Pricing and Reimbursement Guidance Notes

Implementation of a pricing and reimbursement policy: Guidelines from the European Commisison pharmaforum working group.

Guiding principles for good practices implementing a pricing and reimbursement policy The decisions on cost of healthcare and pharmaceuticals are a national responsibility, It has appeared in the Working Group that with decisions on pricing and reimbursement of pharmaceuticals, Member States aim to achieve 3 overall objectives of (1) optimal use of resources to maintain sustainable financing of healthcare, (2) access to medicines for patients and (3) reward for valuable innovation. Each Member State has its specific approach for guaranteeing these 3 overall objectives. Member States shall ensure that any national measure to control the prices of medicinal products or to restrict the range of medicinal products covered by their national health insurance systems complies with the requirements of Directive 89/105/EEC and the Treaty. This EU legal framework requests in particular that pricing and reimbursement decisions are made in a transparent manner. The following toolbox principles will allow good implementation of pricing and reimbursement practices and are meant to offer guidance and facilitate the sharing of information and assessments. They are not binding rules. Access for patients Ensure timely access to valuable innovation. The Transparency Directive defines deadlines that have to be respected in taking pricing and reimbursement decisions. In standard cases, a request for a pricing and reimbursement decision should come with proof of benefit upfront, based on good clinical trials delivered by the applicant, whenever possible in a comparative set-up with a standard treatment. In some cases, when a full assessment is to be made for a new breakthrough medicine with a value not yet certain or difficult to prove, these deadlines might be a constraint in spite of good clinical trials. In these cases more evidence needs to be gathered after a medicine has been put on the market. In such cases, and in particular where it concerns life-threatening situations for which no alternative treatment exists, national authorities and companies could take a first pricing and reimbursement decision with conditional on gathering more information in order to review this decision. Such decisions allow patients to gain early access to potentially valuable medicines and innovative companies to get an earlier reward for investment in R&D. In the meantime necessary data can be collected within well-designed outcome research studies. These pricing and reimbursement decisions should come with a mutual commitment to a risk-sharing contract between companies and authorities. This commitment has to come upfront given that it is difficult to withdraw a medicine from reimbursement. Such a contract lays out the expected benefits of a new medicine, the criteria to assess these benefits, the data needed and methods/capabilities to do these assessments as well as the overall timeframes. On the financial side, the contract can define prices, reimbursement levels and restrictions of utilisation during the temporary period, as well as the financial consequences once new proof of benefit is available (for example leading to price or reimbursement changes –upwards or downwards-, changes in utilisation, premiums or payback). Provide affordable medicines. Medicines should be equally accessible at an affordable cost to all concerned patients. Generic medicines provide an opportunity to obtain similar treatments at lower costs for patients and payers, while liberating budgets for financing new innovative medicines. Promoting generic medicines requires a good combination of demand-side as well as supply-side mechanisms. This includes a flexible and adaptive pricing and reimbursement system, an appropriate level of price-sensitivity in patients (and payers where insurers/sickness funds are involved) and a sufficient level of competition among the different actors in the supply system (manufacturers, wholesalers and pharmacists, taking account of their public health role). It has also become clear that affordability has a European dimension. A similar price-level leads to a different level of affordability depending on the economic situation of each Member State. Attention could be given to measures that allow companies to offer medicines at affordable prices in each EU market. Limiting price-control only to nationally used volumes, as Recommendation 6 of the G-10 Medicines report stipulates, would allow differential pricing taking account of national socio-economic indicators like GDP-levels. Affordability could also be ensured through upfront agreements on maximal expenditure. This could allow authorities across the EU to accept similar prices for a limited number of innovative medicines while maintaining the total expenditure at a nationally affordable level, although this cannot be seen as a large-scale solution. Ensure equal availability of medicines. Several medicines are not available in some markets, in particular small or low-price markets where the potential profits may not seem to justify the investment to organise local supply. Manufacturers should commit to register and supply all EU markets at reasonable prices, including the small and low-price markets. Wholesalers should commit to supply all these EU markets at reasonable prices. Where this is not possible, purchasing and supply managed (partially or totally) by national authorities, potentially in collaboration with other Member States, are to be fully accepted as an alternative. Overall, sufficient attention should be given to patient’s concerns in the development of a pricing and reimbursement policy, in particular to the existing inequities among Member States in availability and affordability. Optimal use of resources Limit price control to where it is needed to contain the public budget. Member State authorities usually fix prices and reimbursement levels to ensure access to medicines at affordable cost for utilisation within their territory. Member States are not interested in fixing prices of products that