Pharmaceutical pricing and market access

Lectures

5 ects

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Table of Contents
Lecture 1: life cycle management of drugs.............................................................................................6
Lecture 2: methods of drug pricing......................................................................................................15
Lecture 3: Reference pricing.................................................................................................................21
Lecture 4: pharmaceutical cost control: impact on market access.......................................................26
Lecture 5: Intellectual property and exclusivity - drugs and medical devices.......................................33
Lecture 6.1: generic drugs: friend or foe?............................................................................................41
Lecture 7: Drug negotiations at the Dutch ministry..............................................................................47
Lecture 8: Orphan drugs.......................................................................................................................51
Lecture 9: NICE’s approach to value assessment..................................................................................55
Lecture 10: expanded access to unregistered drugs.............................................................................60
Lecture 11: MCDA in healthcare decision making................................................................................63
Lecture 12: economic aspects and reimbursement considerations for the treatment of hematological
cancers (focus on CAR-T)......................................................................................................................70

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Lecture 1: life cycle management of drugs
By Maureen Rutten-van Mölken

History of drug discovery

1900:

 Mostly coincidence
 Miracle drugs like penicillin were discovered by accidence (1928)
o Based on herbs, from natural sources
 Natural extracts -> Isolating active ingredients.

1950s:

 Psychotropics used in treatment for common mental health. Better than the current
procedures like electroshock therapy and lifting the skull

Research focus on small molecules (either subtracted or copied from a natural source), after 1990, it
was more focused on proteins. We are now in the time of precision medicine – people are tested to
see if the medicine will be active. For example not prescript for patients that are very likely to have
side-effects. High tech example: CAR-T immune therapy.

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Life cycle of a drug
This is the aim of life cycle management: early
introduction, steeper growth, higher peak
sales, a later loss of exclusivity and higher
residual sales.

A. Development

 Long and winding road to registration (introduction)

o Idea
o Discovery

 It starts with the identification of

possibly profitable targets and
molecules, followed by the selection
and justification of potential targets
and molecules and the
development.
 In vitro testing (if the molecule shows
promise) – challenging selectivity
and potency of the lead structure
followed by the analysis of biochemical and toxicological properties.
o Preclinical test (animals)
o Exploratory Development (candidate, extensive safety studies, formulations
developed “will be a cream or a pill?”, large amount of candidate medicine
synthetized)
o Pre-approval with full development (clinical test on humans)

Phase 1 studies: done in healthy men, investigating safety in about 20 to 100

volunteers. This phase is relatively cheap
Phase 2 studies: relatively small sample with patients who have the disease.
Also dose ranging research: see what dose works best. Investigating efficacy.
Studies on 100-200 patients

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 Phase 3: multinational (really big) trials. Very expensive. Comparison with
current gold standard (apart from placebo). Studies on 10.000 patients.
 After completing phase 3 of a clinical trial there is the submission of NDA (New drug
Application to FDA, US) or of MAA (Marketing Authorization Application to the EMA, EU)
o Where pharma company submits comprehensive data and documentation to seek
approval for marketing a new drug

o Post-approval
Clinical data Analysis
Phase 4: FDA and EMA reviewed – results on real life patients
=>Evidence is gathered and written up for registration at the EMA and FDA.
Looking at:
1.Safety
2.Efficacy
3. Quality
If you get market approval – some negotiations need to follow before you really
have a market.

 Overall, developing a drug is a lengthy process taking up to 15 years for introducing it onto
the market.
Areas of LCM: define indication (sequence)
Indication in LCM refers to the process of determining the specific medical conditions or patients
population for which a drug will be indicated

 Some substances have more indications than one, so you need a lead (most important)
indication. This is based on indication in the proof-of-concept trial.
 Gather burden of disease data: incidence, prevalence, complications, quality of life
impairment, unmet need
 Do we focus on a limited indication of patients with high unmet need or on the wider
indication? Very strategic choices, success of drugs depending.
 Can responders be identified using biomarkers: companion diagnostic (e.g. Herceptin only
effective in breast cancer patients with overexpression of HER2/NEU-receptor)
 Can biomarkers (biological markers) be used to identify patients likely to have side effects.
Medicine can have different effect in slow or fast metabolizers.
 Invest into follow-up indications: now or wait until approval?

Less than 10% makes it from phase one to approval

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 As it is risky to make a drug and just a few make it to the market, investors want
to be compensated for risky business.
Hence, high return
 This is why the drug is so expensive

Area of LCM: designing clinical trial program

o What trials are needed to get approval?

o Which active comparators? How would we position the drug against these comparators?
 If no added therapeutic value but other advantages, like
convenience, it may be sufficient to demonstrate non-inferiority
(new drug is not worse), unless the comparator is going generic
soon.

oWhat endpoints to choose?

 specific measurements or outcomes used to evaluate the efficacy and safety of a
drug.
 Sufficient for approval but not so stringent that chance of success is reduced.
Important for choosing the right endpoint for the phase 3 trials – continuing of
drug trials
 Where to conduct the trials? In centers of opinion leaders in major target markets or in
centers of early adopters still building reputations?

Why provide patent protection?

 Traditional theoretical economic arguments cons of me-too drug
 In this case it is always better to be a follower and not be an innovator/leader.
 High fixed costs in the beginning, and low constant marginal costs.
-In some industries with high FC (like R&D), more efficient to enter the market
after the innovator.
-Leading to lower marginal cost for followers compared to initial innovator
 There will be no innovation under these circumstances
-If market is characterized by high FC and low constant marginal cost
-Little incentives to innovate
 Solutions proposed to challenges above:
 Create patent which create temporary monopoly for innovators – let them
maximize the profit to attract investors.
 By providing market exclusivity (20 years)
-hence, patent enable innovators to regain initial investment/expenses in R&D,
manufacturing and distribution by charging higher prices without competition.
 The profit serves as an incentives for firms to invest in R&D despite the
associated risk.
 Profit maximization ensures that firms attract private investors who seek high returns on
investments.
 Profit gained can be used again in further R&D fostering a cycle of improvement and
technological progress.

Downside of patent

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  Monopolist Market Control
 Because of barriers to entry
 Positive long run economic profits
 These profits do not incentives in an increase in the supply of goods
=>bc sellers cannot enter the market hence no pressure to capture market share
or fed off competitors
=>monopolist dictate prices and supply levels based on their profit maximization
goals
a. How to have long market exclusivity?
b. What are the LC prolonging strategies?

1.Differentiation:

 development of a follow-up product based on existing molecule (same treatment but

different formulation, same treatment but improved delivery method, same treatment but
enhanced efficacy)

2. Evergreening

 Patent can exist for too long as pharma company keeps making small changes to the drugs
(inhibiting innovation)
 Delayed access to generics

3.Neglect of unmet medical needs

 Companies may prioritize R&D efforts on drugs with high profit potential, rather than
addressing unmet medical needs. Lack of innovation in areas where new treatments are
needed like COOPD (Chronic Obstructive Pulmonary disease)

4.Maximise brand loyalty

 advertise but depends on drug and country

5.Swap from prescription to OTC (over the counter)

 only possible for self-diagnosable condition with low risk abuse

 allows for direct customer advertising in the EU and might extend market share

6. Contract settlements

 agreements between pharma company and generic company to exchange knowledge and
payments

7.Orphan Drug Designation

 drugs designated as orphan drugs (intended to treat rare diseases)

 receive extended market exclusivity as an incentive for developing treatments for
underserved patient populations

8. Divestiture

 refers to a company selling off a product line that no longer aligns with its objectives
(near the end og its patent life= turns to be generic product)

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B. Introduction Phase

1. Regulatory approval

 Approval gained for first formulation in the first indication for the first market
 Either by FDA (US) or EMA (EU)
 The goal by FDA or EMA:
 ensure the availability of high quality, safe and effective medicines..
 Next after getting approval the drug can be placed on the market
Label claims:
 Regulatory authorities regulate the format and content lables
 Statements that summarize the essential information on the safe and effective use
of the product (e.g. ingredients, dosing, route of administration, storage, target
population, effects, side effects)
 Information contained in the labeling must be accurate and not false and misleading
 There must be no implied claims or suggestions for use if evidence of safety or
efficacy is lacking
 How to get regulatory approval by FDA and EMA?
 Focus on quality, safety, efficacy
 Early dialogue and scientific advice
Increases chances of building a good evidence case for drug.
guidance and direction from EMA on the best methods and study designs to
generate robust information on how well a medicine works and how safe it is
=>Early dialogue and scientific advise is not a pre-assessment of the benefits and risks of
a medicine; Does not guarantee that a medicine will receive marketing authorisation
 Four different routes for market authorization in EU

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  All these 4 different routes depend on the type of drugs, authorization history and regulatory
& marketing strategy

The centralized procedure is compulsory for:

1. Drugs with a new active substancee, API (Active pharmaceutical ingredient) to treat
HIV/AIDS, cancer, diabetes, neurodegenerative diseases, auto-immune and other immune
dysfunctions, viral diseases;
2. Medicines derived from biotechnology processes, such as genetic engineering
3. Advanced-therapy medicines, such as gene-therapy, somatic cell-therapy or tissue-
engineered medicines
4. Orphan medicines – for rare diseases
5. Veterinary medicines for use as growth or yield enhancers
6. It is optional for other drugs containing new active substances for indications other than
those stated before; that are significant therapeutic, scientific or technical innovation; whose
authorization would be in the interest of public or animal health at EU level.

 Benefits centralized route

 Medicines are authorized for all EU citizens at the same time
 centralized safety monitoring
 product information available in all EU languages at the same time.

 PRIME, (priority medicines)

 additional support
 For WHAT? For the development of medicines that target unmet medical need
medicine’s ability to address health conditions or disease for which there are limited
treatment options available
Ex. Car-T cells and covid-19 vaccinations
 PRIMEs offer a major therapeutic advantage over existing treatments, or benefit patients
without treatment options.
 Very hard to get this label though. To be accepted for prime, a medicine has to show its
potential to benefit patients with unmet medical needs based on early clinical data.
 PRIME is used before EMA approval during the development of a medicine
 Advantage of PRIME:
+offers early dialogue and proactive support to medicine developers
+accelerated assessment

Most applications in the field of oncology and neurology.

2. Drug exclusivity in EU
After there is the EMA/FDA approval there is the drug exclusivity.
The process of drug exclusivity happens when the drug has been developed
Regulatory approval grants a period of market exclusivity (protection)

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 1. EPO Patent Application
 It can take up to 5 years to grant a patent (research is needed).
2. Granted patent in year 5th
 the patent will expire in the 20th year.
-14th year there is EMA market authorization
3. Supplementary protection certificate
 After expiration in the 20th year, pharma companies can apply for SPC which provide
additional 5 years in order to compensate for long investigation
 After the first patent (20 years) end, generics start working on it.
a. Data exclusivity (8 years)
Following EMA market authorization there is a period of data exclusivity
 Data submitted to regulatory authorities for obtaining market
authorization cannot be used by other companies for their
regulatory submission
 Generic cannot refer to innovators clinical trials = data exclusivity.
b. Regulatory Data Protection/market Exclusivity (2 years)
 Othe companies cannot obtain market authorization for a generic
version of the drug
c. Additional year for new therapeutic indication
 If during the 8-year data exclusivity period, the company obtains
authorization for a new therapeutic indication for the drug, an
additional year of exclusivity is granted.

