Market access outlook for 2017 and beyond—ten key trends to watch

2016 was an eventful year for the international market access environment, and 2017 promises to be even more challenging for drug manufacturers. What are the prospects to look out for in the coming months? Here are my predictions of ten key trends to watch:

Increasing use of innovative pricing arrangements

The rapid commercial success of Gilead’s Sovaldi and other direct-acting antivirals has prompted a shift of focus among payers from cost-effectiveness to budget impact, and a search for new ways to manage costs. Price-volume agreements and conditional reimbursement are increasingly common methods of controlling expenditure. Payers are also exploring other approaches to cost containment, including annuity pricing, payment for a licence for treatment, indication-specific pricing, product-service bundling and deferred payments.

The end of “Obamacare” in the United States

Even before Donald Trump is inaugurated as President, the Republicans in Congress have begun the process of repealing and replacing the Affordable Care Act (ACA). Draft legislation is expected to eliminate penalties on the uninsured and larger employers that do not offer coverage, end funding to states that have expanded eligibility for Medicaid and repeal subsidies for private insurance purchased through state exchanges. The new administration could give health insurers financial assistance to protect them against financial damage and to contain premium increases. The Republicans have yet to reach a consensus on what would replace Obamacare, but likely reforms include measures to help insurers sell policies across state borders and assist small businesses to purchase insurance through association health plans. Consumers would probably be offered subsidies or tax credits to offset premium costs and incentives to make greater use of personal health savings accounts. The President-elect has stated that “everybody’s got to be covered,” and has expressed support for maintaining the ban on discrimination against pre-existing conditions and continuing to allow children to be covered by their parents’ health insurance until the age of 26. Implementation of the ACA repeal legislation will be delayed by 2-4 years to avoid disruption of coverage.

Moderation of drug prices in the United States

In an interview with Time magazine in early December 2016, Trump declared: “I’m going to bring down drug prices.” He has yet to elaborate on how he plans to achieve this objective, though he has expressed support for direct negotiation of Medicare Part D drug prices and reimportation of medicines. However, the Republican party in Congress remains resolutely opposed to both these approaches to cost control. Measures to increase price transparency are a possibility, but critics suggest the impact of such a reform would be limited in practice. If the federal government cannot deliver significant change, states may increasingly resort to their own legislation to curb prices. In response to the swelling chorus of criticism, Allergan and Novo Nordisk have pledged to limit future price increases to less than 10% a year, and called on other manufacturers to follow suit. This commitment still allows price increases far greater than in other major markets, and does not address the issue of initial pricing, but it may signal a growing recognition by the life-sciences industry that pre-emptive self-regulation is preferable to increased government regulation in the world’s dominant pharmaceutical market.

Healthcare reform in China

The 13th Five-Year Plan, which covers the period 2016-2020, includes proposals to improve healthcare services, simplify the approval process for new therapies, and increase controls on pharmaceutical pricing. The focus of the government’s strategy will be on “major diseases,” including hypertension, diabetes, stroke, infectious diseases and mental illnesses. As an early demonstration of its commitment to controlling prices, in May 2016, the Chinese government imposed price cuts of more than 50% on several drugs, including GSK’s Viread and AstraZeneca’s Iressa. The prospect of increased volume sales in China’s lower-tier cities may help to offset the impact of lower prices. However, the government has also declared its intention to slash the substantial mark-ups on medicines that have historically played a major role in funding hospitals and have been a powerful influence on physicians’ prescribing behaviour.

Annual price reviews in Japan

In December 2016, the Japanese government announced plans to supplement its long-standing biennial price revision process with annual price reviews in off-years. Price cuts could be imposed on drugs that have a large discrepancy between their reimbursement prices and their acquisition prices. In addition, the government intends to conduct quarterly reviews of drugs that experience substantial sales growth—for example, as a consequence of a label expansion. As a foretaste of this process, the government imposed an ad hoc 50% price cut on BMS/Ono’s Opdivo in November 2016. The government is also reported to be considering measures to restrict the prescribing of certain drugs to specialist centres, or limiting use to particular patient sub-populations. The life sciences industry has warned that the government’s policy could discourage investment in Japan and reverse recent progress in tackling long delays in launching new medicines in that country.

