Value Based Pricing and Innovation across Europe and Beyond

Prof. Mondher Toumi, MD, PhD, MSc

Creativ-Ceutical, Chair of Market Access, Aix-Marseille University

Table of contents

1. Introduction to Market Access (MA)

2. Value-Based Healthcare and Pricing

3. Innovation and Market Access Specificities

4. Affordability

Introduction to Market Access (MA)

4

Market Access of Pharmaceuticals Market Access: Where does it come from?

• Market Access Definition :

Openness of a country markets to foreign goods and

services.

MA reflects the government economic policies

regarding import substitution and free competition

• Firstly introduced by the World Trade Organization (WTO)

to open markets for trade and improve transparency,

reciprocity and non-discrimination in international trade.

5

Definitions – Access to Health Services

• The perceptions and experiences of people as to their ease in reaching health services or health facilities in terms of location, time, and ease of approach.

Access (to health services):

• Aspects of the structure of health services or health facilities that enhance the ability of people to reach a health care practitioner, in terms of location, time, and ease of approach.

Accessibility (of health services):

Market access for pharmaceutical in fact defines the ability for a drug to achieve through a health insurance system a reimbursed price and a favorable recommendation for prescription

• One should consider differently a national wide coverage health insurance system (EU) from a private or mixed fragmented system (US)

6

Healthcare Market Specificities

• We need health but we buy a proxy: healthcare

• We can’t share health

• Health is not well regulated by the market

• Buyer

• Consumer

• Payer

• Medicines are intended to produce health

• When funding medicines, payers intend to buy health production

• There is uncertainty about the actual health produced by a medicine

• There is no uncertainty about the cost of medicine

7

Organization of Public Health

• There are several key players: decision makers and payers, responsible for delivering health services to the population.

• The organization of public health may differ between countries.

• In general, the ministry of health plays the most important role at the national level. Other health and non-health organizations may deliver some public health services as part of their usual business

Payers are Heterogeneous

9

Who are the Payers?

Any price

sensitive

audience is a

payer

• Could be directly or indirectly incentivized

• Could be decision maker or not

• Could be a prescriber or not

• Acting for his own organization or not

Activists could be considered as price sensitive audience but not as

payers

They are not payers but they are fighting for their society values and

may impact the price

Growing fast Heterogeneous With diverse

perspectives

The Payer’s audience is:

A payer, is not a payer, is not a payer !

1/2

10

Who are the Payers 2/2

Payers

Member of HTA

committees GPs in UK

and Germany

Member of pricing

committees

Employers

Patients

Hospital managers,

Doctors

Pharmacists in some

countries

Private health

insurance

11

What are the Payers Doing?

• Because affordability is the issue

• Because payers have limited resources

• Because the demand increases very fast

• Because the offer increases fast

Payers spend their time containing costs through

increasingly complex and irrational but sometimes (very)

effective measures

12

The processes of decision-making

Institutional setting:

• Decisions on priority setting can be made in a variety of institutions: for example, they can be made in institutions which have specific responsibility for priority setting (like NICE in the UK), within central government departments, in regional or local government institutions, in private health insurance companies, or a variety of all of those

Rules of decision making:

• For example clinical effectiveness, cost or severity of medical need. Sometimes these rules may not be stated officially but rather just informally accepted by decision makers.

Accountability for decisions:

• Accountability means being answerable to those who are affected by decisions made about health priorities – typically patients and the public – for how health resources are allocated. For example, providing information about how priorities are set or establishing ways by which decisions can be justified to, or challenged by those who are affected

Participation in decision making:

• Involving patients, the public, health professionals – can be a way to help improve the quality of those decisions by bringing relevant information and experience to the process

13

Model of accountability for priority setting in health care

People

Rationales

Processes Appeals

Reasonableness

Responsiveness Transparency

14

Preferences and values: Distinct concepts

Preferences Values

Preferences relate to individuals’ wishes that may be

aggregated at society level, whereas values are societal and

relate to “what ought to happen”.

15

Preferences and values: Distinct concepts

• When deciding based on the preferences of the majority of the society, decision makers might come in conflict with societal values.

• Societal values have an ethical dimension that may surpass individual preferences.

• Example: Orphan drugs

• Low society preferences

• High value

We Operate Under Value-Based Pricing

But What is VBP?

17

Value vs. Price

Warren Edward Buffett is an American

business magnate,

investor and philanthropist. He is the most

successful

investor of the 20th century.

“Price

is what you pay

and value

is what you get”

18

Value-Based Pricing

Value-Based Pricing or Value-optimized pricing is a business strategy. It sets

selling prices on the perceived value to the costumer, rather than on the

actual cost of the product, the market price, competitors prices, or the

historical price.”

