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06 Aug 2024
In the ever-evolving pricing, reimbursement, and market access (PRMA) environment, European health systems continue to face growing cost pressures and explore avenues for relief. At a recent advisory board meeting, we asked European payers/advisors to discuss these critical developments in their health systems, and the implications on the near-term and long-term future state of PRMA.
This session was the latest in a continuing series of meetings to discuss key pharma market access challenges and the future of PRMA within, and across, Europe. Participants included ex-CEPS (Comité économique des produits de santé) and ex-TC (Transparency Committee) payers from France, an ex-head of the Department of Medicines at a large sickness fund and KV (Kassenärztliche Vereinigung) payers from Germany, an ex-regional payer from Italy, and an ex-SMC (Scottish Medicines Consortium) advisor from the UK.
This post focuses on the management of gross and net prices by European healthcare systems, especially the changing pressures on gross-to-net differential, proposed cost containment measures for combination therapies, and the continuing debate on the transparency of net prices.
How much does ex-factory / gross price even matter? The growing gross-to-net pricing gap across Europe
From a payer perspective, the goal is to allow effective medicines to have appropriate market access at the lowest prices (both gross and net) possible. Gross price serves as the starting point for negotiations to get to the price that truly matters – net. Although net price is always the ultimate focus, different healthcare systems achieve it in different ways.
The pressure on the gap between gross and net price continues to increase as manufacturers often seek the highest gross price possible, especially in countries where price is used as a reference elsewhere. Extremely high discounts (e.g., 50% to 60%) are then often negotiated to counteract growing gross prices. Payers in our panel noted oncology as an area requiring particularly high discounts; however, the same pressures are often seen in general medicines as well as orphan and ultra-orphan areas. However, the gross-to-net gap has sometimes narrowed for products competing with generics and biosimilars since payers can effectively reduce list prices.
Well, I think in Germany we don't really have this this difference between gross and net price [based on AMNOG rules allowing for initial 6 months of free pricing] as we have the negotiated AMNOG price, which is then the list price and which is visible at least for the professionals.
– Ex-head of the Department of Medicines at a large sickness fund, in Germany
DESCRIPTION
Oncology has the biggest percentage discounts in the UK…it’s kind of an index of the unreality of list prices. And in each of our countries in oncology, there's probably the greatest detachment between what companies like to think they're bringing and what they're truly bringing…Companies continue to hype up oncology medicines. And I would say, that will be the area where we'll see bigger discounts in future.
– Ex-SMC advisor, UK
DESCRIPTION
Discount levels can vary by country. For example, in Italy, the average initial discount requested by AIFA (Agenzia Italiana del Farmaco) is often ~70% to 75%, while advisors from France mentioned discounts of 15% are common. However, one must consider that the gross prices are different in the two countries, and this does not mean discounts to gross prices in France are insignificant. For instance, in France, the 2023 clawback payment (rebates paid by the industry to the government) was ~€6 billion (~8% pharma market size). Our payers/advisors see no clear end in sight to this growing gross-to-net “dance,” as additional attempts to relieve cost pressures are made with different cost containment approaches.
Approaches to Combination Pricing
An increasing number of combination therapies are adding to cost pressures with payers often questioning if the additive cost of combinations is proportionate to the incremental value being offered to patients. This is especially true in oncology, where combination therapies have come under increasing scrutiny.
We discussed Germany’s legislation to systematically limit/reduce combination pricing on our ad board: a prominent initiative for cost containment in healthcare. As part of reforms1 an additional 20% “mandatory” discount on combination products was adopted (with exceptions2). However, implementation became difficult as “combination therapy” proved challenging to define. G-BA (Federal Joint Committee - Gemeinsamer Bundesausschuss) has compiled a list of 445 combination therapies that should meet the criteria for mandatory discounts, however, the policy has not been applied in practice due to the continued ambiguity and complexity of what constitutes combination therapy. Our payer panel went so far as to deem this cost containment measure a failure. The policy has also faced legal pushback from pharmaceutical manufacturers due to its potential negative effects on competition & pricing.
