Thomas Paine wrote in his presciently ti tled piece, The American Crisis, that ‘these are the ti mes that try men’s souls’. Although chances are low that he had value frameworks in mind, Mr. Paine likely understood that, in a country that so cherishes liberty, equality may from ti me to ti me be sacrificed. Indeed, the country has historically opted to preserve choice among payers, rather than a government-run, single-payer healthcare system. Unfortunately, this liberty also includes the involuntary opti on to not have coverage at all, resulti ng in great inequity in the pursuit of a more perfect healthcare system. As the country’s legislati ve branch att empts to craft a replacement for former President Obama’s ACA, ISPOR became the crucible for debate around how a treatment opti on should be valued. While there is no clear conclusion at this juncture, ISPOR’s task force assessing value frameworks seems to be in the QALY camp – a bitt er pill to swallow for most health plans that cannot even publicly admit to economic considerati ons (let alone net pricing) when disclosing their coverage decisions. While this year’s conference in Boston was decidedly focussed on the USA’s tumultuous environment, payers from more inclusive health systems like TWN revealed the results of their policies to encourage multi nati onal investment through pricing premiums. Meanwhile, their neighbors in mainland CHN appear to be taking ever-increasingly bolder bounds forward in their effort to clean up the supply-chain and decrease overall pati ent cost-sharing burden. As CHN modernises, the USA stares down legislati on that could lead to over 20m people losing healthcare coverage. At a ti me which cannot be described in many bett er ways than ‘crisis’, other countries push ahead through top-down policy to expand access to medicines and reward innovati on.

ISPOR Internati onal: Times That Try SoulsCyrus A. Chowdhury, Sandeep Dutt agupta, PhD, and Alice Wang

Local knowledge, global thinking

With this year’s ISPOR Internati onal taking place in Boston, home to the origins of the American revoluti on, echoes of transformati ve uprising hundreds of years ago could easily be confused with the din of animated dissent over the path to value assessment in the USA. The week was dominated by diversely informed opinions on the future of value assessment in this land of many payers and a reluctant government. While the bounty may be a far cry from disloyalty to the Crown 240 years ago, make no mistake, these voices of discontent were once again fighti ng the pervasion of imperialism, this ti me in the form of King QALY.

At ti mes, it was easy to forget that this was ISPOR Internati onal; the updates provided by a more serene cast of health authoriti es from around the world should have had a greater share of voice. The real-world results of policy from other, more efficient health systems, which generally took place in the early evening hours, included a few poignant lessons for their American counterparts. They are fixing different and, oft en, more advanced issues that, if undertaken by value framework advocates, could help to get the USA’s healthcare system back on track towards equality and liberty, two principles at the heart of local history and current debate.

FIGURE 1. ISPOR Internati onal 2017: The Essenti als

SOURCE: CBPartners Analysis, ISPOR Internati onal 2017

VALUE ASSESSMENT FRAMEWORKS: FRAMING THE ISSUE

For a country with the largest GDP in the world, a value framework ought to be a soluti on for the health system that can already call among its achievements universal coverage and an understanding of where the right to healthcare sits relati ve to other nati onal prioriti es. For the USA, however, the core issue is that the percepti on of value shift s from one payer segment to the next, and even someti mes from one segment’s payer to the next. Just as value assessment shift s from GER to FRA, so does it shift from one nati onal health plan to the next. Both wish to be effi cient, but each has a diff erent lens through which to defi ne effi ciency.

Despite this uneven foundati on, the process has already been initi ated, with several value frameworks having been proposed over the past two years. These models, with their

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ISPOR INTERNATIONAL 2017: THE ESSENTIALS

ISSUE DETAILS

VALUE FRAMEWORKS

• ISPOR’s Task Force shared an update, but consensus seems to be out of reach for the time being

• At the heart of the issue is whether a patient-level or population-level perspective should be utilised

• At the moment, population-level approaches appear to be in the lead, with the QALY being painted as a lynchpin

EVIDENCE REVIEW

PRACTICES

• Health plans have an overwhelming tendency to set coverage policies based on RCTs and guidelines – but fail to ever mention economic considerations

