Pricing and reimbursement in Australia

As our market access themed month continues, pharmaphorum’s Rebecca Aris interviews David Herd from GSK Australia on the subject of pricing and reimbursement.

To coincide with this month’s market access focus, pharmaphorum speaks with David Herd from GSK Australia. David explains the ever-changing pricing and reimbursement landscape in Australia and how this ongoing evolution is affecting pharma and research-based companies. He also shares with us the ways in which GSK Australia is working to increase access to medicines and vaccines.

Interview summary

RA: David, thank you for agreeing to take part, could you please start by sharing your background and your current role?

DH: I have been in the industry for over 25 years and specifically within the Australian industry for 14 years. My primary area of expertise is Regulatory Affairs; however within GSK I have had accountability for a number of areas of the business as Director of Healthcare Environment, including Reimbursement and Pricing. I also have accountability for Government Affairs and Policy.
The advantage of having accountability of these external areas under one roof is that the business can have a clear line of site of the key changes, challenges and opportunities within our external operating environment and manage strategy accordingly.

RA: How have you seen access to medicines change throughout the course of your career?

DH: There are two key aspects around access to medicines that I believe have fundamentally changed globally. The first is the recognition that there needs to be a different approach to developing countries versus developed countries, with respect to both their ability to purchase medicines and also the infrastructure that helps support patients seek and achieve access.


“…the research-based industry has taken positive steps to help increase the opportunity of access to both medicines and vaccines in many of the poorest nations…”


The second is that within the Health Technology Assessment (HTA) driven countries, the complexity of assessment and the procedures and policy to support and determine access have increased in complexity and robustness.

I believe the research-based industry has taken positive steps to help increase the opportunity of access to both medicines and vaccines in many of the poorest nations, either directly or through NGO driven interventions. In addition, companies like GSK have taken positive steps to re-define how they improve their ability to both increase access and make a difference in investing in infrastructure to help the process of accessing these much needed medicines in the least developed markets.

HTA has advanced through increasing complexity of modelling assessment, economic reviews, healthcare policies and evolving frameworks of assessing cost effectiveness. In addition, the various national purchasing policies and processes continue to predominantly be governed by the financial ability to purchase through either central or decentralised government agencies. The most recent evolution is the increasing ad hoc usage of cost containment measures to drive savings within national budgets, which have been driven by an ever challenging global fiscal environment.

RA: What challenges in market access does GSK Australia face?

DH: The primary challenge facing all research-based companies like GSK, is the ability to design clinical trials that can both justify registration and help provide the epidemiological and cost effectiveness evidence to reimburse that medicine in the same jurisdiction. While the guidelines and policies that help shape the development of evidence to meet the registration criteria are based on international guidelines determined through the International Conference of Harmonisation (ICH) process, the requirements regarding reimbursement can be nationally driven and quite diverse.

This is the situation in Australia, where the Therapeutic Goods Administration (TGA) has clear guidelines, which are aligned to ICH and are more direct and promote consistency in evaluation versus the PBAC guidelines (which can be more interpretative). While this does not necessary reflect on the quality of assessment it does allow a larger degree of opinion regarding uncertainty.


“Within HTA countries, a further challenge is being able to find an appropriate comparator to assess cost effectiveness.”


Within HTA countries, a further challenge is being able to find an appropriate comparator to assess cost effectiveness. This is particularly emphasised within therapeutic areas where the only standard of care has been genericised for a number of years and has significantly depreciated in price. This has the potential to erode the true value of innovation of new medicines and restrict return on investment.

This is a real challenge within Australia since the introduction of price disclosure and the separation of formularies between patented medicines and genericised medicines. This has resulted in a rapid devaluation of genericised compounds. If this is regarded as the true standard of care comparison, the incremental amount of effectiveness required to offset and hence show true cost effectiveness is much more difficult to achieve in the clinical trial setting.

As science and knowledge evolves, it provides research-based companies the opportunity to develop medicines within niche and more defined areas such as rare diseases or neglected tropical diseases. The cost of research and the likelihood of return on investment become more challenging, as does the justification to have these products reimbursed or funded by payors who are driven by set budgets and reducing expenditure. This will be an ongoing challenge.

RA: What do you see to be the biggest challenges associated with balancing profitability and patients getting what they need?

DH: Within the developing nations, affordability within the wealth triangle will continue to challenge research-based companies to broaden access, while maintaining profitability.

