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Variations on an IRP theme: How payers are repurposing pricing policies for new categories of medicines
"Don't reinvent the wheel." "If it ain't broke, don't fix it." These are adages as old as time. And they are rules which policymakers take seriously if recent developments in international reference pricing (IRP) policy are anything to go by. As we prepare the launch of our new IRP intelligence offering, IRP360, which includes the 2021 edition of our IRP Guidebook, we are struck by a commonality we have observed in markets mulling over, or having recently implemented, reforms in this space. Namely, policymakers in several markets are repurposing existing IRP rules to suit new categories of medicines, as an expanding range of therapies are drawn into the policy framework's orbit.
Brazil is a case in point, where Resolution 2 of the Drug Market Regulation Chamber (CMED) has been poised for reform for quite some time. In force since 2004, this policy measure defines several categories of medicines and sets corresponding pricing rules, in some cases relying on IRP. Over the years, the government has issued communiqués that essentially modify Resolution 2, but which it argues are explanatory in nature. After the jumpstarting of a suspended regulatory impact analysis, CMED finally released its proposal for reform in August, edging the country towards the first substantive change to its pharmaceutical pricing framework since the publication of Resolution 2.
While the proposal is still open to public consultation, and therefore subject to change, the draft envisions the creation of three new categories of medicines with corresponding rules for defining ex-manufacturer prices at launch. These include, amongst others, the new Category VII, applying to biosimilars, and Category VIII, comprising several subcategories pertaining to new presentations of active ingredients already present on the market. Historically under Resolution 2, IRP has applied to a number of categories of drugs, generally requiring that ex-manufacturer prices not exceed the lowest ex-manufacturer price for the same product across reference markets and the country/territory of origin. In some cases, the cost of treatment of comparator medicines in the same indication is also considered. Under the new Category VIII, two subcategories of drugs will essentially see the same rules apply: new pharmaceutical forms and strengths with added clinical benefit. In both cases, maximum price caps will be set based on the existing cost of treatment or the lowest price among reference markets (whichever is lowest), plus a premium of up to 35%.
The premium corresponds to a so-called "Innovation Bonus", reflecting the degree of relevance of the added benefit for patients. Added benefit would involve therapeutic advantage, increased convenience in dosing, reduced risk of antimicrobial resistance, or formulation for specific patient populations, among other proposed criteria. The upshot is that Brazil is proposing to slot its existing IRP rules into a new classification system designed to incentivize a variety of forms of innovation.
As another example, under its new three-year framework agreement, France has preserved the traditional European price guarantee forming the basis of its IRP framework, and at the same time introduced some tweaks thereto and expanded eligibility criteria. Namely, medicines awarded an added benefit rating (ASMR) of I to III and which are produced in France may now be priced up to the highest price level in the basket, as opposed to falling somewhere within the basket price corridor. In addition, an expanded range of drugs awarded an ASMR IV may now benefit from this guarantee, including medicines that address high unmet needs and where there are a limited number of comparators, as well as drugs with orphan designation. More generally speaking, for medicines with an ASMR of I to IV, the European price guarantee may be leveraged to address concerns over the drug supply.
Meanwhile, in Switzerland, the Swiss Federal Council proposed the introduction of a new pricing scheme applicable to generics, biosimilars and off-patent brands. Under the proposal - which was first made a couple of years ago and must still be evaluated as part of a package of cost-containment measures - price caps would be set above which the public health insurance system would not reimburse the products. The reference pricing process would be triggered when a minimum of three drugs containing the same active substance become available on the reimbursement list for the first time. IRP would be relied upon to set the price caps using the same reference basket as in place for on-patent medicines. The Council originally advocated for periodic price reviews every three years, thereby following the same cadence of IRP application as for on-patent drugs.
In these and other policy developments, we see evidence that payers continue to reach for the IRP toolkit when crafting new pricing mechanisms. With some minor tweaks, policymakers appear inclined to repurpose existing policy frameworks, leveraging the same reference baskets, formulas, and frequency of application, among other elements.
Viewed through the lens of the emerging literature on best-practice in IRP policy design, the recycling of IRP policies raises some important questions. A few groups have called for a more nuanced approach to policy design, considering how formulas relate to reference basket composition, for example, and encouraging policymakers to apply IRP more selectively to certain groups of medicines, not indiscriminately. While there are surely efficiencies at play, as well as benefits to be had in terms of transparency and predictability, we must ultimately consider how one-size-fits-all policies impact patient access to medicines and incentives for innovation. In some cases, fundamentally altering IRP rules may make sense - or even dispensing of IRP altogether to look at alternative pricing mechanisms.
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