• Although net price is clearly a dominant factor in coverage decisions, the current USA environment limits the ability for health plans to be transparent about this factor – unlike their peer HTA agencies in other countries

OUTCOMES BASED

AGREEMENTS

• While the reports of new outcomes-based agreements are at an all-time high, the reality is that certain payers like HARVARD PILGRIM are driving the majority of these contracts

• Additionally, certain manufacturers are making similar moves at a high enough rate to promote themselves as flexible and willing to take on additional risk through these agreements

PRICING PREMIUM

REWARDS

• TWN health authorities have released data on when and how their policy to incent multinational investment in their local market through pricing premiums has unfurled

• Among 95 new product reviews, 28 were accompanied by local PE data – and among these only 15 of them achieved the pricing premium reward

SANMINGMODEL

• The SANMING model has been able to effectively reduce cost-exposure to patients by combining tendering pools, limiting supply-chain pricing mark-ups, and incenting the use of generics

• These positive results of the SANMING model have encouraged the national government to seek broader application of the policies

VALUE ASSESSMENT FRAMEWORKS: FRAMING THE ISSUE

known limitati ons and someti mes negligent oversights, generally paint the corners of debate as to how value ought to be assessed in the USA. During these past two years, and accentuated through this year’s ISPOR, the lack of sett lement on one parti cular framework means that no single approach is perfect. Loaded with the world’s leading health economists and policy-advisors, ISPOR’s ‘Special Task Force on Value Frameworks’ (STFVF) form the fulcrum of deliberati on on how the framework will eventually take hold across a diverse payer landscape. Yet, the bott om-up approach being pursued by this group appears to be leading to unavoidable cracks in the bedrock of any eventual common agreement.

Given the diversity of payer perspecti ves and prioriti es, the heart of the issue is whether the framework should take on a populati on-level (resource allocati on) approach, or a pati ent-level (individual treatment selecti on) approach. While ISPOR’s STFVF outwardly believes that both approaches have merits and should be adaptable to the USA’s healthcare system, the impasse leads to imperfect soluti ons that fail to comprehensively address the USA’s pluralisti c healthcare system.

Calls for a pati ent-level approach centred on the relati ve void of pati ent- perspecti ve within the current frameworks. Memorial Sloan Kett ering’s Drug Abacus and the Nati onal Comprehensive Cancer Network framework both account for pati ent preferences such as trade-off values and stated-preference experiments, but neglect ability / willingness to pay, caregiver burden, and mode of administrati on. While the Insti tute for Clinical and Economic Review and American Society of Clinical Oncology frameworks do address mode of administrati on, they miss the mark on almost every other pati ent-centric att ribute, including pati ent preference.

As pati ent-level approach supporters cited the need for these factors to be taken into account, populati on-level advocates sought to desti gmati se the QALY. The STFVF clearly believes there is a role for the QALY, and goes so far as to have a recommendati on that decision-rules should be defined based on a cost-per-QALY basis. Although they admit that each private health plan and public payer may have different thresholds, they believe there is an unmiti gated role for QALYs in setti ng a value framework for one America. The STFVF has made a formal declarati on that the QALY should not only be adopted, but that unspecified ‘refinements’ must be ‘embraced’ to incorporate other elements of value. The exact nature of these refinements remains to be defined, but the momentum is clear – ISPOR’s value framework experts currently have laser focus on incorporati on of the QALY within their ulti mate recommendati on for a value framework that can be successfully implemented across the USA’s abundantly diverse payer landscape.

Is there a bett er soluti on? If it did exist, there is no doubt that such an esteemed group of the world’s greatest health economists would have discovered this already. However, one thing is clear – as the world moves closer to personalised medicine and individual treatment access decision-making, the country must develop a system that does not hamstring an environment that has historically served as a leader in drug discovery and innovati on. Are incremental therapeuti c benefit approaches superior to cost-effecti veness and cost-uti lity methods of managing access? This is a debatable point – but struggles that ENG and other CEA / CUA systems have experienced due to paradigm shift s in innovati on (oncology and other therapeuti c combinati on regimens not the least among them), as well as the inability to successfully move towards a value-based pricing system are difficult to deny. By implementi ng a system that rules out access to innovati ve treatments based on a populati on-level perspecti ve, the individual pati ent suffers, and the broader healthcare economy could be equally harmed. Ulti mately, ISPOR’s STFVF must address this issue, or risk creati ng yet another ‘value framework’ that sits on the sidelines of a healthcare system in desperate need of leadership.