4. Pediatric Investigation Plan (PIP) 6 months

 If the drug is subject to a Pediatric Investigation Plan, which involves conducting studies in
pediatric population there is an additional 6 month exclusivity period

Difference between regulatory approvement and reimbursement

- Regulatory approvement: centralized according to EMA

- Reimbursement and pricing: decentralized according to different HTA bodies

3. HTA reimbursement

Pricing and reimbursement is decentralized

 HTA bodies provide recommendations on medicines that can be financed or reimbursed by
the healthcare system in a particular EU member state or region.
 These assessment criteria differ between EU member States, in accordance with regional
and national legislation.

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  The EMA has been working closely with HTA bodies since 2008. EMA offers consultations in
parallel with European Network for Health Technology (EUnetHTA) as of July 2017. The
procedure is a single gateway for parallel consultations with EMA, EUnetHTA and HTA bodies
on their evidence-generation plans.
 New regulation: From 2025 – joint clinical assessment of cancer treatments and ATMP will be
done. Joint clinical assessment, no pricing and reimbursement. Evaluation of the efficacy and
safety of the new drugs. Industry afraid of having different endpoints and comparator – and
thus doing work double.

Areas of LCM: developing international pricing and reimbursement strategy

 Price should be set so to have a high profit, but

also likelihood to get reimbursed (=optimal price).
 Trade-off between quantity and quality.
1. Determining optimal country price for
clinicians/formulary
-Pricing market research
-Competitive game theory analysis
2. Identify achievable country price from payers
for reimbursement
-determining maximum price payers are willing
to reimburse for new drug
 After this trade-off there is
-parallel trade analysis, parallel trade analysis for pricing and reimbursement strategy
-launch sequence analysis, cross regional implication (US, EU, J): evaluating implication of
launching the drug in different regions sequentially
-international pricing strategy

Analysis on where to best first market your drugs.

Areas of LCM: designing HTA studies

HTA studies involves a systematic approach to
evaluate the clinical effectiveness, cost-effectiveness
and broader impact of healthcare interventions such
as drugs or medical devices

o Burden and cost of illness studies

o Quality of Life (QoL) and Utility
Studies:
 QoL and utility studies
measure the impact of a
healthcare intervention on patients' quality of life and overall well-being.
 These studies often use validated instruments such as health-related quality
of life questionnaires or preference-based utility measures to assess patients'
health status and subjective well-being.

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 o Review of Health Economic Literature
o Review of HTA Guidelines

After designing and conducting the primary HTA studies, additional analyses may be conducted to
further assess the economic value and budget impact of the intervention

o CEA (cost-effectiveness analysis)

o Health Economic Model (HE Model) and Budget Impact Model (BIA)
 HE model simulate the natural history of the disease, treatment effects and
associated cost over time
 BIA model estimates the financial impact of adopting the intervention on
healthcare budgets
 Following the completion of HTA studies and economic modeling, the finding are used to
inform pricing and reimbursement decisions, as well as the preparation of formulary dossiers
for submission to regulatory authorities and payers.

Areas of LCM: communicate value proposition

 A value proposition is an aggregation of value messages, which in totality will increase the
likelihood that payers and physicians will support the reimbursement, listing and usage of a
drug.
Epidemiology of disease
Burden and costs of illness in target population
Unmet need of target population
Description of drug and its competitors
Efficacy benefit
Safety benefit
Treatment simplification
Cost savings
Cost-effective
Budget impact

Areas of LCM: building and maintaining customer relationships

For the value proposition to land, the manufacturer needs to build good relationship with its
customers:

- Know the regulators (EMA, FDA), HTA bodies, patient organisations, payers and their needs
- Know the opinion leaders (KOLs), prescribers and their needs
- QALY and non-QALY countries
- Disease management
- Training and education

C. Growth Phase

 High sales
 They can reach a higher peak if we start our LCM project during the development phase
=> By doing so we will already have a wide geographic spread of sales, more than one
indication approved and we will be able to introduce a new formulation which will further
differentiate our product from the others on the market
 Create a low dose formulation if we want to create an OTC version

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  Create a fixed dose combination (LCM strategy) - to improve patient convenience and compliance,
moreover it improves the product in treatment hierarchy
 Factors limiting rate of growth
o Established drug classes (with many me-too drugs) are doing well
o Promotion limited
- It is not allowed to market drugs towards clients/patients in Europe, it is in the US.
o Health authorities cautious about letting new drug be introduced initially to a broad
population because of safety issues
o Switching patients to other drugs may be risky
- Reluctant to approve drug for big population, better to expand over time. Switching
patients on drugs may be risky – reluctant to change.
o More and more biologics that target multiple smaller indications, which are introduced
successively over the life of a drug
o More and more personalized medicines
o Cost containment policies affecting supply, demand, price

1. Slow growth rate during growth phase

Reasons -

 Physicians are reluctant to prescribe a new drug until it has proven its worth
 Ex. Higher risk to move a sick patient from a therapy that is controlling the disease to
one that might not have the same or higher benefits
 Steeper growth rate for a disease that is untreatable
 Slow for a me-too drug (copycat drug) or a new drug class where an already established drug is
performing well
 Companies are limited to how much they can promote a new drug until its approved
 Health authorities like FDA are cautious about introducing a new drug to a large population.
 First, safety database needs to be established
 Then, health authorities allow the drug to be used in broader populations where data are
more robust
 Risk Evaluation and Mitigation Strategy (REMS) needed by FDA - Benefits of drug outweigh the risks
 REMS programs vary in their severity from simple medication guides to dull monitoring and
registry systems
 Reasons for contributing to the slow growth: REMS programs can create barriers to
market access for new drugs (surplus of monitoring, patient education efforts)
 More biologics are being developed instead of small molecules
 Reasons which contribute to the slow growth: development and manufacturing process of
biologics are more complex and costly than small molecule drugs. Resulting in longer
development timelines

D. Maturity Phase
 Often lack of true maturity phase

 Sales flattening
 Thus, growth rate declining as competitors enter market
 Bc patent expiry sets in
 Just before patent expiry, brand sales can be highest
 Primary patent expiry approaches while still experiencing growing
 We have a decline. In order to prevent this from happening
Strategies are called ‘toolbox’ (by European Sector Inquiry) - strategies used by branded
companies shortly before exclusivity is lost in an attempt to save their declining franchise.

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  before patent expiry, companies use LLCM (late stage lifecycle management) to maintain
brand exclusivity and retain market share. However, the decline still happens.
 Another solution is moving to no-prescription (OTC status)
 In some segments of the market (orphan drugs, biologics) the competition is less and prices remain
high

E. Decline Phase

 Exclusivity is lost
 generics flood the market
 No point cutting the brand price, as generics have leaner structures and lower profit margins
 Generally, premium price is maintained by brands and concentrate on laggards/ not price
sensitive
 Sales may still hold in countries that don’t force generic substitution drastically, especially in self pay
markets (India, South America)
 Companies who are good at LCM and have thought far ahead may have secondary patent protected
new formulations
 Manufacturing can be moved to a low cost country
 Another possible way, brand company may manufacture products for one or more generic companies
- so called licensed generic.
 When brand sales drop. Hence, cost> profits
 drug will be withdrawn from the market, or sold or licensed to a smaller company

What is a generic?

“A generic medicine is a medicine that is developed to be the same as a medicine

that has already been authorized. Its authorization is based on efficacy and safety
data from studies on the authorized medicine. A company can only market a
generic medicine once the 10 year exclusivity period for the original medicine has
expired.”

What is a biological medicine?

 Biological is mostly made of proteins made by living cell lives. There are always slight
different – not exactly the same.
 A biosimilar is developed to be highly similar (not identical like generics) to an existing
biological medicines, since living cell lines are required.
o This allows these living organism or cells to produce the active substance of the
biological medicines
 This existing biological medicines is a medicines that has already been approved and is used
in the EU and refereed to as the reference medicine.

What is a biosimilar medicine?

 Highly similar means that the biosimilar and its references medicine are essetianlly the same,
though there may be minor differences in their active substances
o the minor differences are due to the fact that these active substances are large and
complex molecules and they are made by living cells

Industry says price needs to be high, since additional research is required – but reimbursement
companies don’t go into it anymore.

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Generics penetrate the market when it is structured to promote their use
Payers modify other stakeholders’ behaviors in the market and effectively use them as agents to
promote generic use.

 GPs:
o prescribing budgets (budget-holding physicians): set amount of money to spend on
medications for their patients
o generic prescribing targets: Health authorities may set targets for GPs to prescrive a
certain % of generic medications
 Pharmacists:
o generic substitution: pharmacists encouraged to dispense generic versions when
available rather than branded equivalents 8helps drive down medication costs and
increase utilization of generic alternatives)
o tendering: pharmacists participate to supply medications to hospitals or healthcare
institutions (favoring selection of generic medication due to lower cost compared to
branded alternatives) (until recently mostly for hospital-only products)
 Patients:
o internal reference pricing: pricing systems where patients are reimbursed up to the
cost of the lowered priced generic medication as they would pay the price difference
out of pocket
o enforcing patients co-pays: patients may face higher co-payments for branded
medications compared to generics, hence this drives down healthcare expenditures

Overall, all these actions are designed to drive prices down and incentives or penalize each
stakeholder for not conforming

Areas of LCM: strategies at patent expiry

Secondary patent-protection for new formulation, new route of administration, fixed dose
combination

Licensed/authorized generics: is allowed to be launched within the 180 days market exclusivity
period of the first generic, only in the US, and guarantee revenues at a discounted price. Brand drug
producers can also do this.

Taking brand drug off the market to prevent generic from entering. Information is no longer
available, and thus the file cannot be completed.

Litigation: vehicle of attack, tying potential generics up in legal wrangling before they enter the
market. During litigation phase, less generics are sold – so even if it doesn’t work out, it still works.

Move or contract-out manufacturing to low-income countries.

Going to OTC with low dose formulation

Maintain premium price and focus efforts on laggards; sales may hold in countries with self-payment
(India, South-Africa) and countries with little generic substitution.

Pay for delay (illegal) – brand pays the generic to postpone launch.

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Prices are too low in the Netherlands, that producers don’t bring it to the Dutch markets -> shortage
in medicines.

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Lecture 2: methods of drug pricing
By Maureen Rutten-van Molken

Competition vs monopoly
 Marginal benefit, demand, is decreasing
 Marginal cost, supply, go up increasingly.
 In a fully competitive market MB=MC.
o Prices go down to the point where MC are below the price
o At this point an optimal quantity is produced/consumed.
o Consumer surplus, is the MB
 In a monopoly a firm
 We create a monopoly by giving a patent of 20 years
 Market exclusivity
 Higher price than the competitive market price. In this case the price is set as
MR=MC. This is depicted as MR (marginal revenue1)
 If prices increase producer surplus increases
o Consumer surplus will decrease, we shift consumer surplus towards producer
surplus.
o The value of the production that is not produced is the deadweight loss.

1
The increase in revenue that results from the sale of one additional unit. A company that is looking to
maximize its profits will produce up to the point where marginal cost equals marginal revenue.

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Basic pricing strategy: a dual perspective
Finding the right price is finding a balance between company perspective and market perspective

 The viable price is somewhere in the middle.

 Market perspective: downward pressure – it sets upper

limit price achievable. It is the perceived value to payer
in context of alternatives; price/reimbursement
regulations in place.
 The market perspective is generally the starting point
for developing pricing strategy.

 Company perspective: upward pressure – sets lower

limit price required. Reasonable gross margin and ROI.

 Pharmacompanies need to find the optimal

trade-off between price and demand.

