Should pharma scrap per-pill pricing completely?

performance

What if, instead of cutting drug prices, the pharma industry threw out the rulebook altogether?

That’s just what a European trade group is proposing, Reuters reports, in a plan that would dump per-pill or per-treatment pricing in favor of results-based payments.

The “roadmap for change toward outcomes-based reward systems” sets out the benefits of hitching drug costs to real-world results. Rather than fighting with cost-effectiveness gatekeepers over sticker prices, payment deals would be negotiated to reflect a drug’s payoffs for patients--and for payers, in instances where treatments may cost dearly up front but save even more money by preventing hospitalizations and other costly treatments down the line.

The document was seen by Reuters ahead of a discussion by the European Federation of Pharmaceutical Industry Associations board next week.

"This is not without risk," according to the paper, written by Efpia's director of market access Francois Bouvy (as quoted by the news service). "If a product does not deliver on its clinical promise, society should not continue to pay for it. Equally, if the product delivers more value than was ever expected, this extra value must be rewarded."

The idea isn’t unprecedented; several drugmakers have struck performance-based or risk-sharing deals with England’s cost-effectiveness body NICE. In recent months, results-oriented payments have gained traction in the U.S. as well. Top insurers and big drugmakers have inked contracts linking rebates on their new meds to their real-world results, and both private-sector foundations and government payers are starting to test the waters.

But the new proposal isn’t about a contract here, another there. As Reuters notes, the Efpia paper considers adopting the approach across the board. 

Drugmakers recognize that the current pricing model can’t be neatly applied to new treatments such as gene therapies, which can cost upwards of $1 million, but actually cure a condition, rather than treating over time. Makers of pricey cancer immunotherapies, now being tested in combinations that promise to be even more expensive, understand that the cocktails have to be priced affordably, somehow.

Plus, under pressure from payers to show the value of their treatments, more pharma companies have been folding outcomes measures into their late-stage studies--the sort of outcomes data that can then be used to negotiate results-based contracts. Novartis did so with Entresto, its new heart failure med, tracking hospitalizations among patients using the new drug compared with those on an old standard treatment. The Swiss drugmaker recently struck results-based arrangements with top U.S. insurers Cigna and Aetna.

Novartis CEO Joe Jimenez pushed hard for those deals, and he’s been a vocal proponent of moving to new pricing models. Jimenez--who happens to be the current Efpia president--has said that pegging prices to results gives drugmakers a chance to generate more sales off truly innovative new products than they would have otherwise.

- see the Reuters news

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