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Delinking Prices: the future of Pharma and MedTech pricing?

There’s a core contradiction at the heart of most Pharma and MedTech companies: while their mission statements talk about “transforming lives” (Roche), “saving and sustaining lives” (Baxter), “making the world healthier” (Philips), and “contributing to human welfare” (Medtronic), often the very high prices for innovative drugs, devices and therapies limit the number of patients who can benefit.  The justification for high prices is often the need to have sufficient funds for R&D.  The tension this causes creates political pressures to change the rules for drug and medical device pricing.

What to do?

One idea that has some promise is “delinking” pricing for the R&D from the price of the physical product: payers would pay for the R&D separately from the consumed pill or device.

How would this work?

In the pure form, a manufacturer would agree with a health care payer (government, insurance company, etc.) to provide access to a drug, device or therapy for a potentially unlimited number of patients for a fixed number of years for a fixed amount.  You might think of this as Netflix Pricing for Healthcare, or Deutsche Bahn ‘Bahncard 100’, giving unlimited travel on the Germany railway network for a year.   For a hybrid version, a ‘per unit’ charge would also apply to cover the manufacturing cost of each unit (with a reasonable margin on top).  An analog for this might be Car Sharing, with an annual subscription plus a per-mile fee, or ‘Bahncard 50’, giving 50% off German rail travel for a year.

Let’s try an example, with traditional, fixed payment and hybrid pricing approaches. 

  • In the traditional pricing approach, each pill has a price. In the US this can easily top $50,000 per month for novel cancer therapies, limiting the number of patients who can benefit without breaking the healthcare budget.
  • In pure ‘Netflix’ fixed pricing, the manufacturer might agree to a fixed payment (let’s stay $100 million) for 5 years of access to all the patients in the country that meet certain criteria.
  • And for ‘car sharing’ hybrid pricing, perhaps the fixed price would be $50 million for 5 years, but with the price per month of treatment dropping to $5,000 to cover the cost of the pill manufacture (often gross margins for new products are very high).

What are the advantages of Delinked prices?

Why would governments and other payers go for this?  For the payer this gives them a much better handle on the costs, eliminating or reducing the risk of a successful product blowing their limited healthcare budget.  Crucially it enables them to make the product available to a much larger number of patients. 

But what about the manufacturer?  I’d argue this scheme would help them to get back ‘on-side’ with the public about the cost of healthcare (averting more brute-force price controls for example).  They’d make strong profits from successful R&D efforts (and can still make great profits from successful blockbuster products), but those products would be much easier to distribute widely at low (or zero) incremental cost.  This delinking would also enable companies to focus on R&D: manufacturing of the actual products could in some cases be spun off to contract manufacturers (think Apple and Foxconn).  The need for expensive marketing and sales efforts significantly diminishes.  And finally, they would be much closer to living up to their mission statements!

Of course there are substantial barriers and risks: waste can be a problem if the consumable is free or very low price; therapies treating more than one disease will be a challenge (as they are today), and controls over distribution will be needed.  And it will only work for products with high R&D costs and low consumable cost.

Delinking in action

 The ‘Netflix’ approach is being used in Australia for Hepatitis C treatments from Gilead, AbbVie, Bristol Myers Squibb and Merck: in 2015 they signed a A$1B for a 5 year “all the medicine they can use” contract (Louisiana is negotiating a similar deal).  Australia has been able to treat 7x the number of patients that would have otherwise been possible.

Conclusion

I believe this has huge promise for therapies that have high R&D and much lower manufacturing costs, which can benefit relatively large populations.   And while there are clearly challenges, these appear much more tractable than those associated with risk-sharing schemes that have been trailed for several years but never seem to take-off. 

Finding a win-win for high pharma and MedTech prices is becoming urgent: delinked pricing seems to offer one attractive option that’s worth exploring.

 

By Ian Tidswell

Register here for the MedTech Pricing and Market Access Training

6 keysteps to create and capture value in medtech

 

 

Success in the Medical Technology industry requires constant innovation. But capturing a fair share of the value (pricing) from that innovation throughout the product lifecycle is especially challenging given multiple market access hurdles, constrained healthcare budgets and diverse stakeholders to please.

