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The authors look at key factors driving the risk-sharing agreements that have been implemented to reduce drug expenditures across Europe.
Payers across the globe are becoming increasingly assertive regarding products whose costs aren’t in line with perceived performance-a trend that shows no signs of slowing down. In fact, Express Scripts, one on the largest pharmacy benefit managers (PBMs) in the United States, recently announced a plan that would link the price of some cancer drugs to their real-world performance (1). Express Scripts’ action is significant, considering that the US has been slower than many European markets to implement new pharmaceutical reimbursement schemes.
Managed entry or risk-sharing agreements (RSAs) represent another mechanism that payers use to mitigate the cost of new drugs based on real-world performance. Financial and performance-based RSAs (PBRSAs) have been widely employed throughout Europe to reduce drug expenditures. While these agreements may not be universally applicable or without challenge, they are gaining momentum in certain markets where they will likely play a role in enhancing economic efficiency.
This article explores some of the driving forces behind RSA implementation, provides an update on the status of RSAs in the European Union, and discusses some of the inherent challenges manufacturers will need to overcome to achieve success under these types of arrangements.
Linking drug reimbursement to value
In most realms of commerce, if a product fails to deliver what’s been promised, consumers are financially covered through refunds and warranties. Consumers of pharmaceutical products and other stakeholders, however, have no such protections. Rather, the pharmaceutical industry has had a longstanding model of selling products and getting paid regardless of product performance. Perhaps that explains estimates that 90% of conventional medicines are not efficacious in 50–70% of cases (2). In therapeutic areas such as oncology, which is often characterized by high-priced drugs, the efficacy rate with standard treatment has been reported to be as low as 25% across all cancer types (3, 4).
Against this backdrop, global spending on medicines is expected to grow to nearly US$1.3 trillion by 2018 (5). Government and commercial payers in most developed markets face aging patient populations and shrinking budgets. Not surprisingly, they are increasingly calling for manufacturers to “put more skin in the game” in return for broader coverage. Contractual arrangements directly linking reimbursement to a product’s effectiveness or budget impact clearly represent one mechanism through which risk can be shared between payers and manufacturers.
In efforts to contain spending, public and private payers are also shifting risk to healthcare providers through alternative payment models such as bundled payments and capitation. As these changes progress, manufacturers must realize that they face a future in which they will increasingly be required to assume greater risks related to the performance of their products.
The benefits of RSAs for payers are quite apparent-cost containment, efficiency (i.e., improved value for money), and/or improved outcomes for the covered population. There are, however, potential benefits for drug manufacturers as well, including earlier market access, differentiation, and the opportunity for a premium price. Taken together, it’s not surprising that RSAs continue to gain attention from payers and manufacturers and are becoming a more integral part of leadership objectives for both parties.
Trends in the growth of RSAs in the EU
For years now, national health authorities in European markets have “hedged” their reimbursement decisions with pricing controls and negotiated price cuts and RSAs to control costs. To date, RSAs have been largely confined to Europe, where payers have been more restrictive in their coverage, particularly of cancer drugs, and have used value calculations based on comparators and quality adjusted life years. For instance, in addition to successfully negotiating the lowest price in Europe for Gilead’s Sovaldi, the French government secured a volume-based discount as well as a money-back guarantee if treatment doesn’t work (6).
Financially based schemes (e.g., price-volume agreements, price-capping, volume capping, and rebates) have been more widely employed throughout Europe compared to PBRSAs because they are easier to implement and track (7). In contrast, the design and implementation of PBRSAs has historically been more complex due to the need for patient follow up, lack of reliable data generation/registration (e.g., lack of infrastructure to track drugs or non-responders), and increased administrative burden for payers and manufacturers alike. These were just some of the clinical and operational complexities that largely characterized the United Kingdom’s multiple sclerosis scheme in the early 2000s, which proved to be both costly and rather ineffective.
