It’s a recognized reality in the pharmaceutical industry today that you must be a player in the global healthcare marketplace to find true success. This means, of course, incorporating a global approach to everything from provider relations to patient care to pricing and contracting.
While it’s safe to say that one size does not fit all in each of these areas, pricing and contracting often presents the most significant challenge because:
In most ex-U.S. countries, the price of innovative therapies is regulated by authorities, making negotiations complex
During long, involved negotiations with individual countries, each national-level payer will raise concerns regarding uncertainty of the efficacy of the new treatment and its potential budget impact
Pharmaceutical companies often have to fight for scarce financial resources, leaving global teams under-resourced – in staff or budget - to be able to properly support local affiliates with their negotiations
Despite these challenges, successfully managing an effective global pricing and contracting strategy is achievable, with the right tools and marketplace understanding.
For starters, it’s crucial to appreciate the complexities of global pricing and contracting so that you can prepare the smartest approach.
Understanding these four essentials is key:
1. Countries around the world use a variety of methodologies to compare the efficacy of a new therapy to the already available approaches (standards of care). These range from medical or clinical evaluation to relative cost-effectiveness evaluation to many others. To be appropriately prepared to negotiate with a country, you need to understand how they will look at the efficacy of your product.
2. In some countries, the central authority benchmarks the price of an innovative therapy with the price granted in other markets. Of note is International Reference Pricing (IRP), which is similar to the U.S. administration’s proposed International Pricing Index. When working with IRP, it’s vital to understand:
IRP can be used as the primary approach in several countries
IRP can be used as a complementary element to adjust the price determined by authorities through the above-mentioned methodologies
IRP mechanisms have negative impacts on prices over time at a global level
To avoid the negative impacts of IRP, a pharmaceutical company and payer can agree on a confidential discount
This allows the pharma company to show a “high” list price that is in line with the global pricing strategy
The discount impacts only the local revenues and does not expose the product to IRP referencing risk in other countries
However, a plain confidential discount does not reflect the value of the product and can be opposed to the medical and commercial strategies of the manufacturer
3. In Europe, over the last decade, pharma companies and payers developed tailor-made solutions to address concerns on efficacy and budget impact. This approach led to pricing solutions based on value and budget sustainability. Key examples include:
Managed Entry Agreements (MEAs) – these help payers with cost management and budget sustainability through a variety of capping tools (duration, dose, number of patients, or overall budget.) MEAs also support risk management regarding efficacy with refund mechanisms in cases of insufficient treatment response, and financial compensation for dose escalation
Indication Based Pricing (IBP) – this approach progressively allows pharma companies to price the same product differently across various indications, sub-groups of patients, and/or lines of treatment in order to reflect the “real” value of the product
These contracting approaches align the objectives of the pharma company with the objectives of the payer but transfer the financial risk to the pharma company side.
4. Understanding global financial risk requires a precise assessment (net price, revenues, etc.) Pharma companies typically assess risk through complicated and expensive models created in Excel by specialized consulting companies. This approach presents a variety of concerns:
Each model is typically designed for a single need: one product, one indication. This lacks flexibility and viability for use over time
Although outsourced, it is a time-consuming activity for the Market Access team
Modelling in Excel has limits and presents a problematic trade-off between level of precision and usability of the model
Lack of precision can and often does lead to a wrong decision
Lack of usability is reflected in low adoption by local Market Access teams
The knowledge of these four essentials combined with the proper tools can help pharma companies meet their contracting goals. At Archbow, we’ve made a commitment to providing our clients with global support across all commercialization areas. That includes pricing and contracting, and is one of the reasons we hired Bertrand Tardivel. Bertrand worked for 16-years in commercial analytics leading global pricing with pharma organizations before joining the Archbow team. He developed a tool, called ContrAST, to give pharma companies an advantage in global pricing and contracting negotiations.
ContrAST (Contract Assessment & Simulation Tool) is the first standard platform designed to assess the impact of MEA and IBP on net prices and revenues over time. It offers an affordable, flexible way for pharma companies to evaluate multiple pricing options across multiple products. With ContrAST, a new treatment can be set-up in a matter of minutes, and a contracting scenario can be run in a matter of seconds. Unlike an Excel spreadsheet, with ContrAST there is no trade-off between precision and user experience.
ContrAST is available in both SaaS (software as a service) and RaaS (results as a service) models. These models give pharma companies the flexibility to either manage their own pricing and contracting analyses or to leverage Bertrand’s expertise to run scenarios with the ContrAST tool on their behalf.
To connect with Bertrand and learn more about how ContrAST can enhance and simplify your global pricing and contracting strategies, contact us today.
Learn more about ContrAST here.