 Optimal trade-off is where the line starts to be

flat.
 Optimal trade-off=price is affordable
How do we find the optimal trade-off in HC?
Demand is driven by medical need and
epidemiological effect

Profit maximizing price:

 As we can see the highest price does not

necessarily mean the most profit.
 Q1 is in this case more profitable than Q2.
 Highest price P2 does not mean most profit

A price can only be ‘profit-maximizing’ if it allows for

market access
 If the process takes to long they miss days of
sales
 in which they cannot sell the product (and thus make no profit). Important to put on
list.
 It needs to be achievable at national level, where applicable, without excessive delays in
negotiations.
 Limited barriers to use at regional/local level: accepted onto formularies

Achieving market access depends on convincing payers and price-sensitive

customers of the value of the product in order to ‘sell the price’.

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In the past 5 years 79% of oncology launches had annual costs above $100K, up from 52% in the prior
5 years

 We see an upward going slope for drug prices in oncology.

 The highest price is for the CAR-T therapy.
 On the left end side
 2003-2007, 22% of drugs launched costed between 100-200k
 2018-2022 prices increased of 44% to 200-500k
 On the right side
 Oncology spending in billions of dollar
 2013-2017 we have a spending of 30.7 billions of
dollar

 Return on investment for new cancer drugs more than 7-

fold higher than R&D spending. Pharmaceutical companies
can make a huge profit on very expensive markets.

 Why are drug prices so high?

1. Pharma industry says high R&D costs
 Hence, they need capital
2. High bc of shareholders
 Investors (shareholders or banks) buy share
 Since it is a risky investment bc many drugs do
not make to EMA approval
 Demanding large return, high interest rate
 High dividends on share
o the patient population is more niche and thus smaller
o the negotiations take so long that the patent life is shorter to recoup costs.
 Prices are high for a short time of life (monopoly, market exclusivity)
 after that everybody can profit for a very low price (generics).

What would you do to change this? Public investments, replace shareholders by governments, cap on
return of investments, more transparency on price, increase competition, increase patent life.

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Venture philanthropy is not by definition better.
 It might be a good idea, but not always better.

Example is on a CF drug Kaftrio from Pharma Company Vertex.

 Patent expires 2037

1. Venture philanthropists (CCF) invested
150 million
 In return for royalties during patent
life.
 Royalties: right to use intellectual
property like patents, trademarks or
technology owned by the licensor
2. But then another firm (Royalty pharma)
came in
 bought the $royalties from Venture Philanthropists for a single cash sum (3.3 bln)
in 2014. It is expected to be $16bln from 2014 until patent expires (2037)
 they don’t even pay taxes.
 CCF did a bad deal (no expertise?).
 Royalty pharma has not invested directly into Pharma Industry Vertex but decided to receive
royalties over duration of patent life
 Royalty pharma got 550 M in one year and 16 billion until patent expires
 Royalty pharma provides immediate liquidity to CCF which they can use immediately
 Reduced risk bc eliminates uncertainty about future market conditions, sales
performance, changes in regulations
 Time value of money
 they bought off the royalties.

Pricing models in non-competitive market

In non-competitive market we have two models:

1. Cost-plus pricing / rate of return pricing / two-part pricing / peak load pricing
o Price is based on real estimates on R&D costs, manufacturing, distribution cost+
profit
o Development, manufacturing, distribution cost + profit
2. Value based pricing
o Relates price to (perceived) value of the drug
o to align drug prices with the clinical and therapeutic value to patients and healthcare
systems, reflecting social values and budget constraints.
o Consider factors like cost-effectiveness, social welfare
 Challenges exists in defining values solely based on cost-effectiveness analysis,
limiting access to valuable therapies and overlooking important attributes like
reducing health disparities and increasing patients choices

20
Capitalized R&D costs of pharmaceuticals vary between 161 mln – 4.54 bln 2019 Us$ and increase
over time. You never really know what the R&D costs are. Studies show that it is likely to vary a lot.

 High heterogeneity: therapeutic class (oncology), orphan drug or not (mostly orphan drug
more costs), firm size, NCE or NBE or next in class, self-originated or licensed-in.
 Cost of capital is the highest with 30 to 50%.
 Cost of developing a new drug depends on the origin, if drug is developed from scratch costs
are much higher
 Accelerated costs less (more effective and higher need), sooner on the market, and thus no
more R&D costs.
 The most expensive phase is the phase 1 to 3 trials, especially the third part (30%).

1. Cost-plus pricing

Example cost-plus pricing: proposed pricing model of cancer

drugs

Cost price of new cancer drug treatment=

(( costs of R∧D
number of patients ) )
∗ years¿ patent + cost of drug ∗(1+ profit mar

 Without information you cannot put a cost-plus pricing

 International association of mutual benefit societies (AIM)’s fair price calculator. Largely
based on the previous one, but added some other stuff.
 Both algorithms give way lower estimates for listing prices than what pharma companies ask
in real life.

Pro and cons of cost-plus pricing

PRO CON
Price is fair representation of R&D costs Requires insights in R&D costs
High R&D costs as a result of inefficiencies are

21
 rewarded with high prices

Profit top-up transparent Society pays for the price of failures:

entrepreneurial risk is shifted to society
Little attention is paid to value
Does not stimulate the development of drugs
with the highest added value in terms of health
gains

2. Value based pricing

 Price is based on the value generated by a drug
 irrespective of R&D costs.
 How to link the value to price? No formal rules, except
when using cost per QALY threshold.

The perceived value (V) of a product or service is

equal to the price of the reference product (R), plus
the net value of the perceived differentiation(D):

V =R ± D
It may not always be possible to justify target price through
assessing additional value alone.

 The idea is to have a target price in mind.

 Then take into consideration the price of the comparator
 Then we try to find a solution why our price is higher than the comparator:
BC it is cost savings due to:
 Efficacy benefit: we think about patients group with greatest benefit (long run)
 Safety benefit: it captures more value (less adverse events, side effects)
 Treatment simplification: less hospital visit, less monitoring, less administration

22
  How to link the value to the price?
o Savings are factored into the price.
o Price is increased up to the point that ICER still below λ .
o Savings should be shared with society. Pharma companies use it to find the
maximum price at which they still stay within the threshold.

Δ cost s a−b
<λ
Δ effect s a−b
Δ cost s a−b− Δ savingsa−b
<λ
Δ effect s a−b
o CUA is a form of value based pricing

PRO CON
Price is linked to value Price not related to R&D costs
Stimulates innovation (i.e., development of Unfair that savings and added value are
drugs for patients with high unmet needs (most captured by an increased price of the drug
value)) Requires a threshold value for the QALY

Value-based price should be seen as a maximum price at the starting point of

negotiations between manufacturer and payer

VBP triggered debate on definition of value

 Darker blue corresponds to
additional values that are not
included in the QALY.
 Value of hope, severity of
disease, fear of contagion
 Light blue is included in the societal
perspective.

 Concerns on including additional

value elements.
o Unclear how to measure many
of the identified additional
elements of value
o Risk of double counting;
o disproportional attention to elements of ‘positive value’ compared to elements of
negative value
o willingness to trade off length and or quality of life for these additional elements of value
o value in potentially displaced interventions;
o we may adopt interventions that generate these additional elements at the expense of
interventions improving length and quality of life.

23
 o If we start as a society to pay for additional value we prioritize a treatment that prioritize
additional value but provides less to individual patient

UK: value-based pricing experiment failed

The plan was to set higher thresholds for drugs that address:

1) greater burden of illness: considering severity of the condition and the level of unmet need

2) therapeutic innovation: novel agents that have sourced new treatment targets and potentially
revolutionary disease treatments

3) wider societal benefit.

Price cannot be set through economic evaluation only - Can be a good hand hold, but does not
include everything.

 There is usually no fixed cost-effectiveness threshold, but there are values which are clearly
unacceptable.
 Even if is a cost-effectiveness threshold, how close to this should we be aiming?
 In some disease areas, there is no will to increase the budget, or pay a higher price than for
existing drugs, payers and prescribers may not consider a new treatment unless it is cost-
neutral.
 However, other disease areas the emotional or novelty value may be higher making it
challenging to quantify their value in numerical form

What if the payer cannot afford the premium price?

Example: for some oncology products US payers pay $80.000 to increase life expectancy with 1,2
months. By extrapolation, survival of 1 year would be valued at $800.000.

 In US 550,000 patients die of cancer annually. If new drugs are developed that extend life by
1 year, $440 billion would be needed.
We can start negotiating about :
- Direct reduction of the price
- Restrictions on the indication
- Pre-authorization of prescription by the payer
- Large co-payments
- Market entry agreements to share financial risk between payer and manufacturer

Value-based price
 Can be seen as the maximum price to start negotiations

24
  The starting point of price negotiations
 Fair price: 1) provides access of patients to drugs, 2) is affordable, 3) stimulates innovation
 Link the perceived value to the value that is actually delivered in practice: Market Entry
Agreement (performance-based MEA’s)

Joint price negotiations and procurements

 Beneluxa (Belgium, The Netherlands, Luxemburg, Austria, and Ireland)
o Its first tri-partite pricing and reimbursement deal pertained to Zolgensma.
o Netherlands, Belgium and Ireland began joint price negotiations in July 2021 and have
reached agreement to reimburse Zolgensma for SMA with a bi-allelic mutation in the SMN1
gene and a clinical diagnosis of type 1 and for pre-symptomatic patients with up to 3 copies
of the SMN2 gene.
 Nordic countries (Denmark, Finland, Iceland, Norway, Sweden) joined forces to negotiate
about prices

25
Lecture 3: Reference pricing
By Maureen Rutten-van Molken

Price benchmarking
 Comparing prices of drugs with similar products on the market

When used?

1) When similar drugs are on the market

2) the drugs is already launched in other countries.

Price benchmarking
Price referencing system
1. Internal price reference system:
 New product price is compared with a cluster of products that are deemed comparable
 Price is set with reference to other products which are deemed comparable, within the same
country.
 Drugs are clustered into groups and a maximum price per group is determined: they are
commonly clustered either in
o ATC (anatomical therapeutic chemical classification) level 5: only drugs with the
same active ingredient are included in a group (typically for pricing generics)
o ATC level 4: drugs within the same class are clustered (common in Germany, Italy
o Therapeutic referencing: all drugs that are deemed therapeutically equivalent are
lumped (pioneered by Germany, but many others are introducing this as well)
 This means that instead of each individual drug being priced
separately, the prices of all therapeutically equivalent drugs are
compared, and a reference price or price range is established
based on this comparison.

2. External reference system:

o priced in order with
prices in another
country. Every country
has a different basket
of countries on which
they base the price on.
o As of April 1, 2020, the
maximum prices of
medicines in the
Netherlands are set by
comparing prices of
Belgium, France,
Norway.
o Expect UK and Sweden
no use of reference pricing
o Germany prices are higher than Norway, so Norway is the referencing point

26
 POM= prescription only medicine

MNF=manufacturer

TRD = trade

3. Internal + external reference system

New product price is compared to both a group of products and the launch price in other countries.
Typically the lower of internal vs. external price is used.

Which price to reference?

 There is no THE price, it is all dependable on e.g. perspective.

 The list price is the official price that is the official price in registries, but the actual price is
usually lower.

