The UK has previously committed to incorporating some sort of value based pricing into its reimbursement scheme to improve patient access to innovative medicines. With recent backtracking on this decision, as the Jan 2014 deadline for this integration approaches, we examine how such a decision would impact regenerative medicine.
The cost of health care is on the rise. Forbes recently released an alarming figure saying that the true cost of getting a new drug to market is $5 billion and 12 years of development, not taking into account the quality of life cost for the patient being without crucial new treatment. And yet, despite sky-high prices, the drugs that we’re making only show marginally improved efficiency over existing treatments. There is no relationship between the cost of a drug and its ability to improve health, and yet rocketing expenses are essentially pricing patients out of the best care available. Everyone is losing, so where is the value?
Innovative new therapies, including regenerative medicines, add a whole new level to this. The majority of regenerative therapies have added complexity in terms of manufacture, administration, and storage. It’s not quite as simple as popping a couple of pills. This, as expected, means that the standard price point for most of these therapies will be higher than for small molecules. Yet the value they create in terms of patient benefit has the potential to be significantly greater. However, with the gradual migration of health care in general towards personalized medicine, we’re also aware that two people with the same symptoms can respond very differently to identical treatment. The value they get from their treatment is different, but they pay the same price. It’s essentially a genetic lottery. And it has me wondering… is this fair?
Medical devices are developed in a similar way to therapeutics, with one key difference. Generally speaking, the price tag of the final product is much more closely related to the value it provides for the end user (be it doctor or patient). This seems to make more sense, but does it work for medicines? Can we take it one step further, and base the price not only on the value it is proven to give to a population during clinical trials, but also to the value it provides to each specific patient?
This concept, called value-based pricing (VBP), is becoming more and more convincing as a way to share risk and control soaring drug prices. It provides the right incentives for drug developers – by prioritizing effectiveness – and I believe it could be especially useful in the reimbursement of regenerative medicines. But before I get to that, let me explain how it works.
Value-based pricing is where health-care payers and industry agree to link reimbursement price or coverage to the value conveyed, i.e. the actual performance observed (see figure 1). It would create a fundamental shift in the way that value is assessed, and so is especially relevant to countries with single-payer health-care systems, such as Canada and the UK.
VBP functions best when there is a clear definition of when a medication works, and when it doesn’t. Determining the metrics for this isn’t easy, but I argue that it should be a priority. There should be better ways of assessing patient outcomes, and improvements in quality of life that result from medical treatment.
(Figure 1 from http://deloitte.wsj.com/cfo/files/2012/09/ValueBasedPricingPharma.pdf)
Patients who respond well to treatment pay more to subsidize the patients who don’t – and who consequently require further treatment. Regenerative medicine offers treatments for diseases for which no options currently exist, and in some circumstances even the potential for cure. If we can fulfil the promise of these therapies, reimbursement by VBP could be fundamental to ensuring value and satisfaction for all stakeholders, even with the higher price points required.
VBP puts the patient back in the heart of the health-care system, and foremost in the minds of industry. Efficacy pays, and you can’t put a value on life.
How do you feel about the value you get from health care? Do you think it’s fair to pay more for medical treatment if your condition improves and less if it doesn’t? I’d really like to hear your thoughts in the comments section below.
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