In Australia, the community and ethical responsibility for research-based companies is to make their products available as widely as possible. Where access is driven by HTA this creates challenges. Where cost effectiveness limits access to patient populations or limits the reimbursed indication within a registered indication this can delay access. The impact on returning an appropriate profitability on the compound then becomes limited as the patent expiry clock starts ticking and the second generation products come to market close to the original listing, again reducing the first-to-market advantage.

The obvious alternative is to pursue the private market. However in Australia this is difficult due to affordability.


“Where access is driven by HTA this creates challenges.”


A further challenge to profitability and access in Australia will be creating the right legislative and health technology environment to move to personalised medicine. We are already seeing the beginnings of the initial steps for medicines that are effective to specific genes and require the additional cost of a diagnostic test prior to treatment.

In Australia, we have already witnessed the complexity of having a HTA process that can manage the assessment of both the diagnostic and the medicine and then ultimately agree on a package is cost effective.

RA: In what ways is GSK Australia working to increase access to medicines and vaccines?

DH: The government departments are engaging the innovative industry representative groups such as Medicines Australia, to help understand the complexity of the innovation and to develop an assessment process that is transparent and fair. GSK has worked closely with government and industry to achieve this. In addition, GSK has worked with both parties to establish a Memorandum of Understanding in 2010 to encourage process efficiency, improve access times and commit to funding innovative medicines.

RA: In the 2012 access to medicines index published late last year, GSK was ranked top for the third year in a row. What do you think it is that contributes to this?

DH: It is driven by the Company’s mission to help people, “Do more, Feel better and Live longer”, irrelevant of where these communities are in the world. We have worked hard to understand the ways of increasing access in the least developed countries and taken innovative approaches to open up the access routes.

In the poorest nations, the company has committed to invest a percentage of profits into health access infrastructure. This ensures that we not only supply medicines, but that the methods and infrastructure is in place to drive access.

We have also committed to major public community partnerships to significantly impact debilitating diseases and illnesses such as lymphatic filiariasis and polio. GSK has also taken steps to tackle the leading neglected tropical diseases by opening its R&D infrastructure to universities and research-based organisations involved in finding solutions to health issues in the least developed nations.


“As medicine advances and the generations get older, current funding mechanisms will be challenged.”


GSK also understands the need to have alternative funding and payment options to increase access in countries of differing economic circumstance. In particular, our tiered pricing initiative has led to a change in access in the most challenging of economic markets.

RA: GSK has an ongoing commitment to transparency; in what ways is GSK Australia working towards this?

DH: GSK encourages transparency because it allows trust to be built with the community and other stakeholders. In Australia, we have taken a leadership position in relation to the transparency of donations, grants and sponsorships to healthcare providers. These are currently provided in an aggregated format, but GSK has encouraged a move towards individual payment transparency. Our next step will be to publish this individual data.

RA: How do you think market access will change over time – what will it look like in say ten years’ time?

DH: As medicine advances and the generations get older, current funding mechanisms will be challenged. Governments and payors will have to make choices and increasingly apply mechanisms of rationing to sustainably fund healthcare. This will include assessments of effectiveness. It may also extend to making choices about the medical conditions they are willing to pay for.

Alternate funding mechanisms will be considered, including private health medicine funds, differentials in co-payments and non-reimbursement for minor ailments. There will be consideration of cause and effect, where prevention will be monitored and encouraged prior to treatment.

Increasingly, education will be considered as early intervention and access may be driven through engagement in lifestyle change programmes, including real time monitoring mechanisms that will act as reminders to compliance.

RA: Thank you for your time.



About the interviewee:

David Herd is the Director of Healthcare Environment, GlaxoSmithKline (GSK) Australia.

He has worked in the pharmaceutical industry for over 25 years, a period which has seen the industry experience significant change. David has been at the forefront of helping GSK to adjust to these changes including establishing a regulatory infrastructure within Central Eastern Europe, overseeing change management in the International Regulatory Affairs services of the company and as part of the merger team overseeing the integration of Glaxo Wellcome and SmithKline Beecham to form GlaxoSmithKline Australia in 2000.

David was also involved in the establishment of one of GSK’s key NGO community partnership projects. PHASE (Personal Hygiene and Sanitation – for Primary Schools) delivers low-cost education helping to reduce diarrhoea-related disease. Starting in Africa, PHASE now operates in eight countries – Bangladesh, Kenya, Uganda, Zambia, Nicaragua, Peru, Mexico and Tajikistan.
Healthcare Environment at GSK encompasses a range of areas including regulatory affairs, reimbursement and pricing as well as corporate communications and government affairs. David is committed to understanding, leading and motivating the different teams of professionals he manages.

How will the market access space change over the next decade?