Manufacturer Whole sale acquisition cost (WAC) Ex-factory price, not including
discounts/rebates
Average manufacturer price (AMP) Price a manufacturer charges
wholesalers, after discount
Wholesaler/ Estimated acquisition cost (EAC) Estimated price that pharmacist has
direct purchaser to pay to wholesaler
Actual acquisition cost (AAC) Pharmacy acquisition costs based on
review of actual pharmacy invoices
Pharmacy Usual & customary price (U&C) Average cash price paid at retail
pharmacy. Incl dispensing fees
Patient

 The table above provides different pricing points along pharmaceutical supply chain

1.Manufacturer

 Wholesale acquisition cost (WAC): it represents the ex-factory price

not including discounts/rebates
o Average manufacturer price (AMP): average price at which a
manufacturer sells its drugs to wholesalers, after accounting for
discounts and rebates provided by manufacturer
2.Wholesaler
 Estimated acquisition cost (EAC): This is the estimated price that a
pharmacist or pharmacy would pay to purchase the drug from a wholesaler
or directly from the manufacturer. It considers any discounts or rebates
provided to the purchaser.
o Actual acquisition cost (AAC): This is the pharmacy's actual cost to
acquire the drug, based on review of invoices or purchase records. It
reflects the price paid after accounting for any discounts, rebates, or
negotiated pricing agreements.

3.Pharmacy

27
  Usual & customary price: average price paid by patietns at
pharmacies for the drug

4.Patient: refers to the individual who purchases and uses medication

External price referencing – which price?

 The structure of distribution chain of pharmaceuticals is reasonably different in countries
(pharmacies, wholesalers, direct sales to target providers)
 Value added tax (VAT) also varies – France has 2 percent VAT, while Denmark has 25%.
 Consequently, public price of pharmaceuticals cannot be compared as it is influenced by
wholesalers margin, pharmacy margin and WAT
 Multinational pharmaceutical companies are responsible for manufacturer price (ex-factory)
price
 Wholesaler is the link between the pharma company and the local pharmacists.
 As the pressure is to put on pharmaceutical companies to reduce their drug prices in certain
countries, ex-factory price should be used for comparison.

 We can look at external pricing from two sides:

1. Payer’s perspective on ERP (external reference price) and strategy they employ to reduce
prices
Who is the payer?
Government health insurance programs
private insurance companies
a) Race to the Bottom
 Desire for European Floor Price:
Payers in lower-income European countries seek to negotiate
prices that align with the lowest price set within EU
o Known as European floor price, which serves as a
benchmark for pricing negotiations
 Competition for lowest price:
Only one country can have the lowest EU price
o Competitive environment among countries vying to secure
the most favorable pricing terms
o Aim of achieving lower prices for reimbursed medicines

b) Free-rider effect:
o delay pricing decisions in order to start the price negotiation
from what has already been achieved by others.
o Revise pricing decisions regularly based on pricing decisions
or currency fluctuations in other countries.
o Hence, adapt negotiation strategies and secure more
favorable pricing arrangements based on external
market dynamics
o Minimizes cost by benefiting from the pricing negotiations
and decisions of other countries

28
 2. Manufacturer perspective on ERP
For a company it is crucial to first market in a high price company.

 External reference increases care in launch strategy.

They do differentiate prices a little bit to fit with the GDP, but not too much since there is a incentive
to avoid the race to the bottom and parallel trade

o Launch sequence strategy: launch models aimed at

managing the sequence of introduction of new drugs
in different countries to minimize the negative
impact on price and revenues.
 Launch first in countries which can afford high
prices; delay launch in lower-income countries
o Differential pricing: strategy of selling the same
medicines to different countries, according to their
ability to pay, at different prices even though costs
are the same.
 Avoid large differences in prices to avoid race to
the bottom and parallel trade.
o Parallel trade: consists of buying pharmaceutical
products in one EU member state and selling them in
another at a higher price.
 Thus making a profit from the price difference
between the export country and the import
country.

Highest parallel trade in Denmark

Narrow pricing corridor for new medicines

A narrow price band refers to smaller range of prices for a particular medication across different
markets or countries

How do we have a narrow band? (strategy)

Price Adjustment in different markets

 by reducing prices in higher priced markets

 OR increasing prices/not launching in lower price markets
where profitability may be lower
 Not lead to optimal profitability for pharma

29
  Lowering prices in higher markets could reduce profit margins
 Higher prices in lower markets may limit market access and sales
volume
 Challenges
 Parallel trade: pharma product intended for one market are diverted to
another market where prices are higher
o Leading to arbitrage opportunities
 Hard to achieve a narrow price band that will avoid parallel trade flows.
WHY?
o Different countries, different pricing strategies across dosage
strength (flat and linear pricing)

 Consequences of external price referencing in lower income counties

 High proportion on spending: Lower income countries spend higher
proportion on drugs than high income countries
 Bc they have a high need of health care
 as drug prices are similar to international prices, but salary of
physicians and cost of hospitalization is adjusted to local purchasing
power.
o Limited access to innovative products: Despite their greater health care
need, patients have more limited access to innovative pharmaceuticals
because of:
 Due to high prices of patented and innovative drugs
 Lower availability of drugs
o Lower availability of drugs due to parallel trade
o Lower availability of drugs due to delayed launch
 Impact of healthcare outcomes: Life expectancy of birth is partly
explainable by the reference market pricing due to disparities in HC
outcomes. The eastern European countries have a delayed launch.

Value-based pricing leads to differential pricing

 The savings a-b is mostly lower in lower income countries.
 The λ is also lower in lower-income countries.
 Lower threshold, lower affordability
 Eastern countries saving will be lower bc:
 Cost hospital admission are lower
 Lower savings
 Different ICER
 Different charge of premium cost for the drug

Δ cost s a−b− Δ savingsa−b

<λ
Δ effect s a−b
 As pharmaceutical prices are usually established in high income countries, they are often not
justifiable in lower income countries.
 Implementation of differential pricing across countries is difficult in the EU
 Bc of external reference pricing and parallel trade.

30
  Disrupting market dynamics
Price differentials can incentives wholesalers to engage in parallel trade leading to
supply shortage in low market and access inventory in high price markets

 Solutions to facilitate differential pricing

 Ramsey pricing principle: adjustment of ex-factory prices to local purchasing power –
but might not be a realistic expectation.
 Explicit adjustments of ex-factory prices according to 3-4 tiers of GDP.
 Fair approach, but against the general EU framework and the transparency directive
(national regulation of pricing and reimbursement decisions)
 Restrictions on external price referencing (e.g. according to GDP) and parallel trade.
=> EFPIA (European federation of pharmaceutical industries and association): equity-
based tiered pricing.
 Confidential rebate mechanism in lower income countries involves negotiating
discount, rebate and claw-back arrangements with pharma manufacturer to lower drug
price in low-income countries
=> Would be successful approach only if confidentiality remains: and confidential rebate
is not implemented in high income countries. But price is necessary for economic
evaluations?
REBATES: discounts provided by manufacturers to payers after the sales of drugs
CLAW-BACK: past reductions in reimbursements to pharmacies or wholesalers by payers
when reimbursement exceeds the agreed price
 Confidential risk-sharing in lower income countries such as patient access
schemes/managed entry agreements/risk sharing agreement).
=> ICER should be revisited according to the confidential risk-sharing agreement. HE-
model can be used to optimize parameters of risk-sharing agreement.

Should industry be transparent about actually charged drug prices?

Payer Company
Knows what other companies are charging but Knows what they are charging in other
not what company is charging in other countries countries but not what other companies are
charging
Prices should be transparent because we are Prices should not be transparent because it
paying for drug from public resources leads to parallel trade, collusion and ultimately
one low price
In favor of transparency because it facilitates Countries need to accept that they pay different
ERP prices (differential pricing)
Pharmacompanies have a point. In the system that they have now, transparency is not feasible.

Despite ERP2, manufacturers have

differentiated prices across country
tiers in the EU to maximize
commercial potential.

2
ERP: External price referencing

31
 Pharma has taken into consideration ERP by
prioritizing high income and larger EU
markets: start in the northern Europe, then
Southern and large central economies. And
last remaining central and eastern Europe.

Pricing models
To set initial price at launch: cost-plus pricing & value-based pricing

After initial launch: price benchmarking

This deviation does not exist in real life. In reality, a mixed pricing model is most commonly used, in
which both value-based pricing and price benchmarking is used to determine a price relative to the
competitor’s price or the price in other countries.

32
Lecture 4: pharmaceutical cost control: impact on market access
Karin Becker

Pharmaceutical cost containment

From market access to patient access
From market access: a working definition

After a drug has passed the HTA and then it is in the system forever. That is changed. What does it get
to get the drug to go to the patient?

Patient access means getting the right treatment to the right patient at the right
time and at the right price, or, from the patient perspective: ensure that eligible
patients have rapid, consistent and sustained access to treatment.

Implication: access is managed by multiple stakeholders with different perspectives and priorities, at
national, regional and local levels.

Cost containment: why and how?

Healthcare costs are rising across the world, due to aging populations, increasing health literacy and
expectations, medical innovation, and other reasons.

Government-mandated payers must ensure healthcare provision is sustainable -> price and/or access
controls to limit supply and/or demand.

If you have an aging population, you need more money in the system. Moreover, if people know what
can be done, they are more likely to access the treatment. The cost containment discussion is never
going to go away.

Out-of-pocket markets: no formal access controls, affordability is the main driver

Types of cost containment measures

Control demand or supply side

- Control availability of goods/services

- Control price of available goods/services
- Control demand for goods and services

Every country has their unique combination of the above to contain costs.

33
Health technology assessment (HTA)
Health technology assessment is an evidence-based, multidisciplinary process intended to support
healthcare decision making by assessing properties and effects of new or existing health technologies
in comparison with a current standard, with the aim to determine the added value of the new
technology.

Assessment of:

- Efficacy/effectiveness
- Economic consequences
- Social and ethical implications

Governing principles and methodology vary by country. Applied at launch of a new product or at
addition of a new indication/formulation of an existing product and/or service, and in some countries
repeated at regular intervals.

Archetypes of HTA and their impact on access

All is based on comparative efficacy/effectiveness assessment.

Only Germany does the blue one. Everything that is approved by EMA, it is reimbursed and goes into
the system straight away. The HTA assessment is set while the drug is being reimbursed, and then
after one year the price is set differently if necessary.

The green and red one differ in the middle part. The green one looks first at clinical benefit and then
that goes into the price negotiation. The red ones looks at cost-effectiveness as a whole.

HTA example 2: Germany

If a new drug doesn’t have a benefit – the price should be lower than the one that is on the market
now.

All approved drugs must be reimbursed by law – immediate access to the market, already available
whilst HTA is being performed.

- G-BA: main decision body in healthcare system (representation of relevant players)

- IQWiG: performs HTA for most drugs: clinical benefit, very exacting specifications of validity
of evidence, no cost effectiveness.

34
Evaluation and price setting in three steps

1. Clinical value of the drug is assessed for each patient subgroup based on evidence derived
from trials, and rated according to size of benefit and strength of evidence
2. Calculate price per patient subgroup, based on added value in that group (negotiation if
added benefit, otherwise referencing to comparator’s price)
3. Calculate drug price: ‘Mischpreis’ – final price is the average of the subgroup prices weighted
by the size of the subgroups.

GBA frequently overrules IQWiG when determining the value of drugs. New regulation (2023) puts
higher hurdles on value needed for price premium.

Cost control in a ‘free market’: the example of the USA

Rules of the free market don’t apply in the healthcare market.

The US market is the biggest in the world.

Coverage is very fragmented

- Group/ESI (employer sponsored insurance): premium based on group.

- Non-group insurance: individual private health insurance, premium based on an individual
risk
- Medicare (>65 years and people with disabilities): everybody that is retired. There are
different tiers: a, b, c, d. Reflects evolving over time.
- Medicaid (low income population)

Commercial insurance control formularies via co-pays

They nudge people towards the cheapest drugs by having multiple tiers
that are increasingly high in co-pays.