1

How to link value perceived and value delivered?

2

Value depends on how customers appreciate it

3

Value appreciation may evolve over time Co

nseq

uen

ces

19

Value-Based Healthcare

“Achieving high value for patients must become the overarching goal of health care delivery, with value defined as the health outcomes achieved per dollar spent.” – Michael Porter

Rationale:

If the value of healthcare improves all stakeholders can benefit while

improving upon the sustainability of the healthcare system. Stakeholders

include patients, payers, providers, and suppliers.

20

Value is a complex concept as it might cover various domains

VALUE

Philosophical

Accounting

Economic Sociologic

Mathematical

21

Defining Value

• Value should always be defined around the

customer

• In the healthcare system, this means it should be

defined around the patient!

• Value is to be measured by outcomes, the

results are what matters, not the volume of

services provided

• shifting focus from volume to value is a central

challenge.

• Since value is defined as outcomes relative to

costs, it encompasses efficiency.

22

Value Definition

Philosophical

Value can be defined as:

- The importance of a moral or aesthetic judgment;

- A personal or social standard of conduct, considering morality, ethics, politics,

spirituality or aesthetics;

- The set of values that can be, for an individual or a group, a value scale

Mathematical

Value can generally be defined as the determinations of a variable, with

notable variations:

- An approximate value of a number is a number with which the difference is small

enough to replace in numerical applications;

- The absolute value of a number is the numeric value, regardless of its sign

Sociologic The values are the moral principles of a great constitutional philosophy, which is

differently ranked depending on the particularities of the individual or society

23

Value is widely used in economics

In economy, management, finance and accounting, the value cover many topics:

Acquisition value Customs value Net value

Shareholder value Exchange value Residual value

Present value Out of tax value Value at risk

Net present value Intrinsic value Speculative value

Added value Liquidation value All taxes included value

Traded value Market value Marxist theory value

Gross value Security value Use value

Book value Sales value Work value

24

A lot of confusion surround the concept of value even among high level academics

Value Based Pricing

Has nothing to do with cost effectiveness

Thomas Mittendorf et al. 16 November/December. 2009 ISPOR

CONNECTIONS

VBP is often confused with Cost effectiveness based decision

What is value-based pricing?

26

Different Pricing Models

• Value based pricing

• Cost plus pricing

• Willingness to pay pricing

• Mix model pricing

27

Payers Fear their Perception

• To decide on robust ground, payers ask experts to inform the difference in value between interventions

• HTA organization are the expert bodies

• EBM is the tool for decision making

28

From Approval to Pricing

EMA HTA Funding National agency

Safety

Efficacy

Quality

Transpose

decisions

at a

national

level

Efficacy,

Effectiveness

& ICER

Record for

funding

Or formulary

listing

Price &

Reimburseme

nt

29

VBP With No CAP Price

Price

Benefit

A

C B

E

D

30

VBP with CAP Price, Over Costs Charged by Private Insurance

Price

Benefit

A

C

B

E

D

CAP Price

Charged by private insurance

31

VBP with CAP Price Managed by NHS

Price

Benefit A

C

B

E

D

CAP Price

32

There is No Solution and No Wish to Find a Solution

• Today no country does a reasonable resource allocation under budget constraint

• QALY is a wonderful universal measure instrument but carry substantial limitations

• Excluding QALY means excluding the only way to allocate fairly resource across heterogeneous conditions

• Relying primarily or exclusively on QALY is as wrong as excluding QALY

• The solution is likely a multi-criteria decision, but we still don’t know or don’t want to make it reproducible, reliable, and meaningful

• We operate under a deliberative process

Value Assessment Frameworks

34

Evidence Assessment Framework, Value Framework and Value-Based Pricing Framework are Overlapping Concepts

1/2

Lot of confusions around the value framework concept

Evidence assessment framework, value framework and value-based pricing (VBP) framework are often mixed by different

stakeholders because they are overlapping concept

•Evidence assessment framework: defines the way evidence should be reviewed and analysed to capture

the information requested to assess the value

•Value framework: defines a path to generate a value judgement from the available evidence; it could be

based on a multi-criteria analysis such as ESMO, ASCO, HAS-ASMR or it could be based on a threshold

such as NICE, ICER, TLV using the ICER threshold

•Value base pricing framework: defines a process to set a price according to a product value

•In Europe, most HTA organizations have a well established evidence assessment framework but most of them do not have a transparent

value framework, e.g.

