerating change – but this will only last if stakeholders are transparent in their pricing and reimbursement decisions.
The panel of pharmaceutical executives, a former payer, and the founder of a healthcare investment firm agreed that the pharmaceutical industry has largely failed to clearly explain why drugs cost what they do.
“We can do a much better job of explaining how we arrive at our prices,” said Indranil Bagchi, Global Head of Value & Access, Novartis Oncology.
“A lot of pharma explanations have been very technical,” Bagchi continued. “While there’s a technical underpinning of the data that drives the pricing process, that shouldn’t preclude us from developing, demonstrating, and communicating the value proposition of our medicines in a very clear and understandable way.”
Former Aetna executive and CEO of Enlightenment Bioconsult Edmund Pezalla said that a lack of understanding about the value of medical interventions, including medicines, is one of the biggest obstacles to change in the United States.
“We still don’t have a way of valuing drugs that is universally accepted,” said Pezalla. “Cost-effectiveness is used in some places and not others, and generally is avoided altogether in the United States.”
Pezalla added that a lack of transparency was also a problem that plagues payers. “We have a bunch of different payers, who are looking at the same data, for the same medications, and coming to different coverage decisions, especially around what kind of utilization management to apply to it. So how did that happen?”
“I think that’s really where we have a need for transparency, to understand how they make the decision on who is going to get a medication and under what circumstances,” he said. “If they explain that better, I think that we’d have a lot of happier customers too.”
Job losses and other economic fallout from the pandemic will also have a profound impact, the panelists noted. They expect pressures on healthcare budgets to increase, as insurance plan revenues fall in the United States, and European governments are forced to tighten their purse strings.
“There will be a flurry of investments to develop innovative treatments and build capacity to prevent the next crisis,” said Michael Schroeter, Founding Partner of Swiss Investment firm Viopas. “But at the same time, the economic burden from COVID-19 will be forcing payers to spend more prudently.”
Pressure to maximize returns on healthcare spending could lead to more emphasis on medicines and other interventions that deliver tangible outcomes for patients, physicians, and caregivers, the experts said.
“What we see is COVID-19 being an accelerator in terms of delivering value-based healthcare to the population,” Bagchi said.
Pezalla said that COVID-19 was bringing into sharp focus some of the thornier issues facing the healthcare industry.
“COVID is bringing out components that we hadn’t thought about before in terms of how much everything in the healthcare system is costing,” he said. “We’re going to need to align drug pricing with other values in the healthcare system.”
Schroeter believes payers should take a broader perspective when assessing the benefits of medicines. For example, he said, in Alzheimer’s Disease, where currently there are no effective treatments, the caretaker (usually the partner) shoulders the biggest burden and may lose their job or become depressed. Today, Schroeter noted, most payers would not consider these consequences in their payment models, but they should, since society does bear these costs.
“We need to think more holistically as we do with COVID and think beyond individual siloed budgets and start thinking across these silos,” said Schroeter. “Our common goal should be maximizing health and reducing costs. That should be the game.”
SHORT-TERM VERSUS LONG-TERM
Adding to the practical barriers: the conflicting incentives of individual stakeholders in the healthcare system. Showing long-term benefits on medicines may not matter to payers who are only focused on short-term budgets.
Historically, Bagchi explained, the way systems had been set up meant that it was difficult to recognize the long-term value of a medicine.
“If I’m looking to put a medicine on the formulary and my lens is two to three years, how am I going to understand the value of a medicine, which might report out in five to ten years?” he asked. “These days we are talking about CAR-Ts and cell and gene therapies, which have a one-time administration today, but the efficacy and the effectiveness of the medicine can almost last for a lifetime.”
Recently, the panelists said, payers in some countries were using new payment models that recognize the long-term value of advanced therapies like CAR-Ts. The panelists expressed hope that other countries may follow suit.
“For the first time [with COVID] we’re seeing drug spending, pharma spending seen as an investment for the long-term rather than a current expenditure for the short-term,” said Valentino Confalone, the General Manager of Gilead Sciences in Italy, pointing to recent advances in payment models in his country.
“We managed to get an agreement specifically in development with Italian authorities where the full benefit, the full price, is set based on the actual benefit the drug is delivering to the patient. This is done through the assessment of real-world evidence from a registry that has been put in place that allows the authorities to measure the actual benefit delivered, and payments are fully linked to the benefit. In our case, payment is not due unless some benefit is proven,” Confalone explained. “And that’s the first time ever that health outcome-based pricing has really been applied in full.”
Schroeter is optimistic that it will be possible to deliver clinically-meaningful breakthroughs that reduce overall healthcare costs, but only if patients, physicians, policymakers, payers, pharma and others change their habits.
“We can do it,” he said. “We all have learned that lesson during COVID.”
To watch the session that was moderated by Kate Dion, Value Communications Lead for 3D, please go here.