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Michael Kuchenreuther, PhD, is a research analyst, at Numerof & Associates, Inc.
Jill E. Sackman, PhD, is a senior consultant at Numerof & Associates, Inc. (NAI), St. Louis, MO, www.nai-consulting.com.
Bio/pharmaceutical manufacturers in the UK face challenges in proving that their drugs are worth the price.
Bio/pharmaceutical companies in the United Kingdom have recently been struggling to convince the National Institute for Health and Care Excellence (NICE) that their products are worth the price. “Although obinutuzumab is a clinically effective treatment, there were too many uncertainties in the company’s submission and we cannot be confident that it is an effective use of NHS resources” (1). The preceding statement from NICE chief executive, Andrew Dillon, refers to the UK watchdog’s recent negative ruling on Roche’s leukemia drug. Headlines such as this one are not new and are becoming more prevalent in the press. To add to this challenge, recent reports concerning Gilead’s blockbuster Hepatitis drug, Sovaldi (sofosbuvir), suggests that even if a product is truly innovative and deemed to be cost-effective, it doesn’t necessarily guarantee that the government will be able or willing to pay for it.
If getting a positive recommendation from NICE under the standard cost-effectiveness assessment system wasn’t challenging enough, manufacturers have also had to contend with continuous discussions regarding the UK’s transition to value-based pricing (VBP) and value-based assessments (VBA) models. The UK’s pharmaceutical market has been in a state of flux in recent years, leaving manufacturers to question what it will take to ensure success. This article takes a closer look at some of the recent developments in the UK pharmaceutical market, with a focus on pricing and reimbursement challenges and strategies manufacturers should consider for sustainable success.
Overview of the dynamic UK market
In contrast to some other European markets such as Germany and France where reimbursement is dependent on a drug’s added clinical value relative to a comparator drug, the UK primarily evaluates new drugs based on quantifiable cost-effectiveness measures. Technology assessments in England and Wales are performed on request from the Department of Health (DH) and primarily include those medicines with high prices or uncertain effectiveness. Since 1999, NICE has been responsible for formal evaluation and recommendations regarding the most appropriate technology to address health issues.
A few years ago, in an effort to slow spiraling National Health Service (NHS) expenses and to improve access to medicines, the UK’s DH unveiled plans to introduce a VBP system for innovative drugs. The transition was scheduled to become effective at the beginning of this year and would have been a radical departure from the UK’s longstanding negotiated pricing model, which gives manufacturers complete freedom to set a price. Under this new VBP system, the NHS would be responsible for setting prices according to drugs’ calculated value to a patient as well as society. When this model was proposed, one key question that immediately surfaced was how to measure “value.” As part of its standard quality adjusted life year (QALY) assessment, NICE would take additional criteria such as therapeutic innovation, burden of illness, and wider societal impact into account. Specifically, these individual factors would be used to derive a weighted QALY score and an adjusted threshold that would then inform pricing decisions. If the cost-per-QALY for a drug were less than the designated threshold, the drug would be accepted at that price; however, if the cost-per-QALY exceeded the threshold, the drug would not be accepted (2).
The pharmaceutical industry argued against the VBP proposal citing that it would undervalue innovative medicines and that their agreement to keep NHS expenditures on branded medicines flat for two years under the new Pharmaceutical Price Regulation Scheme (PPRS) was enough to help a cash-strapped government. Amidst manufacturers’ concerns, the VBP model concept was abandoned, leaving manufacturers free to continue setting the price of their products. Even though the UK only accounts for a small proportion of global sales, UK prices are important, as approximately 17 countries reference their prices against those in the UK (3).
When VBP failed to materialize, there were still plans to change the way NICE makes recommendations on the use of health technologies. As part of this VBA model, NICE would take the three aforementioned criteria into account when calculating the cost effectiveness of a product. These proposed changes, however, were once again met with swift resistance from manufacturers over concerns that such an approach may be discriminatory, on the basis of age or gender. In addition, manufacturers were frustrated over the DH’s abrupt decision to exclude the “innovation” element, which in their minds should be one of the primary goals of reform (4). Finally, there was shared disappointment and skepticism among manufacturers and other stakeholders that the government’s decision to no longer give special consideration to end-of-life treatments could significantly restrict access to new cancer therapies. For instance, since 2009 when NICE began giving special weight to therapies for terminal cancer patients, 14 positive recommendations have been recorded (5). In October 2014, after much deliberation, NICE decided that no changes would be made to the technology appraisal methodology in the short-term.