are only transiting through their territory to be utilised within other Member States. They should, therefore, abstain from fixing prices for products that will not be used within their territory and that will not impact on their national budgets (as outlined by Recommendation 6 of the G-10 Medicines report). Control of supply and utilisation, including a system of traceability, might be helpful. Price control is not necessary for non-reimbursed medicines. For these products, pricecompetition can steer the price-evolution sufficiently well. Therefore, Member States should abstain from price-control. Monitoring systems might be helpful to get an overview of market- and price-evolutions and to mitigate any potential risk of significant price increases. Set-up a consistent package of supply and demand-side measures. To manage expenditure on pharmaceuticals, authorities need to manage prices, reimbursement levels and proper use. Supply side measures, addressing prices and reimbursement levels, are, therefore, to be managed in coordination and alignment with demand side measures, determining the volume. On the demand side, the individual behaviour of doctors, pharmacists and patients will determine the total use of and expenditure on medicines. Interests of all these actors, therefore, need to be aligned with the national objectives. One or several of these actors should be motivated to push forward utilisation of medicine in a cost effective way, either through a (financial) incentive, or through a controlled obligation. Practices (1) on prescription guidance for doctors, (2) on substitution by pharmacists and (3) on cost-sharing and price-sensitivity of patients, should therefore be aligned. In addition, upfront agreements on overall maximal expenditure, in the form of payback or price-volume agreements, allow effectively increased predictability of overall expenditure. Create the right environment for price competition. Direct or indirect control of prices, reimbursement and expenditure are clearly relevant in a market with low price-sensitivity and high market power of manufacturers, in particular for medicines under patent protection. In situations where competition between different products is possible, e.g. when generics enter the market, open price competition may lead to good containment and significant reduction in prices and costs in a less cumbersome way. On the other hand, maintaining fixed pricing or reimbursement levels, in a situation where competition is possible, could prevent pricereductions. To ensure savings, authorities need to provide for a flexible, adaptive pricing system, an appropriate level of price-sensitivity in patients (and/or payers) and a sufficient level of competition among the different actors in the supply system (manufacturers, wholesalers and pharmacists, taking account of their public health role). Particular attention is to be paid where generic prices are always defined as a fixed percentage of the originator price, regardless of the number of price-decreases of this originator. Such systems may lead generics being out-competed through consecutive price-reductions of the originator. Cost containment mechanisms can create sufficient headroom that is needed for rewarding valuable innovation. This could also benefit from a holistic and long-term perspective, aiming for sustainable financing of healthcare, beyond pharmaceuticals. Reward for Innovation Set expectations. Limited resources force authorities to make choices on what new products to reward and pay for. Through its pricing and reimbursement decisions, each Member States tends to grant incentives (e.g. a high price and reimbursement level, or good access to the market) for those new products that it really appreciates as bringing valuable improvements compared to the standard therapy. In this way, Member States indicate what they expect from pharmaceutical R&D to deliver. It is, therefore, important to reflect what are and will be the desired additional benefits and to allocate resources accordingly. (A separate paper has been prepared for a separate discussion on what Member States consider valuable innovation. See annex) Recognise innovation. The degree of added value delivered by new medicines is often incremental and, therefore, harder to recognise. Companies should, therefore, be prepared to clearly prove this added value versus existing therapies and authorities should be prepared to recognise proven incremental benefits that are estimated valuable and reward them appropriately (i.e. with incremental price-premiums or with measures allowing a higher utilisation). Pricing and reimbursement mechanisms, as well as utilisation guidelines, should be in line with this and ensure a scaled recognition and reward. It should thus not be expected that incremental benefits would be rewarded with break-though premiums. Where added value versus existing therapies cannot be proven and recognised, timing of market entry of a new medicine should be taken into account as well as its effects on competition. Products coming to market soon after the first-in-class originator are the result of a parallel R&D process and should be rewarded in parallel to the first-in-class originator. Products entering the market significantly later should not get a similar reward. Be consistent when giving reward. Criteria for pricing and reimbursement need to be transparent, as requested by the Transparency Directive, and consistent over time. This gives the right signals to companies on what innovations are expected and valued. Research and development of a medicine is a risky and multi-year process, in particular for small and midsize biopharmaceutical companies. The national pricing and reimbursement decisions and related decisions on the timing and utilisation are the only indicators that show whether it will be worthwhile starting this risky process. In addition, overall cost-containment mechanisms, like price-cuts or payback, could be aligned with these initial decisions; they could, for example, foresee exemptions for those innovations that are considered very valuable and have been granted a consequent price and reimbursement level.