The reimbursement environment in Europe

In our market access themed month, Sophia Tickell comments on the reimbursement landscape in healthcare across Europe.

For decades, Europe's labs and R&D centres produced world-beating innovation. A different innovation of sorts is preoccupying those setting the pharma agenda in Europe: how to improve health systems while keeping a tight grip on costs. For nowhere is the reimbursement landscape more challenging than in Europe, as the long-drawn out recession clobbers health budgets and governments cut drug prices in an effort to make savings where they can.

But beneath the headlines on prices, more profound and longer-lasting changes are afoot that will have a significant impact on how medicines are valued in Europe and beyond.

The starting point is the growing trend towards using cost-effectiveness and comparative effectiveness among Europe's payers and assessment bodies. Admittedly, drug evaluation will take on a distinctive twist in each country: Germany's new HTA (Health Technology Assessment) process, under IQWiG, is quite different from the UK's NICE, which in turn, applies a different methodology from France's HAS. But increasingly, the HTAs are networked across Europe, through bodies such as EUnetHTA, and the trend is towards more, not less, sharing of information on protocols and methodologies. The details will differ but the overall message is roughly similar: the onus is on pharma to show how its drugs will help to square the circle of better health outcomes with less cash.

"...nowhere is the reimbursement landscape more challenging than in Europe..."

What are the hallmarks of this change and how can pharma respond? The first feature is the thirst for so called "real-world" data: data on how patients are actually using medicines and what outcomes the medicines are yielding. Importantly, these outcomes will increasingly be defined in terms of what matters to patients and health systems, which are not always captured by the endpoints that define the success of a clinical trial. This "real-world" data is the gold dust that payers and HTAs need in order to better understand whether they are getting enough bang – in health terms - for their buck. The problem is that such data is hard to gather, hard to analyse and hard to extrapolate from.

But there are signs it could be getting easier. For one thing, the payers are getting support from a European regulator that appears receptive to the idea of "real-world" data and receptive to the idea of aligning this with the payer's perspective. Another boost for payers is the increasing relevance of the data from health services: from patient reported outcomes to better patient registries.

The challenge for pharma is to figure out how it can engage with a demand for data that goes beyond the industry's traditional focus on Randomised Controlled Trials (RCT). For companies, the options range from generating some of this real-world data directly, through to helping set the standards and protocols for gathering this type of evidence. Pharma's influence in this debate will be shaped, in part, by how it tackles the legacy of mistrust over the credibility of trial data.

"A broader issue – for both payers and pharma – in this new reimbursement landscape is how to rethink the role of medicines in health systems."

A broader issue – for both payers and pharma – in this new reimbursement landscape is how to rethink the role of medicines in health systems. Currently, pharma and payers are caught in a stand-off argument over the price of any particular drug and whether insurers will cover its reimbursement. But even as they battle it out for isolated wins here and there, the longer-term interests of both pharma and health systems will depend on improving productivity and finding a better alignment of risks and incentives. At the moment, the mechanisms for doing this are pretty unsatisfactory. Take the potential that medicines have to save money for the system by keeping patients out of hospitals and maybe even getting them back to work, assuming they take their medicines as directed. These benefits are real, but they do not, as yet, expand the cash that a budget-holder has to spend on medicines.

Consider another risk that health providers worry about: a medicine may end up working less effectively in the real-world, where it may be taken overwhelmingly by older patients with co-morbidities who are not represented in pharma's clinical trials. Pharma, too, bears risk: a medicine may end up providing unanticipated benefits in particular groups of people that were not envisaged at the time of the trial – and risk going unrewarded as a result.

"...pharma and payers are caught in a stand-off argument over the price of any particular drug and whether insurers will cover its reimbursement."

But currently, there is no way to integrate emerging information into early pricing negotiations, other than through ad-hoc risk-sharing deals. The pattern therefore is fairly predictable. Pharma has every incentive to get the highest price at the outset, as the patent clock is ticking and it is not holding its breath for a pricing uplift down the line if unexpected benefits emerge. Payers, on the other hand, have every incentive to beat the price down as far as it will go, as they juggle a myriad of competing health demands, and wait for real world evidence of a drug's effectiveness. . Where innovation will come from in the next decade will be someone else's problem.

The problems are well-understood. The desire to find solutions is also there. What is lacking is a mechanism to achieve system-wide change, leveraging the small scale experiments that are cropping up. This will require stakeholders to work together in ways they have not done before and with constituencies who have not had a place at the table before. And to do that, pharma and payers need to trust each other more than they do now. Building this trust, through a better mutual understanding of the real constraints that industry and health systems face, should be top of the agenda.

About the author:

Sophia Tickell is Co-founder and Director of Meteos, a not for profit company that combines agenda-setting analysis, with senior level dialogues between industry, investors and societal stakeholders, to accelerate solutions to a range of systemic challenges. In addition to the long-running PharmaFutures dialogue, Meteos is leading multi-sector initiatives on pharma's role in improving health systems productivity, sustainability in energy supply and distribution, climate change policy, and short-termism in financial markets.

Before founding Meteos, Sophia served as Chair of the Board at SustainAbility Ltd, as well as holding the role of Executive Director. Prior to that Sophia led Oxfam's work on the private sector and supported policy development internationally, including in Nepal, Zambia, and Colombia.

Sophia holds a number of board and advisory roles, including being a trustee of Green Alliance, a member of Aviva's SRI Advisory Committee, advisor to Alliance Trust's Sustainable Future Funds, and advisor to the Doughty Centre Advisory Council of the Cranfield School of Management. Sophia is the author of a number of publications, including "The Antibiotic Innovation Study" and the PharmaFutures (www.pharmafutures.org) reports.

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