Should Pharmaceutical Companies Share in the “Accountability”?

Preeti S. BajajPharmaceutical Outcomes and Policy Program University of Washington05 November 2013

Historical R-S Equilibrium

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• Risk to manufacturer: Operate with a blockbuster financing model for R&D.

– Patent protection to incentivize investment and risk-taking, but for a limited time. – There is no ex ante clause to share innovation cost or to purchase drugs.

• Risk to payer: The payer negotiates a price and/or use. – The payer (and patient) bears the risks of making a bad buy.– The payer is free to collect post-launch data. Manufacturers will only do this if it

is in their competitive interests.

• Individual countries strike different types of deals with manufacturers– Range of country environments: negotiated prices <--> free pricing.

Incentive for manufacturers to seek highest justifiable price at launch.Limited incentives for collection of real-world evidence.

Incentive for manufacturers to seek highest justifiable price at launch.Limited incentives for collection of real-world evidence.

The Pervasiveness of Uncertainty

• Drugs are approved, launched, and reimbursed under conditions of uncertainty, affecting many key parameters:– Efficacy (heterogeneity)– Effectiveness in the real world– Risks (safety)– Utilization– Models, including links between surrogate markers and long-term

outcomes– Cost-effectiveness– Budget impact

• Variability Uncertainty (=Risk)• Gathering more evidence to reduce uncertainty is costly.

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What is a “Risk-Sharing Agreement”?

• RSAs between drug manufacturers and payers provide for the collection of additional data after product launch to address uncertainty about a product’s clinical performance, utilization, and/or value.

• Also referred to as:– managed entry agreements (MEA)– outcomes-based schemes – risk-sharing agreements – coverage with evidence development (CED)– access with evidence development – patient access schemes (PAS)– conditional licensing– pay-for-performance programs (P4P)– and others?

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RSAs: Five Characteristics

1. There is a program of data collection agreed between the manufacturer (or provider, in some instances) and the payer.

2. This data collection is typically initiated during the time period following the regulatory approval (which may be full, conditional, or adaptive), and linked to post- launch coverage decisions.

3. The price, reimbursement, and/or revenue for the product are linked to the outcome of this program of data collection either explicitly by a pre-agreed rule or implicitly through an option to renegotiate coverage, price, and revenue at a later date

4. The data collection is intended to address uncertainty about …. For example:– Efficacy or effectiveness in the tested population as compared to current standard of care; – The efficacy or effectiveness in a broader, more heterogeneous population than used in

registration trials or in pre-licensing testing;…5. These arrangements provide a different distribution of risk between the payer and

the manufacturer than the historical manufacturer-payer relationship.

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Trends in the Use of RSAs

• Pharmaceutical risk-sharing has garnered considerable attention in recent years, but in some jurisdictions more than others.– In the U.S., for health plan processes and physician services.– Internationally, for branded drugs.

• The dearth of schemes in the U.S. raises questions as to why but also as to what might become feasible in the rapidly evolving health care system.

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Dimensions of RSAs

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Taxonomy of Risk-Sharing Agreements

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Health outcomes‐based schemesNon‐outcomes based schemes 

Performance‐linked reimbursement 

(PLR)Population level 

Clinical Endpoint

[Ex: Bortezomib in 

UK]

Intermediate 

Endpoint

[Ex: Simvastatin in 

US]

Patient level 

Pattern or process of 

care

[Ex: OncotypeDx in US 

(United Healthcare)]

Only in research

[Ex: Cochlear implants 

in US (CMS)]

Only with research 

[Ex: Risperidone in 

France]

Market 

share

Conditional coverage

Manufacturer 

funded treatment 

initiation

Outcomes 

guarantee 

Performance‐based schemes between health care payers and manufacturers

Price 

volume

Utilization 

caps

Coverage with 

evidence 

development (CED)

Conditional treatment 

continuation (CTC)

[Ex: Alzheimer’s drugs in Italy]

Carlson et al., 2010

Taxonomy of Risk-Sharing Agreements

9Garrison, Towse, et al., 2013 (ISPOR PBRSA Task Force)

Types of Risk-Sharing Agreements and Real-World Examples

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[FRA]

Ministry of health agreed to cover 

Risperidone

if J&J performed studies to 

evaluate whether it helps patients stay on their 

medications

[ITA] Alzheimer’s drugs provided free by 

manufacturer; if treatment goals are met after 

3 months, treatment is continued with drug 

costs reimbursed by national health service. 

[UK] J&J agreed to reimburse the NHS in cash 

or product for patients who do not respond 

after 

4 cycles of treatment with Velcade.  

Responding patients receive additional 4 cycles.

[UK] Novartis agreed to pay for ranibizumab

injections above an agreed upon and clinically 

appropriate threshold of 14 injections per eye.

DefinitionDefinition ExampleExample

RSAs by Country and Type

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CED: Coverage with evidence development; CTC: Conditional treatment continuation; 

PLR: Performance linked reimbursement; FU: Financial or utilization based agreements*Note: Multiple schemes had multiple performance‐based components

Global Trends in RSAs by Type

12CED: Coverage with evidence development; CTC: Conditional treatment continuation; 

PLR: Performance linked reimbursement; FU: Financial or utilization based agreements

Globally Employed RSAs by Type

13CED: Coverage with evidence development; CTC: Conditional treatment continuation; 

PLR: Performance linked reimbursement; FU: Financial or utilization based agreements

Incentives & ChallengesPharmaceutical CompaniesPharmaceutical Companies PayersPayers

• Opportunity to demonstrate real‐

world product value

• Edge/increased access over 

competition

• Discounting tied to product 

performance

• Minimize risk due to a drug’s 

uncertainty (effectiveness, safety, 

utilization)

• Obtain deeper discounts• Maximize spend on products that 

perform

• Data collection efforts• Inability to control product 

prescribing, dosing, adherence and 

compliance

• Data collection efforts• Complexity over traditional 

rebates/discounts

• Long‐term outcomes mean 

delayed returnsCh

allenges

Challenges

Incentives

Incentives

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ALIGNED INCENTIVESSHARED RISK AND ACCOUNTABILITY

Acknowledgments• National Pharmaceutical Council• Lou Garrison, PhD• Josh Carlson, MPH, PhD

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