Value-Based Pricing new approach illustrates the road ahead

The Pharmaceutical Price Regulation Scheme (PPRS), due to expire in 2014, will be replaced by a new Value-based Pricing (VBP) approach designed to stimulate innovation in treatments, Andrew Lansley announced this week at the annual NICE conference. The rationale for such a move is multifactorial but firmly aligned with changes to our commissioning approach too, providing insight for clinical teams, not just R & D pharmaceutical companies.

Under the new scheme, still to be fleshed out in terms of detail, pricing will be agreed based on factors such as:

·         Degree of unmet need

·         Disease burden

·         Lack of alternatives

·         Magnitude of benefit delivered

Once agreed, rather than NICE determining a ‘yes-no’ answer, agreement of VBP will in effect be the yes and trigger purchase of the medication in much the same way that a ‘yes’ determination by NICE does at the present time. However, it is important to appreciate the difference this heralds.

Currently, companies strive for the highest possible pricing and the widest possible patient population in a ‘dance’ with NICE over what the evidence shows clinically alongside a value-for-money determination based on a Quality-adjusted Life Year Cost of £30,000. However, the present scheme often results in a ‘battle’ over the yes-no decision based on a ‘fixed’ high price, in effect, does a yes decision to utilise represent good value?

It is hoped that the new scheme will incentivise companies to develop innovate products that deliver a wider benefit to quality of life and future disease burden than just a cold, hard clinical endpoint. The intended result is that we will may higher figures for drugs that deliver the greatest clinical benefit alongside the greatest value to the system, for example by lowering future utilisation of healthcare services or reducing the need to utilise other medications. Presently, there is an inadvertent disincentive to develop new medications that deliver greater value against existing medications because of the increased risk and reduced return on investment associated with having to enter a served market against an established product. The hope is that a revision to the pricing mechanism can be utilised to incentivise more directly innovations that reduce healthcare cost overall.

This change of incentivisation is at the heart of commissioning reforms too. Clinical services can expect to prosper financially from developing new ways of addressing patient needs that reduce the cost per patient now whilst improving the patients overall quality of life and potentially positively impacting the patient’s future drain on health services. In effect, deliver on this more comprehensive definition of value and expect to prosper from commissioning support.


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