Technology appraisals and patient access schemes
With broad efforts to overhaul the UK pharmaceutical market failing to gain sufficient traction in recent years, manufacturers find themselves in a rather familiar operating environment characterized by increasing price sensitivity and a growing number of negative recommendations (see Figure 1). From 2000 through 2008, NICE recommended coverage with or without restrictions in 88% of cases. In the past five years, NICE’s rate of recommending some form of coverage has decreased to 71%. Oncology is one particular therapeutic area that has been heavily scrutinized by the UK watchdog in recent years. Between 2000 and 2008, 78% of oncology appraisals conducted by NICE resulted in recommended coverage with or without restrictions. Since 2009, however, only 47% of appraisals were associated with a positive or optimized recommendation.
Figure 1: NICE recommendation breakdown for all medicines and cancer medicines between 2000 and 2014.
In an increasingly restrictive, price-sensitive market, manufacturers have come to rely on additional market access strategies, most notably Patient Access Schemes (PASs), to secure a positive recommendation from NICE. PASs were formalized and included in the 2009 PPRS and have become increasingly common over the years, mostly coming after NICE rejects a drug in its initial appraisal. Currently, the DH has approved 48 PASs as workable for the NHS (6). While manufacturers have the option of developing more complex, performance-based schemes, the majority of PASs have been finance-based. In fact, of the 53 proposed schemes, approximately 70% have been straightforward price-discounts with others typically including free replacement stock or rebates (see Figure 2) (5). To date, PASs have also allowed manufacturers to maintain the UK list price, thereby protecting prices abroad through reference pricing. This protection, however, will only apply if the referencing countries continue to use NHS list prices and not the post-PAS transaction prices.
Manufacturers of costly cancer drugs have particularly tried to take advantage of PASs. Almost 50% of all proposed PASs have been associated with a cancer therapy. It stands to reason that without PASs, the proportion of ‘not recommended’ drugs in this therapeutic area would have been even higher. At the same time, while PASs are still being taken into consideration and included in NICE’s calculation of cost-effectiveness, there are more negative rulings by NICE despite manufacturers’ attempts to reduce the cost-burden on the NHS. For instance, multiple cancer drugs (e.g., Zaltrap, Bosulif, Xalkori, Afinitor, Sutent, and Kadcyla) and their associated schemes have been rejected by NICE in recent years.
Implications for manufacturers
With NICE continuing to crack down on new medicines and both VBP and VBA off the table, the key question becomes, what must manufacturers do to increase the likelihood that their product is accessible and reimbursed in the UK? Clearly, a successful market-access strategy begins with collecting strong economic and clinical data to support product adoption. In some cases, however, data alone may not be sufficient to warrant desired reimbursement. A PAS is always a crucial “Plan B”, but increasingly, manufacturers should consider a PAS that links payment to outcomes. Finally, manufacturers must involve local budgetary groups who decide product adoption at that local level. These key considerations for manufacturers are discussed in more detail below.
Requirements for economic and clinical data are becoming increasingly important to success. In October 2014, NICE publicly stated that it intends to expand the scope of its technology assessment to include all clinical-trial data and not just the data the manufacturer is willing to share with the HTA body (7). The goal behind this decision is to ensure that NICE gets a more complete picture of whether new drugs are worth their high price. Whether or not NICE’s actions will push the industry to be more transparent remains to be seen; however, to better prepare themselves for these changes, manufacturers should conduct a comprehensive review of all data generated and confirm that there is no evidence conflicting with the following statements:
Manufacturers can further ensure alignment with NICE’s data requirements through collaborations with the NHS’s National Institute for Health Research (NIHR) Office for Clinical Research Infrastructure (NOCRI). These initiatives seek to create a single point of entry into the UK health system thereby reducing the complexity and increasing the efficiency of running drug development programs. Specifically, in early-phase clinical development, NOCRI provides connections to the country’s experimental medicine experts who can help companies understand the potential of their developmental drugs, devices, and diagnostics, shortening cycle times and enabling earlier go/no go decisions. In later-phase development, agreements with the NOCRI also provide manufactures with access to well-characterized cohorts of patients from within the NHS for larger and multicenter clinical studies. Unfortunately, however, manufacturers have been slow to leverage NOCRI’s infrastructure including expert individuals, research facilities, and technology platforms.
