Health Technology Assessment: Developing Strategies for Understanding Value-Based Pricing

Pharma IQ

Value-based pricing is one issue which divides those in the pharmaceutical industry and the medical community.

Much of this debate centres around how value is defined. This is a subject which has once again been thrust into the spotlight following the announcement of changes taking place within the UK National Institute for Health and Clinical Excellence (NICE).

Changes within the pharmaceutical industry such as the rise of personalised medicine are also likely to have an effect on the development of value-based pricing which makes developing optimum strategies for the practice incredibly important.

UK changes

Under the current system used by NICE, the body is required to make a decision on whether a drug should be available to patients on the NHS based on the price provided by the producer.

Plans announced by the UK's coalition government when it entered office involved implementing a value based pricing system from January 2014 when the existing Pharmaceutical Price Regulation Scheme expires.

Upon launching a consultation into the system in December 2010, the health secretary Andrew Lansley said: "Value-based pricing will ensure that the price the NHS pays for medicines are based on an assessment of its value, looking at the benefits for the patient, unmet need, therapeutic innovation and benefit to society as a whole."

Although the change in the system means NICE will no longer have approval of the drugs available, the body will still have an advisory role in the process, which includes "assessing the clinical benefits of new medicines and giving authoritative evidenced-based advice to clinicians".

In response to the proposals, the Association of the British Pharmaceutical Industry (APBI) said consideration must be given to ensure the new system allows for consistent access to drugs and "must also fairly recognise and reward innovation and investment in research and development."

Dr. Richard Barker, director general of the APBI, said: "The UK continues to lag behind Europe in the uptake of innovative medicines despite having amongst the lowest prices, so price alone is clearly not the main driver of access in the NHS."

Work on developing the new pricing process with new drug companies is set to begin in April.

Effects of value-based pricing

According to Panos Kanavos, Julia Manning, David Taylor, Willemien Schurer and Kyle Checchi, authors of the 2020health report, the current system for the approval of drugs in the UK is the reason why the country's pharmaceutical industry has experienced such strong growth.

Writing for PJ Online, Omar Ali also pointed out a maximum reimbursement level for drug producers would be included within the price thresholds when they're established, which pharmaceutical companies are likely to dispute.

The thresholds would be established if drugs were shown to be relevant in one of three categories; a greater burden of illness, therapeutic innovation or a wider benefit to society.

Ali said these factors will lead to the pharmaceutical industry adapting to produce fewer "copy cat" drugs, paying more attention to diseases with unmet needs and investing more in phase II and III clinical trials – changes which were said to be already taking place.

The health2020 report into value-based pricing also laid out a number of suggestions to ensure the system continues to support diseases which are classed as having high unmet medical needs and personalised medicine by "redefining market exclusivity periods."

It recommended the creation of an innovation commission, which the report claims would 'form a bridge between research and commercialisation.'

Of course, value-based pricing is likely to have differing effects in countries which do not have a free public health service, however the same questions regarding how value is defined and the impact such changes could have on the pharmaceutical industry remain.