Value frameworks in USA: an ongoing discussion.

Sparked by discussions on affordability of drug prices, a number of value frameworks for the
evaluation of drugs have been put forward. National HTA process not defined or planned yet.

- Frameworks from oncology societies

- Drug abacus: rating tool developed by consultancy (‘real endpoints’)
- Institute for clinical and economic review (ICER): generic framework, appearing to gain
traction with US payers

35
USA: current healthcare environment
Drug pricing has been a big theme in the USA since a few years – prices for drugs in the USA are
higher than anywhere else. Discounts are often very high.

- Proposals in discussion revolve around price transparency and importation

- Actions of drug pricing are supported by both parties, but complex to implement

Roll-back of ACA has been a key objective of the past US administration. In 2021 the Supreme court of
the USA rejected the move, so ACA remains in place, but contested.

The Hatch-Waxman Act established the legal and economic foundation for today's generic
pharmaceutical industry. abbreviated path for generic manufacturers to bring lower-cost versions of
pharmaceuticals to market.

Proposals by Biden administration within IRA (inflation reduction act)

- Allow medicare to negotiate prices of high-priced drugs with manufacturers

- Increase rebate for drugs where the price was increased above the inflation rate
- Promote generics and biosimilars, accelerate their approval and launch
- Reform Medicare Part D: including cap on payments in catastrophic coverage phase

Pharmaceutical policy environment

Where healthcare markets are going
…Changes in healthcare sector: policy & regulation; outcomes focus; demographics & budget
pressure; data & digital platforms; AI, machine learning/robotics.

…Impact on customers: customer evolution; shift in decision-making; evolving value drivers;

increasing entanglement

The EU pharmaceutical strategy – key features

European commission’s key objectives:

 Learning from COVID-19, towards a crisis-resistant system

 Ensuring accessibility and affordability of medicines (should not be possible that you can get
a treatment in one country and not in the next)
 Supporting sustainable innovation, emerging science and digitalization
 Reducing medicines shortages and securing strategic autonomy

The EU pharmaceutical strategy is only the beginning of a bigger re-shaping of the EU’s regulatory
legal and business frameworks. 55+ legislative and non-legislative initiatives until 2025 – all details
still to be defined. Strong focus on access, availability and affordability.

36
EU HTA legislation
EU HTA legislation, dec 2021, aims at harmonizing the HTA process across the EU:

…Joint clinical assessment for medicinal products and certain medical devices

…Joint scientific consultation for manufacturers (parallel consultations HTA/EMA) - Different format
for something that already exists

…Horizon scanning early identification of emerging health technologies that are likely to have major
impact on patients, public health and healthcare systems

…Voluntary cooperation on HTA in other areas

Attempt to equalize times for access of pharmaceuticals.

Key players in preparation of implementation

- Oversight: EU coordination group (representatives from MS)

- EUnetHTA’21: consortium of EU HTA agencies in charge of key deliverables. Existed in a
voluntary form before. Writing the methods for everybody – will be disbanded in the middle
of 2023
- Public consultation on deliverables (stakeholders were allowed to comment)

The European commission’s intentions with EU HTA

The regulation (EU) 2021/2282 on health technology assessment (HTAR) contributes to improving the
availability for EU patients of innovative technologies in the area of health, such as medicines and
certain medical devices. It ensures an efficient use of resources and strengthens the quality of HTA
across the EU.

The HTAR will also reduce duplication of efforts for national HTA authorities and industry, facilitate
business predictability and ensure the long-term sustainability of EU HTA cooperation.

Timelines for implementation of EU HTA regulation

History of legislation is in 2018- needed
time till the end of 2021 when it was
voted on the finalized text.

Gradual inclusion of diseases: start with

cancer treatments & ATMPs in ’25,
orphan products three years later and
then after another 3 years all new
products need to go this route.

37
What are the core elements of the JCA regulations?
National stays as it is. We submit at the same time at the European and national level. At the JCA level
there is one clinical benefit and then it needs to be assessed if it has (enough) value. It does not
replace the national level, but goes on top. National needs to reference to European.

- Joint clinical assessment (JCA) for all EU member states

- Assessment of the non-clinical evidence as well as appraisal and value determination remain
under national responsibility
- Decisions on pricing and reimbursement and access are national responsibility.

Potential consequences for pharmaceutical innovation

EU HTA will influence evidence requirements for assets. JCA requirements will be taken into account
for asset evidence planning. It will have the same importance as evidence for EU regulators, thus will
have to be included in the global development plan.

JCA dossier management and submission is a new capability. JCA dossier will need to be written and
will be submitted centrally to a dedicated platform – this isa new process and requires additional
resources.

Implications for access strategy in EU member states. Timelines/requirements for HTA in MS

unchanged, but must take JCA into account. Impact on access and launch sequence possible, effect
on price referencing likely. Launch planning might be affected if evidence generation timelines differ.

Effect of cost containment measures on pharmaceutical development

The payer mindset in a nutshell
Is it worth the price (clinical and economical) and can I afford it?

What is value?
Value is in the eye of the beholder – it’s always relative to the next-best alternative (opportunity
costs). It depends on the healthcare environment and varies across systems. Changes over time as
new alternatives enter the market.

A drug’s value is the benefit it conveys to the patient, physician, caregiver, society, hospital / other
healthcare provider & the payer.

38
What constitutes clinical benefit for a ‘typical’ payer?

General principle: show clinical meaningful treatment benefits using patient-

relevant endpoints against the most relative treatment alternative, i.e. standard
of care, in a head-to-head RCT.

Very lucky if everybody has the comparator, but that is not the case most of the time. Other
differences are also market like endpoints, statistical methods, indirect comparison, patient-reported
data outcome, acceptance of single arm trials, evidence base needed to asses orphan drugs, cost
effectiveness & acceptance of modelling approaches for treatment effects.

Decisions on marketing authorization and reimbursement are made in parallel based on the same set
of available evidence for a new drug, however, regulators and payers have different decision criteria.

Patient centricity
Patients have an increasingly active role in their treatment. Regulators demand the input of patients
in drug development.

HTA focus on patient-relevant outcomes. Opportunity for patients to contribute to HTA varies broadly

Many pharma companies have a systematic process to ask for patient input.

Elements of value: ISPOR ‘Value flower’: many parameters that

constitute value for a new treatment cannot (yet) be adequately
measured or considered in the HTA process. The ISPOR value
flower is an attempt to illustrate this and inform the debate.

Conclusion
As populations grow older and medical standards as well as health literacy increases, demand for
healthcare increases; thus, governments continue to struggle to contain the healthcare budget –
and with the Corona crisis aftermath likely to continue stressing most healthcare systems, this is
certain to become more pertinent

Various methods of cost containment are in place, which have historically evolved and reflect the
different ways in which countries implement the governance of their healthcare system, but also
learn from each other and adapt going forward

Continued willingness and ability to pay for innovation is critical to ensure progress in medicine and
healthcare delivery

Co-operation between the private and public sectors in healthcare will likely become even more
important in the future, as a means to meet healthcare demands

39
Lecture 5: Intellectual property and exclusivity - drugs and medical
devices
By Andrew Carridge

What are the different types of intellectual property?

Patents
 The patent bargain:
in exchange for publication of invention, given limited monopoly (20 years from filing an
application).
 The idea is that it stimulates innovation
o Protect investment in innovation
o Enable competitors to develop work-arounds
o Technical advancements in the public domain published

The process of obtaining a patent

 You make an innovation and you decide you want to file application with a certain
specification.
 Within 6 months you get an opinion with search reports which will identify some
prior publications, with indication if it is possible to patent.
 At 18 months= Publication
 Examination and negotiation can take 2 to 5 years. At the end you get a bundle of
national patents. You can also opt for international application splits: at 30 months
the application is split into Europe, Japan, China & USA.

40
Patent pending: might put some third parties off, put people on notice.

You have to pay annual renewal fees, and you pay them per country, so you can slim down in
countries if you want.

Patents have territorial rights: if you have a UK patent, it only works in the UK, you can’t stop anyway
to use that in Germany.

You file patent at time zero (UK patent application – very cheap). Within 12 months you can file that
patent everywhere in the world. The effective is that you can refer back to this patent. (e.g. if prior art
is published in month 0 to 12, this is no issue). You can delay patent filing costs via an international
(PCT) application: you file one in one language. 30 months after time zero you can decide in which
countries it is worth it to patent. The 30 months is a very expensive part – but depends on how many
countries should be involved.

Patents specification
Claims: definition of the scope of the protection sought. Being broad enough and thus difficult for
competitors, but still needs to be not in prior art.

- Independent claims: broadest scope

- Dependent claims: fall back positions

Description of the invention: context, background, definitions, technical benefits and additional
fallback positions

Examples and data: particularly important in the pharmaceutical setting: in vitro, in vivo, in silico
results. Plausible some drawings as well.

When to file
Play of between early and not too early

As early as possible. As a start-up you want to have talks with other people about what you want to
do, and if something leaks out (gets published) you can’t file it anymore. Don’t underestimate other
parties/competition. You need to be the first.

But not too early. Enough information to be able to put the invention into effect? Cannot be purely
speculative. Some experimental data is needed.

Repurposing drugs: essential to have some indications that it is credible to treat that disease. It needs
to be credible, you cannot just file 100 patents.

Is it patentable?
Novelty: is it new?

Inventive step. Is it a trivial modification to what is already known? An objective test – would it be
obvious for a person of skill in the art to arrive at the invention? Surprising technical effect? Prior art
teaches away? Somebody who is very smart but cannot put two and two together.

41
Sufficiency. Can a person of skill in the art perform the intervention without undue burden? You need
to supply them with enough information so that a professional can work the intervention. If they
can’t it is insufficient. You cannot add new information into your patent application, but you can fall
back to you fall back options.

Exclusions from patentability: discoveries, scientific theories, mathematical methods, aesthetic

creations, schemes, rules and methods for performing mental acts, playing games or doing business,
programs for computers and presentations of information. Not necessarily a hard no – apply it in a
specific way.

Excluded only to the extent to which a European patent application or European patent relates to
such subject-matter as such. E.g. Algorithm cannot be patented, the technical application can be –
algorithm used in internal software of medical device to enable improved functioning.

Exclusions that are applicable to the pharmaceutical industry. You can’t patent genes – but you can
patent isolated parts. Methods of treatment or processes for cloning human beings. Uses of human
embryos for industrial or commercial purposes.

The path to grant

Relevant prior art: previous patent applications/papers/presentations – anything anywhere before
the data of filing.

Prosecution

- Search by patent office to identify relevant prior art

- Patent office issues examination reports raising objections
- Applicant responds: arguments, amendments, hearing
- Granted or dismissed

What to protect
In the pharmaceutical industry you want to file a patent for the compound or biologic X. There are
other ways to get patent protection: combination product, formulation/dosage form, method of
treatment (not in EU), method of making X, alternative form of X and X+ device.

Medical use claims

In Europe not on methods of treatment. There is a way around it – get protection for substances for
use in such methods. If you have a known substance or composition, you can get a patent for a new
way of applying the substance or composition. This only apply to substances or composition – not for
medical devices.

In the case of an invention consisting of a substance or composition for a specific

use in any such method, the fact that the substance or composition forms part of
the state of the art shall not prevent the invention from being taken to be new if
that specific use does not form part of the state of the art.

42
Second medical use claims
Not just new diseases: new modes of administration, patient subgroups or dosages. New indication
(diseases) seems counterintuitive. New modes of administration. You need to show that it is not an
obvious thing – harder.

