During the FT Global Pharmaceutical and Biotechnology Conference earlier this month, three industry leaders spoke about innovative reimbursement models like ‘pay-for-performance’ agreements and the implementation challenges of such initiatives. The session was moderated by FT reporter Donato Mancini and saw the participation of Novartis Oncology president Dr Susanne Schaffert; bluebird bio chief bluebird Nick Leschly; and the Alliance for Regenerative Medicine (ARM) CEO Janet Lynch Lambert.
As investment into and approvals of pricier and more personalized therapies increase, the debate around the affordability of these treatment options for healthcare systems globally has also intensified. Many stakeholders have touted the design and implementation of innovative reimbursement models, including, most popularly, ‘pay-for-performance’ agreements, but its uptake has been rather sluggish.
Novartis Oncology president Dr Susanne Schaffert was a staunch supporter of such agreements, asserting, “I believe [they are] a very fair assessment of the value of a drug.” For their breakthrough cell therapy, KYMRIAH®, they offer a pay-for-performance scheme, meaning that the company would only be reimbursed if the patient responds to the treatment. Dr Schaffert indicated, “this is quite a hard assessment but very fair because it will drive industry to come up with really differentiated therapies. It will also help the payer to pay only for treatments that work.”
bluebird bio has also invested in similar agreements. As chief bluebird Nick Leschly revealed, for their medicine for thylassemia, a potential once-off curative treatment, the company is in the middle of negotiations with European countries as well as various payers within the US regarding value-based contracts. Leschly explained, “rather than … pric[ing] it [as] a one-time upfront [payment] … we’re saying [that] we’re going to take any payment system and spread it over five years … and then [for] year six through the rest of [the patient’s] life, [the payers] don’t pay anything. We define upfront the total life payment – not the price, the total life payment – and then an annual price. And if it doesn’t work after a year or two, [the payers] stop paying.”
While on paper this may look like a great deal for payers and healthcare systems, the reality of implementation is far more complex. As Dr Schaffert lamented, “the problem is [that] not every healthcare system is able to manage that because you need to track the outcome and the performance.” Not all healthcare systems have the technology and capacity to track the key metrics required for such performance-based contracts.
Dr Schaffert also criticized the siloed manner in which most healthcare systems organize their expenditures, advocating, “payers really need to look at it holistically, which is sometimes a challenge. [There is] a hospital budget … a drug budget [and so on]. We believe you need to look holistically to find sustainable solutions. What does the system save and, and how can we help the overall healthcare system to be more sustainable? [Those are] the dialogues we have to have.”
She also thought the industry can do more to engage with payers and other stakeholders. “The industry also needs to start [the] dialogue earlier. Sometimes we are late. Sometimes regulatory bodies are more advanced than reimbursement bodies [so companies receive] approval [and] only then start discussions on reimbursement. [It’s] very critical to start the dialogue earlier.”
Leschly highlighted another more intractable issue hindering more widespread use of pay-for-performance agreements. “This entire system is baked into this concept of chronic medicines. It’s [all about] managing budgets within a 12-month horizon. [For instance] accounting rules [often] don’t allow this type of payment to be done over time or at risk. They prioritize short-term investment.” He remarked ruefully, “when you show up saying, hey, I got this great idea. Why don’t you pay over time and … only pay at risk? Well, they say great. thank you but no, I’m just worried about [the next] 12 months and [anyway] my accountants would have a heart attack.” Due to this myopic mentality that pervades the industry, he exhorted, “we’re in a period of transition that requires the politicians, the media, the industry [and] the payers to really work together.”
Dr Schaffert concurred, pointing out that pay-for-performance contracts for KYMRIAH® were optional only because “many [payers] just don’t want [them]. They want to pay up front to get done with it … they are not ready to track … but we all want sustainable systems. If we offer a discount in the form of pay-for-performance, I think healthcare systems should use it!”
Real World Evidence (RWE) was mentioned as a potential solution to some of the aforementioned challenges. As the Alliance for Regenerative Medicine (ARM) CEO Janet Lynch Lambert shared, “from our perspective, we believe that there will be a need to incorporate real-world evidence and other kinds of tracking of patient data over the long haul, both to support ‘pay-for-performance’ kind of reimbursement arrangements, as well as other regulatory needs.” For this to work, however, she highlighted, there needs to be “some consistency across, at least the Atlantic [but if possible] even more broadly, [on] the standards for RWE that regulators – and ultimately payers too – will find acceptable.” She suggested that regulators and payers initially focus on RWE for advanced or regenerative therapies as a sort of trial run before expanding to therapeutic modalities with larger patient populations.
Dr Schaffert was in vehement agreement regarding the importance of RWE, adding, “it’s unrealistic [to expect] the industry [to do] trials [based on all the] requests that different payers or regulatory bodies [have]. It would take us too long. It’s sometimes even unethical.” However, RWE “can help … fill a data gap in a faster, more efficient and much more convenient way.” For this reason, she hoped that “regulatory bodies and payers would be broadly accepting [of RWE].”
The three were also asked to envision their ideal 21st century pricing and reimbursement model, with some interesting similarities but also divergence in views emerging.
Dr Schaffert expressed, “my dream would be [that] there [are] more medicines that provide cures and everybody [has] access to them. Pricing is based on the value that the medicine brings not only [to] the patient but also to the healthcare system and to society. I don’t expect one system in the 21st century for all countries. Every country will go with a tailored system. But what I would really hope for is that healthcare systems can create RWE data [to] measure the outcome[s and value] of different therapies.”
Lynch highlighted, “different therapies have different characters, different indications have different … experiences too. We need a system that is flexible, but also a bit more consistent and established. The early movers have really [faced] very challenging circumstances [in] broach[ing] these conversations one at a time with the multitude of payers in the United States, [as well as] commercial and public officials in Europe. But as we get more of these, payers will become more accustomed and start to build systems [and] templates. We’re going to mature.” However, she also emphasized, “we need legal and regulatory changes in certain environments to allow these things to happen.”
Leschly affirmed, “One of the dreams that I think we all have [is to] look at our medicines [in terms of RWE and other data] in the context of the long-term so we can actually price more effectively. Right now, we price it when we’re effectively the dumbest and then we’re not smart about adjusting it in either direction [after we learn more about the drug]. But I’m not a big fan of a one-size-fits-all, I do think different countries bring different things and they have different challenges so it is important to constantly be thinking about different systems [and] different approaches.”
He ended on a rather philosophical note about the nature of pharmaceutical pricing. “How you price a medicine that is relevant to millions of people versus tens of people is very, very different and it should be okay to think about it differently. It should [also] be okay to provide that medicine at a different price for people who can’t pay for it [versus] the people who can pay for it. I certainly hope [that] not only do we abide by the legal contract of the patent system and so forth but also the social contract … I’m not against the pharma industry [making] a handsome profit, you want that incentive … [but] it’s not just about profitability in the short-term.”