Innovative contracting in Europe: a Trojan Horse?

By Mary Iyiola & Agnieszka Janska, with additional consultation by Smita Sealey & Barry Farrimond

In a recent webinar, we sat down with a panel of European payers to discuss ‘Innovative Contracting’ – defined as payment models that go beyond simple discounts to address specific payer needs. The conversation also explored how industry should best approach the implementation of new reimbursement models.

The concept of contracting is not new but has recently become a more pressing topic as both payers and industry are looking to ensure patient access to the most innovative treatments in an environment of constrained healthcare budgets.

Cases of reimbursing cell & gene therapies from earlier this year show that both industry and payers are in some instances already willing to embrace new models quickly. Why then are such innovations not implemented more broadly?

The webinar – hosted by ZS Associates’ Smita Sealey and featuring panellists Barry Farrimond, Malcolm Qualie, Alain Boulanger and Filippo Drago – uncovered three key questions that should be considered:

1. Is the product context relevant for contracting?
2. What is the optimal way for the industry to collaborate and engage with payers?
3. What is feasible within a given healthcare system?

When do payers consider contracting appropriate to use?

There was consensus among the panellists that contracting cannot pave the way to reimbursement for products which payers do not perceive as critical to reimburse.

Professor Drago – who has held prominent positions within the Italian public agency for drug evaluation, AIFA –  believes that there is a place for contracting when a drug is fundamentally attractive and states that “we should not forget that the prime determinant of pricing and reimbursement is clinical value. Before we engage in reimbursement, we need to make sure that this product has a clinical value; it's not just good because it saves money. It needs to be good for the patient first.”

He noted that when CAR-T therapies first came to Italy, it was even possible to invent a completely new approach, “payment at results”, which spread payments across three instalments: [1] initial patient enrolment onto the programme [2] when the patient is undergoing treatment [3] in the fifth year of patient survival post treatment. The advantage of this approach was that it accounted for the importance of the end-to-end treatment journey – something that “existing types of agreements have previously failed to address”.

Malcolm Qualie, responsible for specialised commissioning at NHS England, added that contracting can support reimbursement where uncertainty over outcomes is a roadblock. Although in his view contracting requires “a bit of a leap of faith”, payers are willing to deal with some risk if they see a drug as a valuable addition to the existing treatment options.

Alain Boulanger, senior policy officer from the French Ministry of Economy and Finances also stressed that “if there is no added benefit, it is not worth engaging in an innovative contract, even if there is some chance of saving money”.

What is key to consider when preparing contracting proposals?

Once payers are convinced of the value and would in principle want to grant reimbursement the next step is to agree on price and any other contractual terms.

As Qualie noted, there is often a misalignment between payers and industry in terms of what constitutes meaningful cost savings. He quotes the example of reimbursing anticoagulant therapies: “The industry often says these new drugs are going to release beds and we’re going to need fewer nurses and fewer clinics. But in reality, no nurses are going to get sacked because they’ll be needed somewhere else. The clinics won’t be shut down because they still have to use warfarin for 70% of patients. There still won’t be any beds free in the NHS because it’s always at capacity.”

When it comes to timing of payer engagement, “The natural inclination will be to say that industry should engage as early as possible,” said Barry Farrimond, principal at ZS Associates, “but feedback from payers and healthcare systems is that they want industry to speak to them when they actually have something to say.” Therefore, effective engagement is not about who can approach payers the quickest, but about coming prepared with a robust proposal that can be considered and refined in a collaborative manner. As Professor Drago concluded, “solid methodology combined with good clinical endpoints” as opposed to the timing itself is crucial to secure payers’ initial buy-in.

How to make contracting work in practice?

Going beyond product considerations, successful contract implementation must be rooted in a deep understanding of the capabilities of all stakeholders involved and any potential limitations.

Firstly, data gathering remains a key hurdle across markets, as infrastructure is often not advanced enough to acquire information of appropriate granularity and at appropriate time intervals to support contracting. As Qualie remarks: “The NHS data that we have, which there is a lot of, is not constructed in a way that is useful, is not standardised in any way, so we can’t compare apples with apples.”

Secondly, as noted by Boulanger there is also pure administrative burden for the healthcare systems which makes contracting “the least favoured option, as every year the French payer must manage between 350 and 400 new cases for reimbursements – not including generics.” He also continued to point out that currently agreeing which outcomes measures should be used and how to robustly assign value to those is a key barrier for any outcomes-based agreements.

Finally, the question of whose responsibility it is to collect patient data also arose. While the focus is often on payers and industry Qualie urged people not to overlook healthcare practitioners since “as it stands, [data collection] relies on clinicians - but clinicians should be looking after patients”.

So, what should industry be doing?

Due to the unique reimbursement challenges associated with each asset, there is limited scope for a “cookie cutter” approach to contracting and direct copying of solutions found elsewhere. Nevertheless, the panelists agreed that there are common principles that should guide the design of any new proposals to ensure that they lead to successful reimbursement agreements:

1. Start by demonstrating ‘value’, looking through the payer’s eyes
   • When it comes to value demonstration, the focus must be on the payers’ perspective. Therefore, industry must clearly show how new treatments provide additional benefit versus standard of care thus constituting a valuable addition to the healthcare system
2. Seek to understand payer’s needs
   • Contract proposals should be based on a holistic understanding of the payer situation to address issues truly important for them to solve. This will require industry to go beyond providing pure financial savings and also be open to more complex outcomes-based agreements
3. Engage payers with a credible proposal, thinking beyond the product
   • Collaboration and early engagement are key. At the same time, however, industry must strive to come to the negotiation table with well thought-through proposals that already lay out the implementation plan that is in line with the existing healthcare infrastructure capabilities, including data availability and resource for collection/monitoring.