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Flexible pricing in the UK: Where is industry?

16 June 2014 Cameron Lockwood

"If you build it, they will come," a voice once whispered to Kevin Costner in Field of Dreams. (Technically that's a misquote, but since it's how everyone remembers it, I think we can use some poetic license here). One might like to assume the same about innovative pricing and reimbursement policy measures: offer industry something compelling, and they will be knocking on the door to take advantage. Yet what worked for an Iowa corn farmer may not be directly transferable to the world of P&R. Flexible pricing in the UK offers one case in point.

Patient access schemes: Stealing flexible pricing's thunder?
The Patient Access Scheme, or "PAS," has been with us now for some time in the UK. A glance at the list of technologies with approved PASs demonstrates the important role these schemes continue to play in securing a positive recommendation from NICE. You'd be forgiven for forgetting that PASs débuted alongside flexible pricing in the 2009 Pharmaceutical Price Regulation Scheme (PPRS). This latter policy measure, designed to allow manufacturers to seek a price increase for a NICE-approved medicine (on the basis of new outcomes or a new indication), has been slower to enter P&R parlance. In fact, based on research we conducted as part of our recent study on flexible-pricing opportunities for industry, it appears that no companies have yet come forward with such a proposal in the UK. With PASs and flexible pricing both celebrating their five-year anniversary in 2014, what accounts for these very different trajectories?

The answer may lie in the question - that is to say, in the very juxtaposition of these two policy measures. The existence of PASs may have rendered flexible pricing irrelevant for the majority of medicines in the UK. The appeal of the PAS to industry is clear-cut: upon recognition that a rejection from NICE is likely, a manufacturer may choose to offer some form of concession to the health service (nowadays usually in the form of a simple discount) so as to be found cost-effective. For international reference pricing purposes, the UK list price will remain the originally proposed one.

In this context, it is not immediately apparent under what circumstances a manufacturer might choose to pursue flexible pricing. This latter scenario would involve going in at a lower price where there is sufficient promise that latent value can be demonstrated upon reaching the market. But with the option to simply discount under a PAS, it is not clear when industry would have incentives to pursue this model.

Flexible pricing: for a special type of asset?
On the other hand, one might envision scenarios where there is early promise of efficacy, but the data are not fully mature at time of review, such that the product would not be found cost-effective even with the offer of a PAS due to significant sources of uncertainty. This might be the case in certain niche indications for example. NICE and the manufacturer might then jointly agree a flexible-pricing arrangement, where the manufacturer would undertake additional data collection with some degree of steer from NICE. Thus, judging flexible pricing and PASs by the same criteria may be misleading: it may be a special type of asset that is suitable for the former.

At the other end of the continuum, and for the sake of thoroughness, we might also imagine an asset with fully mature data, one facing little difficulty demonstrating cost-effectiveness even at a premium price. In this case, a PAS would not be required, and flexible pricing would offer the opportunity to further enhance that premium price downstream - a very special type of asset indeed. There may be cases where flexible pricing need not be synonymous with "going in low."

Admittedly, there are still some challenges likely to be encountered in practice. As everyone knows, healthcare is anything but a static environment. In the time it takes to collect additional evidence, new comparators may have launched, other competitors may have gone generic, and a set of other dynamics may have altered. It will rarely be the case that the treatment effect and the price are the only two parameters to have changed between time A and time B. Still, there are likely to be certain assets, again perhaps in niche settings, where markets are slower moving. Then too NICE is already accustom to undertaking periodic reviews, where modelers must scan and adjust the evidence base. As one payer memorably stated, there is nothing simple about the idea of flexible pricing, but then the status quo isn't simple either.

Our discussions with UK payers have certainly revealed a willingness to trial flexible pricing, as well as identified areas of the evidence base that are commonly associated with uncertainty and which may lend themselves to the policy. For manufacturers ready to take the plunge, flexible-pricing opportunities are certainly there.

Read more about out our recent study, Flexible pricing strategies: Maximising value across the pharmaceutical product lifecycle and download a sample chapter.


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