Prepare for potential challenges to list prices in the US by calculating true net price trends
John Shakow, partner, FDA and life sciences at King & Spalding, a corporate law firm, recommends calculating a public/private net price, or PPNP, to have at the ready when questions about list prices arise. The PPNP is net of all discounts, including government rebates, 340B prices and other required deductions from gross that are not captured by the figures reported to Medicaid and Medicare. Several biopharmaceutical companies already publish aggregate net prices for some products.
Companies should invest in data collection and analysis – beyond what is required for regulatory approval – to more effectively accommodate the differing requirements and needs of patients across the globe. Pharmaceutical and life sciences companies should focus on out of pocket costs for patients, and use the contracting process to minimize out of pocket costs, which can help to improve adherence rates and health outcomes.
Design pricing models that maximize product access in local markets
As industry pipelines continue to shift toward rare diseases, oncology treatments and gene or cell therapies, an understanding of access issues in key global markets is essential. New financing models may help patients get access to drugs, especially in countries or states where new policies have been created to handle innovative new therapies. For example, Louisiana’s “All you can treat” agreement with Gilead subsidiary Asegua Therapeutics will provide unlimited access to the authorized generic version of Epclusa, a curative treatment for hepatitis C, to Louisiana’s Medicaid patients for five years. Organizations should also consider leveraging a portfolio of products in a subscription model, or offering subscription access to a suite of products.
An increase in the use of health data and analytics – catalyzed by the adoption of electronic health records – is making it easier for companies to engage in value-based contracts. An understanding of different patient populations living in different geographies, and covered by different health plans and different kinds of insurance, is needed to select the right financial model for a given purchaser.
Look past the next quarter when creating a new product pricing strategy
Asked about which industry group is most responsible for the increase in public and political pressure on drug prices, 71 percent of executives said that biopharmaceutical shareholders are “very responsible,” the highest response for any of the 10 selection choices. Shareholders focused on price growth as a key lever of financial performance risk causing a public backlash against their companies. Reputational harm can take much longer to repair than a quarterly report with flat product growth due to price stabilization or changes in the market.
Organizations must continue to build product lifecycle management programs that anticipate new products entering the market, and affordability issues unique to individual patient groups. Financial assistance programs will continue to be an important aspect of patient access, but drug prices will continue to receive the most attention in the public and policy realm.
Build capabilities to enable effective use of evolving pricing models
Planning for future pricing scenarios (e.g., a world without rebates) and developing the capabilities to enable these and other evolving pricing models is becoming increasingly important as stakeholders across the value chain align on the need for change. Working to build these capabilities now so they are ready for use when needed can create a competitive advantage, or at the very least a de-risking strategy, for companies that take the lead. Successful planning for what comes next in pricing, contracting and market access will take a real commitment to build the right organization, data and technology, policies and processes, and development of skill sets.
Managing a single or small number of innovative contracts is feasible in an incubator type setup; companies will need a scalable, repeatable and efficient capabilities system to manage dozens of different types of emerging pricing models across a diverse portfolio and pipeline of products.