New, flexible pricing models needed for pharma industry - new EFPIA president

by Thomas Meek at the EFPIA annual conference
BRUSSELS, June 15 (APM) - The European pharma industry needs "innovative and flexible" pricing models for its drugs in order to reflect their value, the new president of the European Federation of Pharmaceutical Industries and Associations (EFPIA), Stefan Oschmann of Merck KGaA, has said.
Speaking on Wednesday at EFPIA's annual conference in Brussels, Merck CEO Oschmann said that medicines can help reduce spending on hospitalisation and other health services and that all healthcare stakeholders need to have this value in mind when it comes to drug prices.
"All of us - healthcare providers, payers, regulators, patient organisations and, of course, our industry - must collaborate to find new ways to make sure that all Europeans have access to the best medicines in the years to come. And for that we need new innovative and flexible pricing and financing mechanisms."

Indication and outcomes-based pricing

Oschmann, who was elected president of EFPIA on Tuesday (APMHE 53501), said much of the current system for financing the drug spend was created for older healthcare systems and was based purely on consumption.
"It's a very crude, old-fashioned method and we need to move forward into a new world of outcomes-based pricing."
He said one solution could be to introduce indication-based pricing, which would allow companies to charge different prices for medicines depending on the disease they are used to treat.
"If this is correctly implemented, indication-based pricing can ensure the price of a medicine is more directly linked to its value in a specific indication"
Oschmann also discussed the potential of outcomes-based methods of pricing, which are becoming increasingly popular in the U.S., with several major pharma companies signing deals with healthcare providers so that payments are based on how effective a drug is in its intended patient population.
These include Amgen, which in May said it had signed a contract with Harvard Pilgrim under which it will refund the cost of cholesterol-lowering drug Repatha if a patient has a heart attack or stroke (APMHE 52917); and U.S.-based Merck & Co, which has signed a contract with Optum to develop drug reimbursement models based on the value provided by the product.
"Speaking on behalf of all EFPIA members, I want to emphasise we are ready to explore opportunities to demonstrate the value of our products together with all relevant stakeholders," said Oschmann.
"We are keen to debate how we can deliver outcomes-driven and sustainable healthcare systems. But for that we need to shift our focus away from the immediate budget impact and towards long-term improvement in patient outcomes."

Oncology combinations

Oschmann highlighted oncology as an area where innovative pricing models are needed, considering that by 2020 it is expected that most newly approved cancer medicines will be used in combinations with drugs from different manufacturers.
"There is currently no mechanism in place that enables manufacturers to discuss a revenue split which takes into account the different contributions of the medicines used in combination therapy. But we need such combinations, we need more flexible pricing in cancers."

Digital technology

In order to move towards more of an outcomes-based approach for drug pricing, Oschmann said it is critical the different healthcare stakeholders use new digital technologies to handle data more effectively and efficiently.
"Digital technology is a a prerequisite for making the value generated by medicines transparent. It is absolutely necessary to establish outcomes-based pricing.
In order to achieve this, the different stakeholders must work more closely on sharing data, although this can only be done successfully by building the public's trust, said Oschmann.
"We have to get better at making our case. We have to explain the transformational potential of big data: faster development of innovative medicines, better and more consistent services, increased efficiency and lower costs."



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