The very important news is the mandatory [combination therapy] discount [of] 20% [is] so far not at all applied. Not in one case. It's too complex.,. It’s currently not applied and it may be that in the long run, we would not ever apply it.
– KV member, Germany
DESCRIPTION
Even so, cost pressure from combination therapies remains a concern across Europe, and it seems no country has yet figured out how to deal with it. The pushback to Germany’s combo pricing policy has caused other European payers to rethink their own best approaches. In general, our payers agreed that applying a “simple,” one-size-fits-all rule to the complicated issue of combo pricing is unlikely to be viable. Payers expect combination pricing to remain a major area of concern requiring their focus.
Is net price transparency the way forward?
European advisors on our panel were divided on the pros and cons of confidential discounts versus price transparency. France, Italy, and UK advisors were in favor of confidential discounting since, in their experience, it supports achieving the best net prices possible. In some cases, “opaque” pricing has led to positive results for payers. For example, in the UK where net price negotiations are based on cost per QALY (quality-adjusted life years) evaluations, in negotiations, manufacturers often overshoot their rebate targets to avoid negative recommendations from UK HTA bodies.
We've got a confidential discount system… I think it works quite well. If the company knew all the information [and their competition was discounting by] 40%, [and then] they come in at 30%, they get our ‘not recommended.’ [Since they don’t know, they stay safe and think] maybe we should go to 45% or 50% to be on the safe side. [So] we actually get a better price than we would otherwise. The alternatives are either know a perfect guess by the company or an imperfect guess that gives us a bigger rebate than we'd otherwise get.
– Ex-SMC advisor, UK
DESCRIPTION
Germany has taken a different approach and emphasizes price transparency as a key aspect of their health system. One advisor noted the system would collapse without it since it is foundational to three key elements of their system:
1.
Physicians make informed prescribing decisions with net price as a consideration;
2.
Germany is in the reference price basket for >50 countries; and
3.
Efficiency audits and related penalties depend on net price transparency.
However, in July 2024, the government introduced the potential for price confidentiality as an option for products meeting certain criteria3. Beginning January 2025, it will promote drug research and development in Germany. It is too early to predict how this bill will impact the German health system; so, it will be a space to watch.
Conclusion
Gross-to-net approaches manifest differently across countries, but all are striving for the same goal – to achieve the lowest possible, fair prices. Some still embrace the idea and promise of transparency, while others trust their preferred levels of pricing confidentiality (France, Italy, Spain, UK). In either case, each European market is working to secure the best possible net pricing for their healthcare systems. It is apparent that experimentation and change to achieve this desired goal will continue to be a “high stakes” game.
This blog post is the latest in a 3-part series following our EU Advisory board.
2.
Current blog - Manifestations of the European Healthcare Gross-to-Net Pricing Gap
Be sure to check out our other posts as well.
If you enjoyed this post and are interested in any of these topics, please get in touch. We plan to discuss monitor and report back on these in future blogs/whitepapers and at conferences.
Contact us to learn more!
*Abbreviations: TC: Transparency Committee; CEPS: Comité économique des produits de santé, KV: Kassenärztliche Vereinigung, AIFA: Agenzia Italiana del Farmaco (Italian Medicines Agency), SMC: Scottish Medicines Consortium
Footnotes:
1.
Exceptions: does not apply if the backbone therapy is generic/biosimilar, products are packaged together & had a joint benefit assessment, and/or if combination is assigned a considerable or major added benefit the discount can be waived
2.
The German Financial Stabilization of Statutory Health Insurance System Act of 2022
3.
Criteria: the company has a significant drug research activity in Germany (defined as having a drug research department and relevant projects of its own or co-operations with public institutions in preclinical or clinical drug research); a 9% discount will apply on the negotiated price under the AMNOG procedure
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