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Adaptive Licensing + Flexible Pricing = Adaptive Pricing?
The European Medicines Agency (EMA) recently launched an adaptive licensing pilot project, which was hailed by the Agency as an initiative "to improve timely access for patients to new medicines." The EMA described the concept as "a prospectively planned process, starting with the early authorisation of a medicine in a restricted patient population, followed by iterative phases of evidence gathering and adaptations of the marketing authorisation to expand access to the medicine to broader patient populations." Adaptive licensing is an interesting concept and not exclusively from a regulatory perspective. Indeed, the concept - recast as "adaptive pricing" - could translate to the P&R sphere.
Payers open to the concept of "adaptive pricing"
IHS recently looked into the existing frameworks and opportunities for pharmaceutical manufacturers to secure a price rise post launch. As part of this piece of research, we also discussed with payers in nine developed and emerging markets where they think future opportunities for post-launch drug price rises exist and "adaptive pricing" featured high in the discussion. In practice, payers tend to be open to the idea that prices could evolve upwards over time based on the collection of real-word data or on the conduct of additional clinical trials, as in their opinion additional value warrants additional rewards.
Adaptive pricing could therefore go hand-in-hand with adaptive licensing and become entrenched in the product lifecycle management strategy. With regards to adaptive pricing, industry needs to ensure that the additional data collected has fiscal leverage, i.e. that payers will want to pay for the demonstrated outcomes. This seems obvious, however payers report that a significant proportion of the real-world data collected at the moment is of purely academic interest and of little-to-no use when it comes to addressing areas of uncertainty and informing P&R decision-making. This is simply because, on its own, data doesn't translate into evidence any more than it translates into knowledge.
As such, industry must be clear on the type of evidence that matters--not only to payers, but ideally also to providers, physicians and patients--at the onset of additional data-collection programmes. With regards to payers, our research demonstrates that they have specific evidence requirements in mind prior to granting medicines a price rise on the basis of emergence of new evidence (be it in an existing or a new indication). As expected, these evidence requirements vary by therapeutic area and by geography. That said, while healthcare systems are different, the challenges that payers face are similar, meaning that data collected in one market may be accepted as relevant by payers in other markets.
Over the course of our research, payers accepted that the concept of adaptive pricing, if it entails launching medicines at a lower price point and renegotiating this price over the course of the drug's lifecycle based on demonstrated outcomes, would constitute a culture shift for industry. Based on our research, it seems that this could require a culture shift for some payers too, as they would need to accept that the general price trend for innovative medicines could be an upward one.
From industry's perspective, adaptive pricing would likely also require a greater tolerance of risk, at least to start with, until the process and the associated performance-outcome metrics were clearly defined. That said, one can argue that over the last decade, the risk has increasingly been shifted onto industry already, be it through risk-sharing agreements, commissioning through evaluation, or patient-access schemes.
In the meantime, the existing market-access paradigm means that drug price rises post-launch are not the rule, although as demonstrated by our research, opportunities for such rises do exist. For drug manufacturers, it is critical to identify and leverage these opportunities on a market-by-market basis, and align them with a broader lifecycle management strategy early in product development.
Learn more about our study and review a sample of the research. We would be happy to talk to you about our findings and how they may help your organization.
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