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Barricading the front door: A look at Colombia’s moves toward value-based pricing

26 March 2018 Tania Rodrigues

With Colombia having just launched controversial Decree 433 of 2018, which could penalize new innovative drugs upon market entry, value-based pricing (VBP) is continuing to make inroads into emerging markets. Although the overall methodology needs to be fleshed out with accompanying documentation, the move appears to follow, in very broad strokes, the VBP model adopted 14 years ago by Brazil.

The Decree is expected to be implemented by December 2018, as part of the National Development Plan's reform to strengthen the so-called "front door" (puerta de entrada), aimed at changing the current free pricing of new drugs after the regulator INVIMA's marketing approval. Price caps, via international reference pricing (IRP), are only set by the pricing body CNPMDM for already commercialised drugs with reduced competition and, controversially, patented drugs with a declaration of public interest.

Under the Decree, to obtain market registration from INVIMA, which will conduct a pharmacological evaluation, the manufacturer would have to submit a comparison of safety, efficacy and effectiveness of the new drug versus a comparator. The HTA agency IETS would then subject the new drug to a therapeutic value classification made up of six different categories based on a comparison to the standard of care in Colombia.

As part of the IETS's economic evaluation, which could include cost-effectiveness and budget impact analyses, a manufacturer would have to submit a proposed commercialization price. Orphan drugs would be exempt from the cost-effectiveness analysis. The IETS entire evaluation would then be sent to the CNPMDM, which would carry out pricing, to be completed within a total of 180 working days plus three months. Registration would take place simultaneously, but the Decree stresses that it should be independent of the HTA and pricing processes.

Colombian branded drug industry association Afidro's main bone of contention is that Decree 433 is ambiguous about registration being conditional on the HTA outcome, opening the door to economic criteria potentially prevailing over scientific criteria. Afidro believes its wording should be improved, including by specifying the criteria to be used by the CNPMDM based on the HTA conducted by the IETS, the latter of whose value determination methodology has also not been included.

Lessons from other markets

The IETS is shortly expected to publish its therapeutic value classification approach, while the CNPMDM is working on a draft detailing the associated pricing methodology. According to a 2017 Colombian Ministry of Health presentation, more favourable pricing is expected to be attributed to categories 1-2, whereby a new drug is superior to the comparator, as opposed to categories 3-6. Research conducted as part of the 2017 edition of our International Reference Pricing Guidebook, based on in-depth primary research, indicated that formal or informal use of IRP may follow the value-based evaluation.

Formal IRP features in the Brazilian launch price methodology for new innovative drugs, as well as biosimilars, with added therapeutic value. The IETS classification approach is anticipated to be a source of tension, as the one used by Brazilian regulator Anvisa (prior to pricing by inter-ministerial body CMED) continues to present a challenge for innovative drug manufacturers. As a case in point, in December 2017, a court rejected an appeal from GlaxoSmithKline (GSK) to suspend a CMED decision revising the price of orphan blood disorder drug Revolade (eltrombopag) due to an alleged misclassification.

GSK argued Revolade should have been assigned to Category I based on submitted clinical studies, and characterised the CMED's proposed commercialization price as "unreasonable and disproportional." However, the judge sided with CMED's Category II designation due to lack of sufficient evidence resulting in a failure to demonstrate added therapeutic value compared to existing drugs used for the same indication, a requirement for a Category I classification. Category I drugs are attributed premiums via IRP, as opposed to those in Category II whose prices are typically compromised by an associated cost-minimization study because of CMED's frequent selection of an outdated local comparator.

As the GSK example illustrates, the Brazilian VBP model sparingly attributes a Category I classification, usually only reserved for radical treatment innovations, and tends not to recognise those of an incremental nature. It also does not consider unmet medical need or the size of the therapeutic gain, criticisms already directed at Decree 433. Colombia has the opportunity to learn from the Brazilian experience as the Decree's VBP-related methodologies are due to be published. Further afield, there are lessons to be learnt from Italy's updated innovation algorithm, or the lesser known "innovation meter" (innovómetro) in Spain. The next nine months will determine how the VBP methodology will evolve in Colombia, amidst the country's cost-containment agenda.

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