• IQWiG in Germany has a well defined value framework: for a given effect size and 95%IC, it is possible to decide on the level of

additional benefit score

•Transparency Committee in France has a detailed evidence assessment framework but no transparent value framework; it is not

possible to predict which effect size will lead to which benefit score

35

Overlapping Concepts 2/2

Illustrative representation of current process of drug funding and the

different frameworks

Evidence Review Evidence

Assessment Appraisal

(Deliberative)

Funding

(Deliberative)

Evidence Driven

Value Driven

Evidence assessment framework

Value framework

Value-based pricing framework

36

Examples of Value Frameworks scope

Evidence review Evidence

assessment Appraisal

(Deliberative)

Funding

(Deliberative)

Evidence Driven

Value Driven

NICE

IQWIG

HAS-TC

ESMO

ASCO

ICER

ABACUS

37

The components of pharmaceuticals prices

Value assessment aims to quantify the additional benefit of a new innovative therapy

VBP is modulated by affordability and uncertainty

The affordability is disconnected from the value – However public health priorities and breakthrough enjoy a more flexible attitude in handling the affordability and uncertainty

Pricing

Value Based

Pricing (VBP) Affordability

Uncertainty?

38

Value Frameworks AND Impact on Revenues

Data Package

VALUE JUDGEMENT

1. Value-Based Pricing

2. Affordability

3. Uncertainty

HTA bodies/P&T Frameworks Non-HTA bodies/non P&T

Frameworks

VALUE JUDGEMENT

PRICE ACCESS

CONDITIONS (POPULATION SIZE)

X REVENUES PRESCRIPTION

BEHAVIOUR X =

39

From Assessment to Price

Only UK, Germany and Sweden separate clearly appraisal from assessment

Assessment Appraisal Decision

Very factual analysis of the

available evidence

Put the data in the context

Funding

40

Decision Framework

Health economics

Clinical

Mixed

UK: NHS perspective Germany Italy

Morocco Algeria Sweden : Society perspective

France Turkey

Poland Belgium

41

Formal vs. Informal HTA

Formal HTA definition

• A term and mission are set

• Transparent decision framework process

• Meeting agenda available

• Decisions are publicly available and argued based on evidence submited by manufacturer

Informal HTA

• Do not meet formal HTA criteria

• Mainly no decision report is published

42

HTA Ex-Anté vs Ex-Post pricing

Ex-Anté

Ex-Post

Dual: Ex-anté and Ex-post

43

Price Revision

Systematic Price Reimbursement Target

population

Market

access

No Systematic Possible

Value and Innovation

45

Regenerative Therapies Are Key to the Future of the Life Sciences Industry and Patients Health

Small Molecules

• Chemical engineering: Small molecules with specific targets

Biologics

Protein engineering:

Optimized recombinant proteins

Regenerative therapies

• Stem cell therapy

• Tissue engineering

• Gene therapy

• Gene editing technologies

• Regenerative medicines have the potential to replace, regenerate or cure many chronic

and disabling diseases • A high potential for dramatically changing the course and prognosis of many devastating

conditions.

• In Europe, many regenerative therapies qualify for the class of Advanced Therapy

Medicinal Products (ATMPs) but not all regenerative therapies systematically. • ATMPs is a class that encompasses gene, cell and tissue therapies, well defined in the

Regulation (EC) No 1394/2007 specific for ATMPs that has been put in place in 2007.

46

Rapid Pace of Therapeutic Innovation

Dramatic advances in technology

Advanced-Therapy

Medicinal Products

• Gene therapy

medicinal product

• Somatic cell therapy

medicinal product

• Tissue engineered

product

Personalized Medicines

• Medicines tailored to

the specific

characteristics of a

patient (e.g. targeted

therapies in

oncology)

Digitized Medicine and

Big Data

• Electronic-health-

records

• Computer based

medical decision

• Lost of clinical power

in Rx decision

Therapies that might substantially extend survival times,

even cure chronic and/or severe diseases

Easier analysis and

utilization of rapidly

growing, large repositories

of health information

47

Advanced Therapy Medicinal Products Definition

In Europe, Advanced Therapy Medicinal Products (ATMPs) is a class of innovative

biopharmaceuticals that encompass gene therapies, cell therapies, tissue engineered

products and combined therapies.