As highlighted above, Patient Access Schemes, while still effective, have shown some recent signs of ineffectiveness in manufacturers’ negotiations with NICE. In a market that is increasingly focused on value, NICE has been clear that it is looking for more productive sharing of risk between companies and the NHS. Therefore, while simple, finance-based schemes have essentially served as the standard offering here, stakeholders’ interest in performance-based access schemes is expected to grow.
One possible reason why so few proposals for more complex, outcome-based schemes have been submitted is because these types of arrangements often involve collection of new data, and thus increase activity for both the health system and the sponsor. These types of arrangements not only present administrative challenges, but there are also significant challenges associated with their design. Andy Stainthorpe, director of the NICE’s Patient Access Schemes Liaison Unit (PASLU) has said that “Schemes need to use outcomes that already have systems in place to measure them and companies need to find imaginative ways of fitting into what the NHS is already doing” (8). This approach will also ensure that additional cost burdens are not being placed on the system, making the offer more attractive to cost-conscious stakeholders.
While gaining approval from NICE is a crucial hurdle that needs to be cleared to gain market access, it’s not the only challenge for manufacturers. Because NICE does not hold any budgetary authority, a positive NICE appraisal does not automatically gain product adoption at the local level. Like Italy and Spain, England has now decentralized decision-making power and budgets to local bodies (clinical commissioning groups or CCGs), each of which has unique unmet needs and definitions of value. Here, early engagement with these local stakeholders focused on evidence-based solutions to their needs is crucial. By law, market access teams can begin engaging with healthcare budget-holders three years before launch. Thus, initial discussions can help inform Phase III clinical study design with respect to patient subpopulations and endpoints, while later discussions can revolve around the product’s value message.
Manufacturers must not only focus on when to engage CCGs, they must also re-evaluate the way they are approaching these bodies. Here, an important first step is identifying who the actual decision makers are. Unfortunately, there is no specific job title that defines the key influencers of a CCG. Such lack of clarity requires that manufacturers do due diligence to investigate who these decision makers are.
In addition, companies must understand the strategic direction, goals, and objectives of the CCG, and align their value proposition to these inputs. In general, the message manufacturers are delivering to these stakeholders needs to shift from being product-centric to patient-centric. The NHS’ and CCGs’ tagline at the moment is ‘put the patient at the heart of what we do.’ What is the technology’s benefit to the patient? This question needs to be front and center of all discussions. Manufacturers that understand specific pain points of their audience’s patient population and are building value-added services to address these needs will be well positioned. To understand these pain points, manufacturers should rely on publically available documents produced by CCGs in conjunction with other stakeholders (e.g., Joint Strategic Needs Assessment, Joint Health and Wellbeing Strategy, CCG strategy, Commissioning Intentions, and Integrated Operating Plan). The more manufacturers can do to help CCGs engage the patient and public and remove costs from the system, the better.
The authors thank Kate Eversole and Sarah Garner, PhD, for their insights.
About the Authors
Jill E. Sackman, DVM, PhD, is a senior consultant and Michael Kuchenreuther, PhD, is research analyst, both at Numerof & Associates, Inc., St. Louis, MO, www.nai-consulting.com.
Article Details Pharmaceutical Technology
Vol. 39, Issue 1
Pages: 26–30, 76
Citation: When referring to this article, please cite it as M. Kuchenreuther and J. Sackman, "Value-Based Healthcare in the: United Kingdom," Pharmaceutical Technology 38 (12) 2014.