Second medical uses describe the use of a medicament for a new indication for
which it had not previously been authorized.

Combination product
If individuals components are known, but not together it may be patentable. It is patentable if the
effect of the two (or more) compounds is greater than the sum of their individual effects.

Formulation
Example: if you have a powder, and then have an additive so that it is easier to dose – this could get
you a new patent.

Alternative formulations that provide a surprising technical advantage can be considered inventive.
Like improving pharmacokinetics or bioavailability / improved stability / extended release
formulations.

Alternative forms of compounds

Different crystal forms for example. Only if particular beneficial effects.

Methods of making compounds

If a method is more cost-effective or produces more pure product.

Lifecycle management
For certain clients. First, you patent the compound.
Research continues and finds a better formulation. Further
down the line you can find a new mode of administration,
and file a new patent. Associated with that you can
research new drug/device combination and file a new
patent application. Further on: new disease and another
patent.

You can drag out 20 years of patent protection for way longer. Known as evergreening

One of the criticism of patents.

Who owns the patents

First establish inventor: someone who has made a contribution to the inventive concept. Routine
work, under direction from someone else does not make you an inventor (the instructor is). It is not

43
like naming an academic papers. Some hard talks: someone with a lot of skill but the idea from
somebody else is still not an inventor. Is the inventor employed?

If you are working for a pharmaceutical company; the pharmaceutical company is the inventor. The
employee is expected to do inventions in normal course of employment.

Inventors have to be named

Formal agreement/assignment: always have it in place before PhD (mostly goes to university, but
should have agreement in place)

Designation of inventors

How can you use them

Exclusive rights: prevent third parties making, using, selling, offering to sell, importing. It is territorial.

Remedies: number of actions that you can do against patent infringements: injunctions, damages,
accounts of profits. You cannot profit on the remedies.

Freedom to operate: having a patent does not give you rights to use your invention. Example on
bikes, you can patent a bike with gears while the patent is still going on for a normal bike – but then
you cannot sell that bike with gears.

Protect your innovations: actively by enforcing in the courts or passively by being a deterrent

Investment: an asset that can contribute to company valuation. Objective indicator of differentiation
from competition.

Revenue: licensing, sale and collateral (mortgage your invention). Having patents can lead to tax
breaks. Patented inventions can be subject to lower tax.

Marketing: patented product can distinguish in the marketplace. Patented product can look
impressive to consumers and help to distinguish in market place

Collaboration: with customers or competitors who have overlapping patent rights e.g. cross licensing.

How are they challenged?

Oppositions: at European Patent office within 9months from grant (all national at once) or at central
revocation

Counter-claim during infringement action.

Exceptions to infringement
Private and non-commercial purposes

Experimental exceptions: e.g. researching the generic so that if patent expired, the generic can
market right away. Bolar exemption: activities conducted only for the purpose of obtaining an
abridged marketing authorization application by a generic company.

44
Exhaustion/parallel trade: goods placed on the market within a specific territory, by or with the
permission for the rights holder. IP rights cannot be used to stop the further distribution or resale of
those goods within EEA.

Compulsory licenses
TRIPS agreement (agreement on trade-related aspects of intellectual property rights)

Governments can allow production of a patented product without patent owner consent. The owner
still has right to be compensated. Discussed during the COVID19 pandemic

45
IP waivers
Proposals during COVID-19 pandemic in India and South Africa. Overcome product-by-product
requirement for compulsory licensing. Temporary – only for limited time to meet urgent need.

Some drawbacks though: companies refrain from entering markets with poor intellectual property
protection or dissuading them from innovating in certain sectors. Know how might also be important.

Are they even needed?

- Monopolies for past patents reduces incentives for current innovation because subject to
constant legal action from earlier patent holders
- Most patents do not represent useful innovation, just weapons in an arms race
- Information disclosure function fails – if secret can be kept for N years and patent lats M
years, N<M=patent. Otherwise no patent, but trade secrets.
- Extent of practical disclosure in patents is negligible. It is impossible to build functioning
device from modern patent application.
- Emphasis on the ‘first mover advantage’ without needing patents

Confidential information/trade secrets

Is it always right to pursue patent protection to protect innovations?
No It can also be beneficial to keep things really secret – to not enclose the inventions

Other options are

Trade secrets: information or know-how belonging to a company that is kept confidential due to the
value it brings to the business, like coca cola and the google algorithm. It can potentially last you
forever, but it is risky. The competitor could arrive at development independently and then nothing
can be done. Trade secrets are useless if it can be reverse engineered. It also takes a lot of
bureauratics to keep it a secret with instructing employers what is secret and what not.

In the context of pharmaceutical: patent vs trade secret

Patent Trade secret
Limited term of monopoly (20(+) years) ‘protection’ potentially ad infinitum, but
Published 18 months from priority data – tell Risky – competitor could arrive at development
competitors how to do it? independently and then there is no recourse
Robust protection, regardless of how they arrive Not applicable for things than can be reverse
at invention engineered
Registration and defense costly and takes time No registration but extensive internal
procedures in place – educating employees on
what information is to be kept secret, limiting
access to the secret information and NDAs
Hard to police acts which might not take place Damages and injunctions if breaches of
publicly, e.g. methods confidence, but has damage been done?
What is the most appropriate? Most likely the Hybrid approach.

46
Patent term extension
Maximum patent term is 20 years from filing date. USPTO – patent term adjustment if delays in
prosecution.

Drug must be first obtain regulatory approval before they can be marketed. Extensive clinical trials
can take many years.

Effective patent protection is shorted: 20 year clock ticking years before a drug product reaches
market. Marketing authorization typically takes about 12 years. So 8 years left. Patent term
extensions compensate this delay. In EU these are called supplementary protection certificates
(SPCs).

SPCs what are they?

National rights available in the EEA (and UK, Switzerland) – granted by national offices. It confers
substantially same rights as basic patents, but scope of protection only extends to product approved
for MA (more narrow protection).

Maximum duration is 5 years. SPC term is the period between filing date of basic patent and date of
first relevant MA in EEA, minus five years

6 months for doing pediatric research.

SPCs duration
SPC manufacturing waiver: generics and biosimilar manufacturers can manufacture and stockpile
medicines protected by and SPC 6 months before expiry. So they are in position to start selling the
product on day 1.

No SPC if they were able to quickly sell the stuff. Is the case on the right.

How to get one?

The SPC applicant must own the patent, but does not have to hold the MA.

Must apply within 6 months of a) the date on which the MA to place the product on the market was
granted or b) the date on which the basic patent was granted.

47
Regulatory data protection
Data and marketing exclusivity
Before medicinal product can be put on market in Europe, it must receive MA.

For new active substances, a full application for MA must be made: substantial preclinical and clinical
trial data.

For old active substances, an abridged application can be made. This is used by generic and
biosimilar companies. They refer to information in full application. Avoid excessive and repetitive
testing on humans. Only demonstrate equivalence with original.

Period of data exclusivity

 8 years data exclusivity: generic company cannot use data in abridged application
 2 years marketing exclusivity: generic company can use data but cannot market a product
 1 year extension possible: if during 1st eight years MA holder obtains an authorization for one
or more new indications with significant clinical benefit compared with existing therapies.

Orphan drug exclusivity

Encourage development of medicines for rare diseases

Orphan drug is

 A life threatening or chronically debilitating conditions affecting not more than five in 10,000
people when the application is made; or
 A life threatening, seriously debilitating or serious and chronic condition that, without incentives
it is unlikely that marketing the medicine would generate sufficient return to justify the necessary
investment

No satisfactory method of diagnosis, prevention or treatment of the condition concerned must

already be available or if such a method exists, the drug must be of significant benefit to those
affected by the condition.

Orphan drug exclusivity

More favorable, they get 10 years of market
exclusivity, even if they generate their own data. Third
party cannot launch a similar product. Similar is
defined as containing a similar active substance, a
substance which is identical or which has the same
principal molecular structural features and which acts
via the same mechanisms, and which is intended for
the same therapeutic use.

Potential additional two years if pediatric studies are undertaken.

Again, if market authorization approval goes quick, granted patent stays the longest and there is no
effect of DE/ME/Orphan or SPC (those start at point of market authorization approval.

48
Lecture 6.1: generic drugs: friend or foe?
By Liesbeth Ruijgrok

Perspective from the hospital side

What is a generic medicine

A generic medicine is a medicine that is developed to be the same as medicine that has already been
authorized.

Very much the same as the originator medicine

 Same API (active pharmaceutical ingredient)
 name, appearance and packaging can be different.
 Same biological dynamics
 Same route of administration
 Same strength
 Same dosage form
 Same use
 Its authorization is based on efficacy and safety data from studies on the
authorized medicine.
 A company can only market a generic medicine once the 10 year
exclusivity period for the original medicine has expired.
 Drug discovery, Pre-clinical and clinical development do not need to be
followed
 With generics we have a smaller publication instead of a full dossier
 What is the role of generics on the healthcare system?
 Drive downs healthcare spend by creating price competition on the pharma
market
 Stimulate meaningful innovation by innovators with generics competition
 Patient access to high quality medicines has more than doubled over the
past ten years thanks to generic medicines
 Without generics higher health care spending
 What sorts of generics?
 Plain generics
 Generic version of traditional medication that come in standard dosage (tablets,
capsule)
 Contain same API as the brand name drug
 Specialty generics
o Generic version of medication which are more complex
o They include:
 Injectables
 Special formulations (tailored to specific patient population or delivery
requirements)
 Different salt: same drug but API is combined with different chemical salts
 New Combination: product that combines two ore more API
 Biosimilar
o Biosimilars are produced by living organisms, so they can change slightly. It’s also
harder to estimate correctly how much active ingredients is in the batch.

49
 o Highly similar means that the biosimilar and its reference medicine are essentially
the same, though there may be minor differences in their active substances.
 Due to the inherent variability of biologic manufacturing processes
o Some degree of variability is inherent to all biological medicines and minor
differences may occur among different batches of the same biological medicine.

What is a patent?
o A patent is a form of intellectual property that gives its owner the legal right to
exclude others from making, using, selling and importing an invention for a limited
period of years, in exchange for publishing and enabling public disclosure of the
invention.
 What is the cost of development of a new drug?

It takes a lot of time and many will fail, so the costs are high about 800M to more
than 2 billion.

How do you get a generic on the market

Registration pathways for generics
 European Marketing Authorization procedure necessary before it can be sold on the market
in the EU
 Go to CBG or EMA: national procedure, decentral
procedure or central procedure (European authority).
 Depends on how you want to market the generic and
what the regulations are on it.
 Generics are put on the market via decentralized or
national procedure
 Which market authorization is used?
It depends on the manufacturer perspective of the market
 Light version is national procedure
 Sometimes it is mandatory for branded and generic drugs to make use of central
procedure
 What is a generic registration file?
The same as the innovator you have to do work via the regulations on standards of
quality/conduct (chemistry):
1. chemistry, toxicity and manufacturing
2. QA: You have to have quality people in place to check.
3. Work on producing a bioequivalent product – you have to prove similarity to at least
80 percent.

50
 Differences that generics do not have to do: no animal studies, no clinical studies (is changing
for complex generics) and bio studies. You basically don’t have to do any costly work.
 What does the generic differs from the biosimilar?
Biosimilar can rely on the safety and efficacy experience gained with reference medicine
 Avoiding unnecessary repetition of clinical trails already carried out with reference
medicine
 This is slightly different for biosimilars. Quality studies, but harder since the
pharmacological is more difficult. Some small non clinical studies. You need to have a
comparative clinical studies – show that they work the same, but way smaller and
less costly as the branded.