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This experti se is routi nely summoned

for engaging with clients'

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secondary research.

EVIDENCE REVIEW: THE ELEPHANT IN THE ROOM

Health plans in the USA have a broad range of philosophies when it comes to access decision-making. To no one’s surprise, price, and more specifically, contract-based discounts, have historically dominated decisions around the ulti mate access of a new therapy. Beyond this cost considerati on, however, health plans can be segmented based on their relati ve sophisti cati on with regard to clinical evidence review. However, the natural inclinati on to combine these cost and clinical drivers into a cost-effecti veness analysis has escaped almost every payer in the USA.

There are many reasons for this disregard cast against more refined methods to evaluate value for money. Many payers will cite the lack of a nati onal mandate to dictate a consistent evaluati on technique. Others cite the ‘unnecessary’ complexity of such modelling, while even more default to the self-fulfi lling lack of internal capability to carry them out. This is not to say that these payers do not closely examine clinical evidence – indeed, the two most commonly cited types of evidence are randomised clinical trial (RCT) data and clinical guidelines.

FIGURE 2. Health Plan Use of Evidence to Support Coverage Decisions

SOURCE: CBPartners Analysis, Tuft s Center for Evaluati on of Value and Risk in Health

According to a session run by the Tuft s Center for Evaluati on of Value and Risk in Health, the data from which is illustrated in FIGURE 2, coverage policies from major health plans like AETNA and ANTHEM confidently and routi nely note RCTs and guidelines as support for their coverage decisions – rarely, if ever, citi ng, let alone conducti ng, economic analyses. The rati onale for this is simple – without a systemati c and consistently applied framework for economic analysis that can withstand public scruti ny and declarati ons for choice in this ‘sweet land of liberty’, these insurers are left with only clinical means of supporti ng their conclusions. Obviously, price, budget impact, and other economic factors are at play, but most insurers dare not disclose these points within their actual decisions for fear of public reprisal. Aft er all, who is checking their work?

Comparing these insights to what is considered standard practi ce in ‘HTA countries’ leads the objecti ve observer to connect the fear of public scruti ny with the lack of a nati onally accepted or mandated framework for value assessment. The best these insurers can do for

CBPartners has recent experience

across over 80 therapeuti c areas,

spanning both speciality and non-speciality

therapeuti c areas.

EVIDENCE REVIEW: THE ELEPHANT IN THE ROOM

now is publicise their risk-sharing agreements that hint at the economic considerati ons that truly drive most reviews.

OUTCOMES-BASED AGREEMENTS: NOT QUITE THE SAME OLD STORY

Those paying att enti on to contracti ng practi ces by USA payers will readily observe that the frequency of ‘high-profile’ outcomes based agreements (OBAs) have increased during the first six months of 2017. Given the recent spate of announcements, the responsible parti es tend to market the result – which, for now, is just that they signed one, and not yet their ability to prove they lead to bett er value for money.

ASTRAZENECA’s ($AZN) recent announcement that they have successfully arranged for 13 such agreements reflects the company’s prioriti sati on of this evidence-based tacti c. Given $AZN’s strong reputati on for contracti ng NEXIUMTM and other blockbusters, this bit of marketi ng sends a clear message to the industry that the ti de is indeed turning towards more complex agreements involving clinical and economic outcomes. However, a closer look reveals that there are really only a handful of insurers who are implementi ng these agreements – not just with $AZN, but across the enti re industry.

Results from a panel of 45 payers that were disclosed during a session on OBAs reveal that only 17% are ‘very favourable’ of such agreements – likely the ones who actually have implemented the agreements cited in news stories every few weeks. Indeed, the same survey indicates that only a quarter of all payers even have a single OBA in place. HARVARD PILGRIM, which was not specified as one of these payers (but undoubtedly is if included in the survey), is leading the charge with high profile agreements across chronic conditi ons such as cardiovascular disease, diabetes, and rheumatoid arthriti s (FIGURE 3).

