Payer Roadblocks and Risk-Sharing Agreements
Around the World
Global Overview of Risk-Sharing Agreements
The increasing use of risk-sharing in reimbursement decisions across major and emerging markets necessitates that key stakeholders understand the role of this concept in shaping drug development and regulatory decision making. The goal here is very clear – to offset the risks among payers (such as insurance companies or government health care bodies) of paying high reimbursement costs for treatments where there are uncertainties over the clinical value and/ or health economic value of the treatment. For pharmaceutical companies, the risk-sharing agreement can offer an important alternative to offering a discounted price, or when they are faced with an outright rejection from the reimbursement authorities.
As a concept, risk-sharing agreements mean different things in different contexts. With this in mind, two definitions have been used and are listed here for reference:
•_ IHS Global Insight definition: “an umbrella term for a host of creative pricing or costing initiatives with the goal of securing reimbursement or greater access to the drug. Agreements are put in place between manufacturer and payor to potentially spread the cost of a particular medicine, or treatment regime, by placing conditions that explicitly dictate how much the payor will spend and not spend. Risk-share conditions can significantly vary in nature depending on the drug, its mechanism of action, and the type of disease it is treating, and their implementation can often be indirect,” and
•_ University of Washington’s PORPP definition: “agreements between a payer and a pharmaceutical, device, or diagnostic manufacturer where the price level and/or nature of reimbursement is related to the actual future performance of the product in either the research or ‘real world‘ environment rather than the expected future performance.”
The taxonomy here is generally split between finance-based and outcomes-based agreements:
•_ Finance-Based: These agreements are conditioned by a set of pre-specified budget caps, discounts or restrictions that can either be based on a particular patient or on the disease population. These can include: price-volume agreements (France), expenditure caps (Australia; United States), price cuts that are attached to forecasted spending (Japan) and conditional discounts (Italy; UK), and
• Outcomes-Based: These agreements are conditioned by a pre-specified endpoint or definition of response that dictate whether the payor will cover the treatment on an ex post facto basis. These can include outcomes guarantees (United Kingdom; United States) and form the traditional model of risk-sharing agreements, as payment is weighted entirely against the performance of the drug.
This is a fast-evolving concept with few best practice guidelines or standard regulations. Each country has its own approach to the issue, and each therapeutic area has different requirements and strategies with regards to the potential need for risk-sharing agreements. In some markets, and certain therapeutic areas, risk-sharing agreements are a reality to the extent that they are a near-substitute for the normal reimbursement process. These include the UK (with both NICE and the SMC), Australia and Italy. In other markets, and other therapeutic areas, risk-sharing agreements are not seen as an efficient reimbursement tool or indeed, even feasible. These include Japan, Germany and France, although, exceptionally, risk-sharing agreements do appear in these markets as well.
This reveals an inherent paradox to the risk-sharing paradigm: the need – or demand – for risk-sharing agreements is greatest when the clinical outcomes for a treatment are uncertain, because the payer is potentially facing a high-cost product, but is not convinced by the value of the product.
It is precisely when the outcomes are uncertain, however, that risk-sharing agreements are potentially detrimental. This is because a successful risk-sharing agreement is incumbent upon a clear definition of when the treatment works, and when it does not work. If the outcomes are not clear, though, it becomes very difficult to set up clear parameters for a risk-sharing agreement and decide who pays for the treatment.
Research in this area is always limited by the often confidential nature of the agreements in question. Some agencies, however, are more transparent than others in their dealings with this subject, and there are increasing initiatives to provide more details on each agreement, particularly in the United Kingdom and Italy. . For this overview, the primary research was conducted through 50 in-depth 45-minute telephone interviews in native languages. Subjects were carefully selected and represented payers, government agencies and health technology assessment (HTA) organizations in nine markets (United Kingdom, Germany, France, Italy, Spain, Australia, New Zealand, United States and Canada) to understand their assessment of the role risk-sharing agreements have – or have not – played in their respective markets, and whether they will do so in the future. This was complemented with secondary research of reimbursement decisions around the world based on a newly created database of risk-sharing agreements (IHS Risk-Sharing Agreements Database).
In some large markets, such as the United Kingdom, Australia and Italy, for certain therapeutic areas such as oncology, these agreements are very common, but primary research indicates that this practice faces significant resistance at many layers. Many other countries are seeking to understand the potential applicability of risk-shares to their own market. Also, risk-share agreements are being examined for their potential in several other therapeutic areas. While population- and patient-level agreements remain the most popular, it is clear that health outcomes-based arrangements are significantly on the rise, with 27 having been identified through the study, the majority of which were signed since 2007. Just over half were signed for oncology therapeutics, including treatments such as bevacizumab, sunitinib and bortezomib. Outcomes-based agreements are becoming an increasingly important consideration to include in pricing models across the traditional development pathway for new molecules.
Clearly, achieving “normal” market access for a new treatment, where regulatory approval is followed immediately by drug pricing and launch, is an increasingly rare phenomenon. While health care economics is an old discipline, it is being used with increasing sophistication by reimbursement authorities. This, in turn, is requiring increasingly flexible and creative pricing arrangements. Risk-sharing is not always successful, and the vagaries of sensitivity analyses, defining clinical response and setting budget or utilisation caps, can often upset the balance of cost-effectiveness thresholds. A key problem in the rise of risk-sharing agreements is that it has not been sufficiently legislated for, nor adequately controlled or monitored. There are few guidelines on the specific criteria used to select when—and, perhaps more importantly, how—these agreements are applied. For pharmaceutical companies, risk-sharing agreements are quite clearly a last resort. By their very nature, risk-sharing agreements can call into question the validity of the clinical data supporting a drug launch. Also, agreements here can essentially transfer the entire risk onto the company, which has often spent many years, at very high cost and risk, developing the new treatment. In a world, however, where health care costs are becoming increasingly constrained both by government austerity measures, and government health care insurance expansion plans (e.g., the United States, China, and many emerging markets), the need for a strategy on risk-sharing agreements is essential, and will should be considered as part of the global launch plan for new drugs.
1 Risk-Sharing Agreements: Creative Pricing as a Reimbursement Strategy. IHS Special Report, March 2009.
2 ISPOR Educational Symposium. “Performance-Based Risk-Sharing Arrangements: A Framework and Taxonomy. May 18, 2010.