How to protect the branded business?

o Branding
 Many bonds between pharmaceutical industry and presciber/ hc
professional (pharma influencing doctors)
 Marketing budget is huge (highest of all industries)
 Marketing not always discernable form scientific material
 Transparance registries partly efficacious
 Complexity in value-assessment makes doctors vulnerable
 Pressure to treat
 Financial incentives of prescribers to cut costs is minimal (hardly any budget
impact analysis)
 Words of “Fear, Uncenrtainty and Doubt”
o fake news (sow doubt, ex. Generics are not working as good as)
o evergreening (new formulations, new small patents, new salts or very similar
molecules, data exclusivity)
o commercial defense (pricing strategies, authorized generics, legal attacts)

Side-step: drug hijacking

 Drug compounding and manufacturing in academia, hospitals and pharmacies. Lecturer can
make their own drugs for their own patients.
For example: smashing up medicines to fit dosage to smaller children.

Pharmacists are licensed to manufacture drugs within certain boundaries

- Unlicensed drugs, e.g. pediatrics

- Origin within institutions/pharmacies

Erasmus MC has the following in drug innovation and development: therapeutic peptides, small
molecules (repurposing), radiopharmaceuticals, cell- and gene-therapy (ATMP) and 3d printing of
drugs.

Hijacking is the case that pharmaceutical companies take the academical findings and register it
themselves.

Example on Hijacking is the CDCA case. Amsterdam UMC had a treatment and it costed not a lot.
Then a pharma company ran with it and patented it, and jacked up the price a lot. Amsterdam UMC
made it themselves. A legal combat started on if this gave quality issues: but this was diverted.

51
Manufacturing of drugs by CART
 From API to patients: personalized medicines costs about 330.000, because it has such a long
logistic chain. This can be shorter: Erasmus is looking into possibilities to make the
treatments themselves. It then would be about something like 80.000.

Manufacturing of drugs by pharmacists

 Pharmacists are licensed to manufacture drugs with certain boundaries.
 What is a downside? They cannot commercialize

What is the commercial strategy for Gx3

You have different types of pharma companies strategies:

1. innovation only
2. generics only
3. broad portfolio (generic, innovative, OTC, vaccines)
4. geographic focus

Generic companies have specific market tactics

- First to launch - Second wave launches, low pricing

- Early launch - Broad portfolio ‘bundling’
- Authorized launch - Unique products

Mostly these is just one site that produces the same thing for different generic companies (just a
different wrapper)

Is there a future for Gx

Netherlands have a high volume on generics compared to other EU. Generic companies can focus on
increasing generic uptake in other countries, like Greece.

- Less products losing patent - Types of molecules losing patent more

- Still a lot of market share to be gained complex
- Constant high price pressure - New markets outside US and Europe
(reference pricing system, tender
contracts)

They are losing their price over the years.

Conclusion: friend or foe?

Generics are equivalent to specialties

Biosimilars are equivalent to branded biotech products

Generics help to keep medicines available to patients

Trust in healthcare providers at stake? Education of patients (de-marketing?)

3
Generic drugs

52
Shortages are an issue

Lecture 6.2: The pharmaceutical supply chain

From API4 to patients

1. Start with manufacturing API, Puerto Rico

 Start with products that are needed to synthesize the API
 UPSTREAM CHEMICALS refers to the initial stage of the production process
Raw materials are transformed into intermediates before processing in into the final
API
 SOLVENTS are REAGENTS crucial roles in API manufacturing bc they enable market
transformation
2. Formulation, Netherlands
 Excipients
3. Primary packaging
4. Secondary Packaging

Active pharmaceutical ingredients

High footprint of medicines, because production is all over the world. A lot of different companies
have a piece in the supply chain. Multifactor logistic – lot of stakeholders in the progress.

Pill Picker used in Erasmus MC: robot that picks and dispense the medicines that are necessary.

Drug shortages
Different risks can materialize at any time and in different places.

4
Active pharmaceutical ingredient: biologically active component of a drug product that produces the intended
effects.

53
Cyberattacks/war is a big worry in the pharmaceutical industry. It can stop a plant to stop producing
all at once. To get economies of scale, the trend is to have one plant in an LMIC producing for the
entire world. If there goes anything wrong, there is a shortage all across the world.

80% of API is from China or India.

Low reimbursement prices lead to companies prioritizing supplying the higher paying countries.
Ultimately, low reimbursement prices can easily lead to dug shortages. Shortages lead to countries or
hospitals hoarding the drugs, which is a egoistic reflex.

Drug shortages-Mitigation
 Increase prices, but this can lead to a race to the top (because the pharma company will
always pick the countries with the highest price).
 This only works if you have really low priced compared to other countries.
 Stockpiling: wholesalers have to have stock for more than 2 months or more. This stock costs
money (over data medication), so who is paying for that?

Increasing EU manufacturing resilience: we need to be able to do manufacturing again in the EU (be

less dependent). But this is probably more expensive than the plants in China and would take years.

The power of insurance companies

They state which drugs should be used. An insurance company can see which one they want to sell in
their register: the pharmacist needs to have all of them in stock. How do you explain this difference to
the patient? This also means that if a patients switches insurance, they switch generics. Pharmacist is
responsible if not available.

Unlicensed/off label drug use

 Every drug on the market should be registered
 Very urgent medical need, some way around registration. For example: the use of
chloroquine that is registered for Rheuma was used for Covid 19. They are very hesitant after
the Thalidomide-disaster in 1960.
 Unlicensed drugs only:
o Clinical trial
o Permission from Inspectorate

Falsified medicines
Criminal activity / fake drugs

 In Europe there is a falsified medicines directory: every package has a unique code.
 But it is too expensive and has little impact. In the Netherlands we have no problem with
falsified medicines, but checking this costs a lot of time. Erasmus MC is not cooperating.

54
Lecture 7: Drug negotiations at the Dutch ministry
By Evelien Langhorst

Working together for health, wellbeing and resilience

Reimbursement pathway NL

Two path ways: Outpatient pathway (extra-mural): everything has to be looked at by HTA body and
have to be cost-effective. You can be on 1A (clustered with other drug that are more or less the same)
or on 1B (not comparable to others). The second pathway is the hospital system. Before it was not
possible to negotiate, but now introduced the LOCK (negative list): minister actively takes a decision
to not reimburse before it is being researched.

HTA bodies looks at four criteria: necessity, effectiveness, cost-effectiveness, feasibility (financially). If
for example somebody is able to pay it themselves (e.g. paracetamol), it won’t get reimbursed.

There is a multi-payer system in the Netherlands. The ministry is the only one to say no to a drugs,
but other bodies can also negotiate.

Pricing instrument vs value judgement NL

Maximum price is determined by international reference pricing by taking the average of four
countries. Switched from Germany to Norway as a cost containment. Netherlands refer to INN5, not
brand name, unique for the Netherlands.

You also use internal reference pricing, but only in the outpatient setting.

Value judgement
Cost + : value judgement based on the R&D costs and some extra for profit – not very common in the
Netherlands. In the Netherlands value is based on the use of cost/QALY thresholds – increasing in the
burden of disease.

The Netherlands use the societal perspective. ACP6

5
International nonproprietary names: facilitate the identification of pharmaceutical substances or active
pharmaceutical ingredients. Also known as a generic name.
6
Advance care planning

55
Types of managed entry agreements
Negotiate conditions before entering the market of products. Two types: financial (price (volume)) or
performance based (outcomes of treatment; if patients dies, you don’t pay). Every negotiation is
unique.

Conditional reimbursement is not preferred, but possible -> strict criteria.

Performance based agreements are unpopular: how much risk are we willing to take? Industry thinks
it’s good for the innovation. Complicated questions. Financial MEAs are more certain.

56
The negotiation team at the ministry of health
12 people to perform horizon scanning, negotiations and calculating the rebates. In 2021 they
lowered expenditure with 745 million with an average discount of 46%.

But, are they brilliant negotiators or is the industry anticipating on giving away this margin?

Not many countries publish their numbers (not transparent) – some do and they are also around this
40% off margin. Phantom list prices: what are these?

What do we do all day?

Most of our time is spent on preparing our negotiations – before and during. They work in the
ministry of health, but they do not do policy. Besides, we spent time on answering questions from
parliament, communication with stakeholders and international collaboration. (also drink coffee)

General principles of negotiation

Boils down to: understand the opposition and their minimal price they are willing to take. Your
opponent will likely do the same, but then highest WTP. Company doesn’t want a deal if they make a
loss, government don’t want a deal if they have no money left on drug budget. Average duration on
negotiations are about a year.

High levels of information asymmetry.

The willingness to come to an agreement depends on many factors

Industry perspective Payer perspective
Aim is profit maximization. Don’t depend on For the government in negotiations the aim is to
morals, they are unlikely to have. reach an acceptable price (but what is that)
When there is risk or uncertainty with regards Based on a HTA assessment
to generating revenue – this results in a lower
willingness to negotiate lower prices
Willingness to offer discounts increases when Weighing effectiveness, cost effectiveness and
there is competition total cost in relation to the budget
Strategy aims to obtain and maintain a MEA are not savings, they prevent expenditure
monopoly position – patented products Money rebate is returned to the people paying
health insurance premiums

Information asymmetry in negotiations on pharmaceuticals

We like that they do the work to make people better. By the time they are in clinical practices, they
are starting to strategize. Marketing machine is right under way before the product is high. If the HTA
phase is happening, they are influencing the patients.

HTA body does not know anything on the data – apart from what they publish.

If it’s about your life, WTP is just infinite until you can’t pay. The HTA looks at the best for society and
not just for the individual.

57
WTP is very difficult, because a lot of factors come into play. The core elements are in the HTA file.
Timing is a real issue; patients are currently dying which leads to social pressure. Political situation is
so that even if the ministry says no, politics can. Doctors and patients can influence. Market size;
small countries don’t have a high potentiality. Early access sometimes companies have schemes that
they can get treated before market access – if you already get it, it is harder to take it away (loss
aversion).

What is an acceptable price?

What is budget impact, cost per QALY?

Lot of factors playing a role: unmet need, HTA assessment, total cost, law (ZVW), discount required
and market.

Some things are not captured in the current HTAs: evergreening, drug repurposing etc.

International
We established IHSI – the international horizon scanning initiative. Funding of making a database with
all upcoming products from phase 1 forward.

Horizon scanning is key to anticipate change and pro-actively taken action

NL is part of the Beneluxa which partakes in joint HTA and joint negotiations

Industry is a global player, so we have to be too

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Lecture 8: Orphan drugs
By Maureen Rutten-van Mölken

Example on Gilead filing orphan status for an antivirus meant for Corona in the early days. People
mocked Gilead a lot and they withdrew request.

When is an indication rare?

Orphan drugs: medicines in which the industry has little interest under normal market conditions
because there are only a small number of patients suffering from the rare conditions. Number of
people depends on the country. America has an absolute number, other countries a proportional
number.

An extreme for orphan disease is the ultra-orphan: very extreme rare diseases.

How many rare diseases are there?

Key question for orphan drug status is the patient population. The indication sought must be
medically plausible. Not just a subgroup (salami sliced indication) of a greater patient population that
might be otherwise be greater.

For the most orphan diseases there is no effective treatment

50% of orphan disease patients are young children and they die very soon.

Large number diseases are orphan (6000-7000), so even if it is rare a lot of people are affected by
some in their lifetime (1 on 17 will be affected at some point in their lives)

We have a treatment for 5 to 10 percent of the orphan diseases.