FIGURE 3. Outcomes-Based Agreements at HARVARD PRILGRIM Over Past Year

SOURCE: CBPartners Analysis, www.harvardpilgrim.org

While payers’ interests in discussing and implementi ng OBAs are on the rise, a coaliti on of the willing among manufacturers appears to be chomping at the bit. Their moti vati on? In most cases, it is revitalising the prospects of high potenti al brands that may not have immediately met shareholder expectati ons within a competi ti ve therapeuti c area. These reasons cannot be criti cised – aft er all, these manufacturers are doing just what everyone seems to demand: put their money where their mouths are. With ti me, these moti vati ons will likely evolve as larger payers observe success stories and the positi ve impression OBAs can leave for a public that is only now coming to realise their role in the country’s pricing saga.

OUTCOMES BASED AGREEMENTS: HARVARD PILGRIMBRAND MFG DATE TA METRIC INCENTIVE

ENTRESTO NVS JUN 2016 CV: heart failure

ECONOMIC OUTCOME: hospitalisation reduction REBATE – PARTIAL REFUND

TRULICITY LLY JUN 2016 DIABETES CLINICAL OUTCOME: HbA1c

IF MISS, REBATE – PARTIAL REFUND;

IF ACHIEVE, SMALLER REBATE

ENBREL AMG FEB 2017 RA

ECONOMIC OUTCOME: compliance, switching / adding therapy, dose

escalation, steroid intervention

REBATE – PARTIAL REFUND

FORTEO LLY FEB 2017 OSTEO CLINICAL OUTCOME: persistency

IF ACHIEVE, REBATE –PARTIAL REFUND

REPATHA AMG MAY 2017 CV: lipid management

CLINICAL OUTCOME: heart attack or stroke

IF MISS, REBATE – FULL REFUND

BYDUREON AZ MAY 2017 DIABETES CLINICAL OUTCOME: HbA1c

IF MISS, REBATE – PARTIAL REFUND

BRILINTA AZ MAY 2017CV:

acute coronary syndrome

ECONOMIC OUTCOME: Hospital revisitation vs.

generic clopidogrel

IF MISS, REBATE – PARTIAL REFUND

CBPartners has specifi cally worked on over

40 diff erent tumour types

within oncology, across diff erent lines of therapy

and stages of disease, as well as orphan and

more prevalent tumour types.

OUTCOMES-BASED AGREEMENTS: NOT QUITE THE SAME OLD STORY

PRICING REWARDS: ARE THE RUMOURS REAL?

In fairness, they are more than rumours – they are policies – but do they lead to the reality of which multi nati onals dream? Beginning in 2009, the TWN government set out to create a more favourable environment for foreign pharmaceuti cal and biopharmaceuti cal companies to invest in the country. The approach was many-sided and included tax incenti ves, creati on of a research and development hub, as well an easing of the regulatory environment through a more efficient review process and ti meline. Indeed, this effort led to many successes, ranging from TWN being the first country in the world to approve GILOTRIFTM

(afati nib, BOEHRINGER INGELHEIM – beati ng the FDA by two months), to creati on of the Si2C, an incubator for early stage development programmes. Given the latency of similar policies in other countries, their efforts are indeed leading to some defi niti on of qualifi ed success.

One parti cular aspect of interest to multi nati onals is the effort to create a more appealing pricing environment that maintains levels within a range acceptable to the local health authoriti es, while allowing pronounced incenti ves for specific forms of innovati on paired with local investment. The TWN government categorises new products for pricing and access decisions based on being a ‘breakthrough’: CLASS I (new mechanism of acti on or significant clinical improvement), or CLASS II (falling in line clinically with previously launched products). Both classes are able to achieve up to a 10% premium for local research and development of the product; further, given the pricing challenges of being a CLASS II product, an additi onal 10% can be achieved if the product has undergone a local pharmacoeconomic study. These potenti al premiums are structured in such a way to overcome the daunti ng pricing anchor being set by the median of the A10 countries.