Nevertheless, RSAs, including performance-based arrangements, continue to be explored and implemented in select EU markets (see Table I). A recent review of RSAs established between 1993 and 2013 identified 148 arrangements, the majority of which were initiated within in the past six years (8). Italy, the UK, the Netherlands, and Sweden accounted for approximately 71% of these arrangements. In contrast, the prevalence of RSAs in other major EU markets such as Germany, France, and Spain is markedly lower (2–3%).
Of the 148 arrangements, approximately 36% included a component that linked product reimbursement to clinical outcomes observed in the real world. Not surprisingly, oncology was the most active area for RSAs, likely due to the number of new cancer drugs, the high disease-related costs, and the premium price tags typically associated with these products.
A closer look at some of these markets reveals certain nuances that are important to call out. In the UK, there has been a trend away from more complex arrangements toward increasing adoption of financial-based arrangements. In fact, the majority of recent arrangements were implemented as simple confidential discounts (9). In Italy, RSAs have often consisted of both financial-based and performance-based components; however, more recent arrangements have included one or the other, not both.
Table I: Examples of performance-based risk-sharing agreements (PBRSAs) from Italy and the United Kingdom.
Myelodysplastic syndromes/chronic myelomonocytic leukemia/acute myeloid leukemia
Manufacturer provides an 11% rebate for patients not responding to three cycles of the treatment
Advanced renal cell carcinoma
Manufacturer pays for patients not responding after 24 weeks of treatment
Manufacturer pays for patients not responding after 26 cycles of treatment
Advanced renal cell carcinoma
Manufacturer provides an initial 12.5% rebate with the possibility of future rebates based upon the results of a head-to-head trial against Sutent*
Manufacturer refunds the full cost of the drug for patients who experience less than a partial response after four cycles
*Note: The National Institute for Health and Clinical Excellence (NICE) revised this agreement in 2013, removing the head-to-head trial component.
Source: Ernst & Young Biotechnology Industry Report 2013 and “List of Technologies with Approved Patient Access Schemes” from the official site of NICE (9–10).
In France, the aforementioned Sovaldi example is just one sign that the government is willing to expand the use of performance-based arrangements. In fact, Celgene committed to the French government on the effectiveness of their multiple myeloma drug Imnovid in exchange for a higher price (11). The agreement required Celgene to build a registry for collecting real-world efficacy and safety data.
Considerations for manufacturers
Payers’ concerns with pharmaceuticals in the current healthcare environment include rising budget impact, differential value, large patient populations with difficulty in identifying responders, and the uncertainty regarding duration of treatment. At the same time, manufacturers are concerned with delayed market access due to prolonged price and reimbursement negotiations, demonstrating differentiated value in crowded therapeutic areas, and earning a premium price that is in-line with the value their products create.
RSAs represent an appealing option for both parties if designed appropriately and implemented in a collaborative manner. It’s true that these arrangements are likely to increase administrative burden for both payers and providers, particularly PBRSAs that require patient-level data tracking. It should also be noted that PBRSAs bring inherent risks outside the manufacturer’s direct control, including inefficient healthcare delivery and poor patient compliance. For these reasons, RSAs do not represent a “one-size-fits-all” solution.
Before entering into an RSA, pharmaceutical companies should always ensure that the potential benefits are significant enough to justify the effort and risks associated with these types of agreements. In addition, manufacturers must understand how their products deliver value to ensure that the particular measures agreed upon align with that value story. Implementing RSAs requires not only lengthy negotiations and potentially costly administration, but also the ability to efficiently capture real-world evidence. As a result, pharmaceutical companies must develop the appropriate IT and data analytics capabilities to successfully implement these types of agreements.
About the authors:
Michael J. Kuchenreuther, PhD, is a research analyst, and Michael N. Abrams, MA, is managing partner, both at Numerof & Associates, www.nai-consulting.com.
Article DetailsPharmaceutical Technology Europe
Vol. 27, No. 11
Citation: When referring to this article, please cite it as M. Kuchenreuther and M. Abrams, “Risk-Sharing Agreements in the EU and Considerations for Moving Forward,” Pharmaceutical TechnologyEurope 27 (11) 10–13 (2015).