 The infographic below outlines the 6 steps to creating and capturing value in MedTech, from offer design through market access and reimbursement approval to new product transitions. For each step it highlights some of the key concepts and tools.

 These steps will be discussed in detail during the MedTech Pricing and Market Access Strategy and Tactics training. Covering both industry-wide challenges and your specific improvement opportunities, you'll leave with an understanding of how leading companies are achieving success with pricing, and the confidence to tackle all your pricing challenges.

 

 

Cube Revenue Management announces new Business Advisory Board

Cube Revenue Management (http://www.cuberm.com/), an enterprise pricing software company with Fortune 500 customers and thousands of users in 20 countries across Europe, announced today its new Business Advisory Board consisting of distinguished members of the worldwide pricing community.

Cube Revenue Management is happy to announce the official launch of its Business Advisory Board consisting of two distinguished members of the worldwide pricing community, namely:

  • Ray J. Almeida Jr.: Ray is currently Vice President, Renal Therapies Group Sales Operations at Fresenius Medical Care North America. Prior to joining Fresenius, Ray spent more than 20 years in various leadership positions at Boston Scientific Corporation where he pioneered the Contracting Operations and Sales Analytics function. 
  • Nico Bacharidis: Nico has been working for Pfizer for over 13 years, most recently as the Country Lead in Pfizer Essential Health in Switzerland. He brings a broad range of experiences and a strong network within the pharmaceutical industry and has a strong track record of driving commercial innovation, building and leading high-performing teams and implementing change. 

Most large companies in many industries, from life sciences, to technology and retail, face  everyday many of the challenges that Ray and Nico successfully addressed throughout their career such as identifying the optimal price per customer and efficiently managing the sales process including Tenders, Quotation, and Contract Compliance.

CEO, Costas Economopoulos : “We feel both honoured and privileged to be working closely with two distinguished professionals like Ray and Nico. We are committed to use their vast knowledge, especially concerning the tendering and pricing processes of large organizations of the Life Sciences, to further develop our offering to the benefit of our customers in this important market.”

About Cube Revenue Management

Cube Revenue Management (www.cuberm.com) offers an enterprise software suite including an intuitive Tender Management and CPQ (Configure Price Quote) system and integrated price guidance through sophisticated machine-learning models, which helps companies to create and evaluate tender proposals, efficiently manage sales quotes, and identify optimum pricing. The company already has a successful track record including Fortune 500 enterprise customers and a user base of thousands of sales people in more than 20 countries across Europe.

 

EPP is excited to announce another addition to a Prime Stuctural Partner company

EVERSANA™ Adds Seeker Health® to Growing Life Science Services Platform

This week, the fast-growing life science services platform built in partnership with investment firms Water Street Healthcare Partners and JLL Partners unveiled its new name and brand: Eversana. Catchword developed the name, a blend of ever and sana (Latin for “healthy”), to convey the company’s long-term commitment to advance life sciences for a healthier world.

Eversana encompasses the six premier service providers that were merged over the past year to form the industry-leading platform: Dohmen Life Science Services, The Access Group, Alliance Life Sciences, Health Strategies Group, Triplefin, and Patient Experience Project.

“As our name implies, Eversana is poised to offer the services and products that support today’s needs and tomorrow’s future,” said Jim Lang, chief executive officer, in a release. “Together, we offer integrated solutions to the life science industry that address the shift to value-based, patient-centered care and deliver long-term sustainable value for payers, providers, channel partners, and patients.”

Water Street approached Catchword to name the company last May on a fast track for rollout early October. In partnership with the Water Street team, we developed thousands of names, then narrowed to several hundred that expressed the brand’s messages.

In addition to ever and sana, the name recalls versatility, suggesting the company’s range of services and ability to respond to the ever-changing life sciences industry, healthcare system, and patient needs.

Eversana employs more than 1,500 experts and professionals around the world that collaborate with more than 500 organizations to maximize the impact of new therapies.

 

by Erin Milnes 

 

Read original article here.

 

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