Closer investi gati on reveals just how demanding the price negoti ati on process in TWN can be. Among products approved for reimbursement during the past five years (i.e., a successful conclusion to negoti ati ons), they achieved only 60% of the A10 median price, which represented a value of 82% from the price initi ally proposed by the manufacturer. The most challenged products were, predictably, CLASS IIB therapies, which were only able to achieve an average of 52% of the A10 median price. As multi nati onals can att est, TWN is indeed home to strong negoti ators.

However, the widely reported pricing premium opportuniti es were only mildly eff ectual. Among the 95 therapies reviewed and negoti ated, only 28 included local PE evidence – a trend that has increased in the years since the policy was developed. The good news is that all 28 of these products achieved reimbursement, whereas only 54 of the 67 without local PE evidence were as fortunate. Among the 28, however, only 15 were able to achieve the local PE premium – and even then, they capped out at a 6% premium allowance, rather than the 10% commonly cited.

These mixed reviews are nothing new for the complicated TWN market. The local authoriti es pride themselves on a structured, transparent HTA and reimbursement / pricing process. They are equally enthusiasti c about their commitment to creati ng a local environment conducive to multi nati onal companies making investment in their local economy. However, the reality of what is actually achievable can be demoti vati ng. With this said, the TWN system is a model to be watched as further product launches are executed, parti cularly as clinical treatment paradigms evolve towards combinati on, gene, and cell therapy.

SANMING SAYS ‘CUT YOUR PRICE’

As is their way, the astute, unrelenti ng market developers in CHN spent the past few years taking some ti me to plan the next major wave of policies to improve access to and efficiency of healthcare. While the government claims to have achieved universal coverage as of 2013 by bringing some form of insurance to 97% of the populati on, it is hard to overlook

SANMING SAYS ‘CUT YOUR PRICE’

Over the past year alone,

CBPartners has led over 30 M&A

assessments, focussing on

both commercial opportunity and

forecasti ng, as well as pricing,

access and value positi oning

considerati ons.

the significant shortcomings of the comprehensiveness of that coverage. In order to extend the reach of the insurance mechanisms on a per-pati ent basis, officials understood that one issue needed to be addressed: inefficiency in the supply chain. Despite the massive consolidati on of distributors that has occurred during the past two decades, the pricing mark-ups and overuse of certain inpati ent therapies conti nued to dog the system.

To address the efficiency issue, the now-famous ‘SANMING’ model was piloted locally, which addressed several concerns ranging from low physician salaries that drove overuti lisati on, to the multi ple insurance funds that diminished bargaining power for procurement.

The most disrupti ve aspects of the model, however, took aim at pricing and reimbursement. By collapsing the several insurance mechanisms to two, the city was able to increase the reimbursement rates for both employee and residenti al insurance schemes by over 15% (FIGURE 4).

FIGURE 4. Reimbursement Rates for SANMING Relati ve to Levels in Other Citi es Across CHN

SOURCE: CBPartners Analysis; Sun Yat-shen University

However, these improvements in reimbursement rates are not driven by an increase in the amount of funds being used to subsidise pati ent costs. Rather, officials targeted the prices themselves by exploiti ng tendering as a means to reduce distributor acquisiti on prices. They were further able to drive uti lisati on towards lower-priced and lower cost-sharing generics by adjusti ng reimbursement rates. Finally, through the two-invoice system, which requires submission of only two invoices for reimbursement (from manufacturer to distributor, and from distributor to hospital), compounded prices through ritualisti c mark-ups are no longer a factor.

By examining the reimbursement price relati ve to hospital sales price for the pati ent (FIGURE 5), several insights surface.

• Reimbursement prices differ for generics and brands, which refl ects the government’s bias towards local, generic manufacturers. While ZOMETATM’s reimbursement rate is the lone excepti on, the stark example of generic fluconazole being reimbursed fully at USD 0.32 for one week of therapy, while PFE’s branded DIFLUCANTM has substanti al economic economic disincenti ves for pati ent selecti on at USD 16.76.

53.8% 44.9% 38.0%

68.9% 50.0%

NAT

ION

AL

SA

NM

ING

REIMBURSEMENT RATESSANMING, CHN NATIONAL; URBAN / RURAL SCHEMES

URBAN EMPLOYEE

URBAN RESIDENT

RURAL RESIDENT

CBPartners' Global Health

Advisory Board includes both

local regulatory and payer

authoriti es, as well as KOLs, OLs,

and community prescribers in more than 70 countries who

are available on short noti ce

due to their relati onship

with the fi rm's consultants.