Cell therapies: cells

subject to substantial

manipulation or not

intended to be used for

the same essential

function(s) in the

recipient and the donor,

used to treating,

preventing or diagnosing

a disease

Gene therapies: contain

recombinant nucleic acid

used to regulating,

repairing, replacing,

adding or deleting a

genetic sequence

Advanced Therapy Medicinal Products

Tissue engineered

products: contain

engineered cells or

tissues, used to

regenerating, repairing or

replacing a human tissue

Combined products:

contain engineered cells

or tissues, with one or

more medical devices

Autologous or

allogeneic

48

Approved ATMPs in Europe

Chondrocelect Characterised

viable autologous

cartilage cells

2009

Glybera Alipogene

tiparvovec

2012

MACI Matrix-applied

autologous

cultured

chondrocytes

Provenge Sipuleucel-T

2013

Holoclar Ex vivo

expanded

autologous

human corneal

epithelial cells

Imlygic Talimogene

laherparepvec

2015 2016

Zalmoxis Allogeneic T

cells genetically

modified

2017

Spherox Spheroids of

human

autologous

matrix-associated

chondrocytes

Alofisel Darvadstrocel

Yescarta Axicabtagene

ciloleucel

Strimvelis Autologous

CD34+ cells

Kymriah Tisagenlecleucel

2018

O Orphan Drug X Withdrawn

O O

O O O X

X

X

X O O

Cell therapy Gene therapy Tissue engineered

product

Luxturna voretigene

neparvovec-rzyl

O

13 ATMPs were granted marketing authorization in Europe until February 2019.

Four ATMPs were withdrawn due to commercial reasons.

49

ATMPs Specificities

Conventional therapy

High upfront cost

One administration or short course

treatment

Downstream durable

outcomes

Prepared and prescribed for a

broad population

Custom-made cell and gene

therapies

Long-course or lifetime treatment Usually administered once

Cost spread over time of

administration Upfront cost

Outcomes observed after

administration

Outcomes observed on the long

term

ATMP

Patient-specific/ Personalized

medicine

ATMPs Budget Impact Will Not Be Sustainable

51

Case Study Spinal Muscular Atrophy (SMA)

• Spinal muscular atrophy (SMA) is a genetic disease affecting the part of the nervous system that controls voluntary muscle movement.

• The muscles closer to the center of the body (proximal muscles) are usually more affected in spinal muscular atrophy than are the muscles farther from the center (distal muscles)

• Spinal muscular atrophy (SMA) is a progressive genetic disorder that affects the nervous system and muscles, and is a very rare disease at that, found in an estimated 1/6000 to 1/10000 people.

Type Onset Life expectancy

SMA type 0 The most severe form of the disease,

takes place before birth.

Few live longer than six months after

their birth

SMA Type 1

(most common)

Within the first six months of life 68% of children die before their second

birthday and 82% die before their

fourth

SMA Type 2 between the age of 7 months and 18

months

majority live into early adulthood

SMA Type 3 After 18 months the same as the rest of the population

52

Case Study Spinal Muscular Atrophy (SMA)

• Gene therapy X is an innovative therapy for SMA type 1.

• Gene therapy X proved a good efficacy in clinicak trials. Almost all treated patients were cured after the Gene therapy X administration.

• Life expectancy becomes normal instead of 2 years.

Life years gained: 78 years

QALY= Life years gained x Utility= 78 years x 0.75 = 58.5 QALY gained

The cost-effective price= QALY gained x 250 000 € =58.5 x 250 000 = 14 625 000€

250g : 9100€

53

Budget Impact of ATMPs

If 35 ATMPs for 35 diseases (15 prevalent and 20 rare diseases) will reach the market

successively (5 ATMPs each year), the annual budget impact may reach €1trillion.

0 €

200,000,000,000 €

400,000,000,000 €

600,000,000,000 €

800,000,000,000 €

1,000,000,000,000 €

1,200,000,000,000 €

1st year

2nd year

3rd year

4th year

5th year

6th year

7th year

8th year

9th year

10th year

11th year

12th year

An ATMP may be Cost-Effective, but Not Affordable

55

From Cost-Effectiveness to Budget Impact

Budget

Impact

Cost-

Effectiveness

56

From a Trend to Reality

Source: Eichler H.-G., Bloechl-Daum B., Abadie E., Barnett D., König F. and PearsonS. Outlook: Relative efficacy of drugs: an emerging issue between regulatory agencies and third-party payers Nature Reviews Drug Discovery 9, 277-291 (April 2010)

Dedicated relative efficacy/

effectiveness assessment ?

•Quality, safety, efficacy

•Benefit-risk profile

•Cost vs health benefit

•Budget impact

•Relative efficacy/effectiveness

•Emphasis on RCT, most often

active- and placebo-controlled

•Cost-effectiveness/utility analysis

•Budget impact analysis

•Active-controlled RCT

•Adaptive Phase III-IV trials

•Observational studies

•Meta-analysis

Assessors

Assessment focus

Studies/data

MA Current paradigm Regulators

Payers

Tomorrow

Future paradigm