International collaboration on pricing

In July 2016, the EU Council recommended greater cross-border collaboration on pharmaceutical pricing, including joint horizon scanning, pro-active sharing of pricing information and joint price negotiations in “coalitions” of member states. A pricing coalition launched by the Netherlands and Belgium in April 2015 has since expanded to include Luxembourg and Austria, with Ireland set to become the next member. In July 2016, the Greek government hosted discussions with Italy, Spain, Portugal and Malta regarding joint pricing negotiation. In November 2016, Romania and Bulgaria signed a memorandum of understanding on pricing cooperation; Croatia, Estonia, Hungary, Latvia, Macedonia, Moldova, Poland, Serbia, Slovakia and Slovenia have expressed interest in working with Romania and Bulgaria. The organisers of the Central and Eastern European coalition plan to seek advice from the Benelux-Austrian alliance; their objective is not only to obtain lower prices, but also to deter manufacturers from withdrawing drugs from their markets. International collaboration is also happening outside Europe. In September 2015, the Union of South American Nations (UNASUR) announced its intention to undertake joint negotiation of drugs with a major budget impact. The Irish government recently disclosed that it is eager to work with England, Scotland, Canada and Australia to negotiate a lower price for Vertex’s Orkambi, a treatment for cystic fibrosis. It will be interesting to see how the growth of such international coalitions is aligned with established national pricing procedures.

The impact of Brexit on the European pharmaceutical market

More than six months after the UK voted to leave the EU, very little is known about the likely impact of Brexit on both the UK and the remainder of the EU. Drug manufacturers are particularly unsettled by the uncertainty, a reflection of the fact that London—the home of the European Medicines Agency (EMA) and the new European Unified Patent Court’s pharmaceutical unit—lies at the heart of a highly integrated regulatory ecosystem. The EMA will almost certainly have to move from its current home, inevitably causing disruption. What is less clear is whether the UK will remain subject to EU pharmaceutical regulation or develop a completely independent system. The EU may have to find capacity elsewhere to replace the UK’s substantial contribution to the drug licensing process in Europe. The industry is also concerned that the UK might not be covered by the EU Clinical Trials Regulation, which is expected to streamline access to trials across the EU when it begins operation in 2018. The UK has been one of the pre-eminent players in cross-border collaboration on health technology assessment (HTA), a role that might be jeopardised by Brexit. Furthermore, the UK’s departure from the EU could have significant implications for parallel trade and external reference pricing.

The Accelerated Access Review—potential harbinger of a two-class market access system in the UK

The British government is at pains to emphasise that the UK remains open to international business. The life sciences industry hopes that the recently completed Accelerated Access Review (AAR) will make the UK a more attractive market for innovative medicines. The AAR recommends the creation of an Accelerated Access Pathway to speed up access to the most promising new therapies by up to four years. However, only 5-10 technologies—not just drugs, but also diagnostics, medical devices and digital products—are expected to qualify for this provision each year. All other drugs face the less-appealing prospect of disinvestment in older products, new flexible pricing arrangements, substantial charges for the services of NICE, and a budget impact ceiling of ￡20 million in any of the first three financial years on the market. The UK government is currently reviewing the AAR’s recommendations.

Reform of Germany’s AMNOG early benefit assessment system

The German government is expected to pass legislation in the spring to alter the AMNOG system that has been the basis of new drug pricing since January 2011. The life sciences industry has welcomed the promise that drug rebates will no longer be published, a significant change, given that dozens of countries reference German prices. Drug manufacturers are also heartened by the government’s plans to continue free pricing for the first year after launch, though the threat of rebates if sales in that period exceed €250 million is a concern. The other key proposals are unwelcome news for the industry: the extension of the current price freeze on reimbursable medicines until the end of 2022, the threat of early benefit assessment of older drugs that are licensed for significantly different new indications, and the possible imposition of prescribing restrictions on drugs that are judged to offer no additional benefit overall, but that might benefit certain patient sub-groups.

Cross-border cooperation on HTA in Europe

The European Commission and the European Parliament would like to see much closer cross-border collaboration on HTA in Europe to reduce duplication of effort, promote convergence in procedures and methodologies, improve the reuse of joint work by member states and ensure the long-term sustainability of EU HTA cooperation. To that end, the Commission plans to explore five options for the future of HTA collaboration in the EU, ranging from maintaining the status quo until 2020 to joint production of full HTA reports, with mandatory uptake by member states. Legislation would be required to implement the more extensive options for HTA collaboration, and the EU would likely need to provide substantial funding for such initiatives.

This is by no means an exhaustive list of key trends in market access. What do you think are likely to be the most significant developments in the coming months?