• Some cost-sharing is simply set at 50%, as is the case for IRESSATM (gefiti nib, $AZN) – which is cut across both the branded and generic versions of the therapy, despite the overall cost difference – equal treatment for equal treatments.

• Tendering has selecti vely eliminated pati ent cost-sharing responsibiliti es for generic versions of certain non-specialty therapies, including fluconazole and clopidogrel.

• Tendering has not driven margins down for all branded therapies to the same extent as they have for generics. Multi nati onals are sti ll staking their financial outlook on the percepti on of quality associated with branded opti ons relati ve to locally-manufactured generics – a phenomenon which has a surprisingly vitality in the brand-conscious urban centres of CHN.

FIGURE 5. Reimbursement Rates Relati ve to Maximum Hospital Sales Price in SANMING, CHN

SOURCE: CBPartners Analysis; Sun Yat-shen University; GBI Pricing Data

IN CLOSING

The current value framework dialogue led by ISPOR cannot be assumed to predicate a new American revoluti on in healthcare. One simple way to minimise ISPOR’s STFVF recommendati ons is to brashly select only certain components of value assessment practi ces from other countries and eras of innovati on. The QALY will not survive in the USA – at least not in the short-term future, and not among commercial health plans which provide coverage for about two-thirds of the populati on. The QALY worked for a populati on-level perspecti ve at a ti me when incremental benefit was too oft en negligible in the age of ‘me- toos’. The QALY worked for an obedient nati onal payer who aimed to provide universally consistent coverage that minimised ‘post-code prescribing’. Regardless of the country, today’s healthcare environment requires a pati ent-level perspecti ve for value assessment – a model which does not swivel to this view will fail to fully capture the clinical momentum of personalised medicine. This is not to say that policy-makers should not look beyond their borders for clues and case studies. The ever-evolving healthcare experiments around the world serve as informati ve lessons that should be heard and someti mes embraced. One thing at a ti me, though: the priority conti nues to be universal coverage in order for a value framework to move from theory to practi cal use to consequence.

116.54

173.38

58.38

58.38

116.54

173.38

184.12

382.21

0 50 100

150

200

250

300

350

400

450

500

gefitinib - GENERIC (齐鲁)

IRESSA (gefitinib) - AZ

zoledronic acid - GENERIC (正大天晴)

ZOMETA (zoledronic acid) - NVS

REIMBURSEMENT RATESSANMING, CHN; BRAND VS. GENERIC

8.61

12.910.32

0.49

3.01

16.76

0 2 4 6 8 10 12 14 16 18 20

clopidogrel - GENERIC (MULTIPLE)

PLAVIX (clopidogrel)

fluconazole - GENERIC (MULTIPLE)

DIFLUCAN (fluconazole) - PFE

COST OF THERAPY (USD)

NO

N-S

PEC

IALT

YSP

ECIA

LTY

REIMBURSEMENT RATE

COVERAGE GAP / PATIENT COST-SHARING

18 20

CBPartners' engagement teams span

multi ple offi ces to ensure nearly round-the-clock

eff ort on the business issues

at hand, as well as a high level of

availability and responsiveness to

client needs.

ABOUT CBPARTNERS:

CBPartners is a global consultancy committ ed to providing unparalleled strategic support to pharmaceuti cal companies, biopharmaceuti cal companies, medical device companies, and government health authoriti es. The fi rm has four practi ce areas: • Value, Access & Pricing• Commercial Planning• Portf olio Opti misati on• Government Policy Advisory The fi rm has four offi ces; US operati ons run out of New York City and San Francisco. London, UK is our European regional hub, and our Asian engagements are anchored in Shanghai, China.

Cyrus A. ChowdhuryCEO & Managing DirectorCBPartners

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Sandeep Dutt agupta, PhDPrincipalCBPartners

e. sandeep.dutt agupta@cbpartners.comm. +1 917 951 2652o. +1 646 604 0620

Alice WangSenior AnalystCBPartners

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