Innovative Pricing: The Wider Picture

In a recent article, I gave a brief, top line view on Innovative Pricing schemes and some of the different structures these schemes can take. This time I thought I would focus more on some of the wider benefits of Innovative Pricing for both the NHS and pharma.

For me, at least, the greatest upside of Innovative Pricing (particularly Outcomes based schemes) are that you are making the pharma company worry about what happens after they have sold the treatment. This seems like a small shift, but it could have huge consequences for patient outcomes, NHS budgets and our healthcare system in general.

To illustrate this, let us do a short worked example for a fictional Asthma Inhaler. The broad premise of the contract is that if the patient does not obtain control of their Asthma within 6 weeks of starting treatment, the pharma company will pay back the value of the treatment (essentially creating a financially zero risk switch). The terms of the contract might look something like this:

  • Patient has a confirmed Asthma diagnosis and is prescribed the inhaler inline with current guidelines
  • Patient does not have any additional conditions that might effect the patients ability to reach control within the trial period
  • Patient adheres to the treatment regime
  • Patient does not experience any acute events during the treatment period that would effect the patients ability to reach control
  • Patient demonstrates control of asthma within an agreed time period

Hopefully this represents a ‘fair’ contract with a reasonable ‘burden of proof’ sitting on the NHS while staying within current NICE guidelines. All of these variables are also found within the patient Primary Care Electronic Health Record (EHR) and (with suitable infrastructure) means this contract can be run off that record, without additional admin or work for the NHS. However, what does it mean for patient outcomes?

Firstly, it puts a heavy focus on right patient, right drug. The ‘burden of proof’ on the NHS essentially gives an additional financial incentive for GPs to work to (and record) clinical data to the NICE guidelines (above and beyond what is provided by QOF). However, more significantly, the pharma company now potentially has a vested interest in the quality of care a patient on their treatment receives above and beyond the Guidelines. A clear example of this would be around patient diagnosis. Currently it is possible (and sadly does happen reasonably regularly) that patients get misdiagnosed just based on the sophistication of the diagnostic tests used (not through any fault of the physician). Every misdiagnosed patient is a potential rebate the pharma company will have to pay back, as such supporting GPs during the diagnosis phase becomes a financial investment with a measurable ROI.

Secondly, it provides metrics. Real-world, quantifiable data on how a drug is performing and interacting with the healthcare eco-system. This obviously benefits research. More data means more insight. And more insight means better drug development, improvement of care pathways ect. However, it also has another, more subtle impact. It highlights problems and missed opportunities, and once you know there is a problem, there is a strong incentive to fix it (it is just the way we are wired). As such, it becomes the starting point for a wider discussion about how pharma can better support the NHS. What we otherwise call ‘Beyond the Pill’ style schemes.

Finally, it might help reinforce the current growing discussion about patient responsibility. Particularly in Asthma (but really in all disease areas) patient adherence is a problem. The very fact that we consider 70% adherence a reasonable level should be laughable but sadly isn’t. If the discussion moves in the direction of, ‘you as the patient have cost the NHS £X’ and we as a society no longer feel that is entirely acceptable, we could really move the needle to make drugs for effective in the real-world. I know this is an uncomfortable thought, and it does have to be backed up with a carrot (patient support and education programs etc.), but having the hard numbers might make a difference.

The final thought I will leave you with is this. The upside for the NHS and patients are huge if innovative pricing comes to fruition. It is a simple equation, better patient outcomes directly equates to less A&E attendances, GP visits, even less drugs. Equating to lower costs. The first movers from the pharma space will gain a huge competitive advantage over their competitors because their drugs will literally be more effective (giving better patient outcomes) than the competition. However, as the industry slowly shifts, this will become the standard way of pricing, and the set up costs for tracking these contracts, and all the additional support programs will eventually become the cost of doing business in our industry (the same as warehousing and shipping drugs). There are huge gains to be made, and a lot of money to be lost for those that are slow to follow (as with any inflection point). On the Brightside, saving money for the NHS in hospitalisations and additional GP clinics, leaves more budget for them to buy new medicines.

Petri dish