Value-based pricing – the concept

Generics and biosimilars Initiative

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Value-based pricing – the concept

Genéricos/Investigación | Posted 01/04/2011 0 Post your comment

The concept of value-based pricing (VBP) is outlined. A key purpose of the VBP system is to assess over time whether the drug has achieved its intended goal and justified its cost.

Is a new approach needed?

In recent years, health technology assessment (HTA) has become a widely-used tool in informing decisions on the approval and pricing of new drugs. The National Institute for Clinical Excellence (NICE) in the UK is an example of a respected HTA body. The pharmaceutical industry prices new drugs independently of the HTA body and the HTA body may not accept its calculations or find the drug not cost effective at the industry’s price. The drug may, at least temporarily, be disallowed in the health system evaluating it; this is an inefficient way of proceeding.

Different approaches to calculating the drug’s value to society might result in a realistic value being agreed, thus ensuring better access to new medicines. Quality-adjusted life years are one such tool for quantifying value for money. Reassessing the price after the medicines has been in clinical use for a trial period may also be helpful. VBP aims to assess wider-based aspects of societal value, and the drug company may be asked to justify its claim about the value of its product. This system has already been introduced in France, Germany, Italy, The Netherlands and Spain.

Possible implications of VBP: a case from Germany

In 2006 the Institute for Quality and Efficiency in Health Care (IQWiG - Germany’s equivalent of NICE) published a report entitled ‘Superiority of atorvastatin not proven’. In it, IQWiG concluded that atorvastatin was not superior to other statins and adverse effects were more frequent at higher doses than with simvastatin. After legal challenges, the value-based reimbursement price for atorvastatin was set extremely low — less than a third of the price that Pfizer charges. Doctors in Germany can still prescribe atorvastatin and patients can ask for it by name if they want it, but prescriptions in Germany will only be reimbursed at the government-set price. Who pays the difference? The answer lies in co-payment. The difference is paid by insurance companies, by healthcare providers, by employer health benefits, or by patients themselves. Since the implementation of VBP, sales of Lipitor have gone from 75% of the statins market to less than 25%, as patients choose not to pay the extra cost [1].

The intended advantages of VBP

VBP is intended “to ensure that the price paid 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”, in the words of UK Health Secretary Mr Andrew Lansley. A basic cost-effectiveness price will apply unless one of three categories is met for higher thresholds:

greater burden of illness—the severity of the condition and the level of unmet need
therapeutic innovation—novel agents for new treatment targets and potentially revolutionary disease treatments will attract higher thresholds for pricing
wider societal benefit—economic well-being of the population as well as direct healthcare costs

Under VBP the role played by the HTA body changes, and industry attitudes are expected to change too, as companies are increasingly required to produce hard data on efficacy, compliance and other relevant data. Pharmaceutical companies should welcome a pricing system that is more stable, transparent and gives clear signals about priority areas so that research efforts are directed to maximum effect, while a better way is also needed for dealing with new drugs whose benefits are more limited. However, industry’s possibly greater role in the consultation process is easily criticised. At the same time, the Pharma industry has warned that the VBP system for medicines will not necessarily save money on drugs.

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