Regulation to incentivize R&D orphan drugs

The US was the first to have regulation in place to incentivize R&D for orphan drugs in 1983. The EU
was quite late. China and India does not have legislation. FDA and EMA will decide on their own if a
drug is classifiable as an orphan drugs, they do have a common application process however.

Market exclusivity starts at point of market authorization. Market exclusivity is a time during which no
other company can secure approval for a similar drug for the same orphan indication ( a non-similar
can still be improved).

Market exclusivity begins after the marketing authorization. It may exceed the patent period because
a patent is awarded in the early R&D phase.

One drug can have several market exclusivities for several indications.

Other incentives of legislation

Assistance in the design of clinical study protocols and during the market authorization review
process. Lower(EU) or no (US) regulatory fees for this assistance. Faster regulatory review

Exempting from particular taxes (not centrally regulated in EU), but only helpful if company has
taxable income.

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Research grants in the US and Europe.

However, concessions are not done in terms of prices and reimbursement. Like all other drugs,
market authorization for an orphan drug does not mean that the drug is available in all countries of
the EU.

The drug will go through the necessary procedures in each country in order to establish its price and
set reimbursement conditions.

In principle, but in reality we do some concessions.

- France: orphan drugs qualify for SMR ranking ‘important’, so 100% reimbursed; ASMR
(compared to comparator) varies
- Germany: orphan drugs qualify for abbreviated benefit assessment by GBA and are
guaranteed a rating of additional benefit if turnover < 30 (was 50) million in 2 consecutive
years. If you go over, you need to prove effectiveness again
- UK: NICE assessment but higher ICER thresholds. If NICE recommendation is negative, patient
access schemes with confidential discounts/rebates. Specific procedure for highly specialized
technology that brings all stakeholders around the table.

How to get an orphan designation?

A company must apply for orphan drug designation and it must adequately show: 1) patient
population proposed meets the prevalence criterion OR 2) without incentives drug does not generate
sufficient ROI. The latter is less used and only valid in EU. Other things necessary to include: 3) life
threatening or chronic debilitating disease, 4) need for therapy, 5) medical plausibility for the drug’s
expected benefit.

An orphan drug designation may be requested for a new unapproved drug, or an new use for an
already marketed drug.

This is a confidential process – if disclosed other companies can also apply/make the drugs. They
mostly wait until they have confirmed that they can produce it in a large scale and stable form
(=commercialization). Once approved the designation will be made public.

Seeking approval of an orphan drug is only possible through EMA’s centralized procedure.

 Regulations worked: clear increase in number of designations.

Oncology ranks first in orphan drugs. Then metabolic diseases and central nervous system.

In the first years after the regulations the number of new orphan indications is declining. In the early
days for new disease areas, now a lot smaller proportion. Companies target the same orphan drugs,
instead of new orphan targets.

Orphan drugs are first launched in the US. In US 100% of orphan drugs are available, while in the
OECD countries it is just 44%. Reimbursement is still 100% in the US and just 32% in OECD countries.

Launch date in OECD countries varies quite a lot. Partly companies wait to launch in the countries,
but also since it takes some time for negotiations.

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Success had led to concerns
Stratification; subgroups to meet rarity criteria (orphan drugs justify higher prices)

Indication creep: drug that is approved for an increasing number of different orphan indications; drug
no longer needs orphan incentives because it benefits from economies of scale. For example,
Imatinib that is suitable for more rare cancer diseases.

Multiple non-similar products for the same orphan indication: clustering. Might be beneficial in
terms of competition.

Existing hospital formulation / magistral formulation was slightly modified and approved as orphan
drug and priced more than 50-fold higher than the unlicensed formulation. Hospitals can make it for
their own patient – happens for very rare cases.

Line extensions

 Only orphan drug designation if no economies of scale in production

Concerns
Orphan drug previously or later approved for a non-rare condition. They sometimes can keep the
orphan drug designation

FDA will no longer approve as an orphan, even if there is a a unique rare disease, if the drug is also
effective against a very similar indication that is not rare

Rare diseases remain a very high unmet need area given that there are no treatment options
available for 95% of rare diseases. Products tend to be developed in certain more profitable
therapeutic areas.

The patient access to the available medicines for rare diseases is unequal across the EU member
states

Affordability of orphan medicines is also becoming a growing challenge for the healthcare systems

Assessment procedures were inefficient and burdensome.

OMP legislation being revised as part of the 2020 EU pharmaceutical strategy of the EC
A clear definition of unmet medical need based on disease severity and availability of therapies

Possible joint procurement of orphan medicines across the member states

Streamline procedures linked to drug evaluation and authorization to ensure timely access to orphan
medicines and reduce the burden for manufacturers and regulators.

A necessity to involve more SMEs in developing orphan medicines and differentiate rules to
accommodate companies of all sizes

Boost R&D and clinical trials for rare diseases in the EU

Shorter or variable exclusivity periods are on the table, but no action yet

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  EU wants to incentivize development of new drugs targeting other orphan diseases.

Why are orphan drugs priced so high?

Big difference in cost per patient per year; orphan drugs are really much more expensive. Why are
they priced so high?

- Recoup high R&D costs in small population

- Sometimes difficult to manufacture
- Greater challenges in proving efficacy/effectiveness

It is difficult to recruit a sufficient number of patients. It is often chronic, progressive, serious, life-
limiting and life-threatening with high unmet medical needs. It is very difficult to design a randomized
controlled study, no comparator is used (single arm study). Poorly understood disease processes.
Because of the genetic origin, heterogeneity patient population often great. Endpoints, outcome
measures tools, instrument.

- Uncertainty is high
- High unmet need
- Reflecting perceived value
- Monopoly in unique indication

In absence of mature dossier at time of decision making, payer and company rely on conditional
reimbursement or managed entry agreements.

Orphan drug market is nowadays the most lucrative market; it is growing twice as much as the
normal market.

Big pharma companies are increasingly reliant on orphan drugs. The sales of non-orphan drugs are
lower than for orphan drugs. Few very big players: before normally the smaller biotech companies –
but they are bought by the big companies.

Market exclusivity is way higher than 10 years – the industry is very successful in extending exclusivity
for the drugs. Also little room for generics to get a market share in already small markets.

Prices of orphan drugs often remain high. They face little competition. Of the 503 orphan drugs
approvals in the US, 217 are no longer protected by either orphan designations or patents and yet
only 116 of these unprotected medicines currently face generic or biosimilar competition. In Europe
70 drugs with expired orphan states, but less than 20% has faced generic or biosimilar competition.

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Lecture 9: NICE’s approach to value assessment
By Jacoline Bouvy

Nice and its role in the English National Health Service

NICE has been around for
decades. It had been set up by a
liberal government in 1999 as the
national institute for clinical
excellence. Health systems were
managed regionally, which meant
that there was local variation in
access to certain drugs (postcode
lottery).

Over the years, it changed in name (kept acronym); they are now a non-departmental public body
and took on responsibility for developing guidance and quality standards in social care.

Name changed to National institute for health and care excellence.

The NHS
NHS is a tax-funded public health system which is free at the point of use. The NHS commissioning
board does budget, planning, and delivery of services -> it is the payer in the NHS.

Companies have to pay NICE for assessment of drugs. Flat fee, just cover costs – goal is not to make
money. Smaller companies can get a discount. More funding is received via the government, but it is
designated by independent bodies.

NHS is independent and autonomy in making the decision if the drugs is refunded or not.

NICE gives recommendations.

Healthcare provider still has final say.

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How Nice makes recommendations for new drugs
Evaluation process (single technology
evaluation)

Scoping/referral: what is the intervention,

standard of care, patient population? NICE
asks pharma company for evidence on clinical
but also economical grounds. An independent
company will review this evidence. Optimistic
assumptions are made, to make it as positive
as possible -> assumptions need to be tested.

All relevant stakeholders hold a meeting to come to a no or yes. Stakeholders can appeal (mostly
happens with negative recommendations). The committee will look at the ICER – can be not cost-
effective with given price. Then preliminary recommendations with another meeting in four weeks,
see if they can make it cost-effective (negotiate). NICE does not directly negotiate, it facilitates it.

Stakeholders involved in the appraisal

The appraisal committee: members that practice medicine in
real life (pharmacists, health economist, pharmaceutical
industry people, committee members (representatives of
public)).

External assessment group: the pharma group, coordinators,

experts.

NICE asks 2 key questions about new drugs:

Benefit: how well does the technology work compared to standard practice in the national
health service?

Cost: how much does this course of action cost compared to standard practice in the NHS?

Clinical effectiveness. Used in the EMA approval as well. Key difference is that regulatory looks into
efficacy (does it work? No placebo), NICE looks into different evidence. It considers all available
evidence and look into the comparator.

Results are reported into an ICERs. Effects are given as QALY.

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NICE reference case for technology evaluation
Reference case perspective reflects an objective of the English healthcare system to maximize
population health gains from available resources. NHS budget is set by treasury – NICE does not have
any influence on how much, but how it is spent.

Healthcare perspective: non health outcomes and non-health areas of public spending are usually
excluded.

Rationale for cost-effectiveness analysis

When a technology generates additional costs but also improves patient outcomes. Are the increased
costs justified? Does introduction lead to efficient use of available? There will be displacement in
other fields of care, to fund this new treatment. Uncertainty on what treatment is displaced.

- Potential displacement and opportunity costs

 Use of threshold.
 Cost effectiveness plane. ICER is somewhere on here. Of course south east is the best, but
mostly it will be in northeast or southeast.

What does the NICE threshold represent? Between 20 and 30 thousand pounds. Maximum
acceptable. If it is very below or beyond, then those tend to be forward cases in terms of yes or no. If
the ICER is right below or above, other factors are considered. Uncertainty, non-health objectives and
uncaptured benefits are also taken into account.

Higher uncertainty is accepted if rare diseases, technologies for children or innovative and complex
technologies. It is harder to conduct large clinical trials to eliminate the uncertainty.

Examples on appraisals where non-health benefits were taken into account. 1) Nalmefene for
reducing alcohol consumption with people with alcohol dependence – costs and outcomes relevant
to the criminal justice sector were taken into account. 2) Cochlear implants for children and adults
with severe to profound deafness – benefits to education were taken into account (no need for
special schooling).

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Role of uncertainty in decision making
You always have some probability that you picked the wrong advice. You pick the highest probability.

1. Not recommending a technology that is cost effective

2. Recommending a technology that is not effective.

Severity modifier
QALY weight is higher (multiplied by 1.x), since
evidence shows that society values benefits more
for severe conditions. If the proportional shortfall
or fraction of health was higher than .85. and the
absolute shortfall should be above 12.

What recommendations can the appraisal committee make?

Recommended: recommended in line with the market authorization from the EMA or medicines and
healthcare products regulatory agency or in line with how it is used in clinical practice in the NHS.

Optimized: recommended for a smaller subset of patients than originally stated by the marketing
authorization.

Recommended for managed access: agree for a limited time period that they provide funding to
reduce uncertainty. A couple years down the line a more robust advice can be given

- Drug cannot be recommended due to clinical uncertainty

- Drug has plausible potential to be cost effective at the current price
- Data collection could reduce uncertainty
- Ongoing studies will provide useful data and data collection is feasible

Only in research: very rarely used – since EMA said good for market use. The drug or treatment is
recommended for use only in the context of a research study, for example a clinical trial.

Not recommended: when there is a lack of evidence for the clinical effectiveness of the technology,
or if it is not considered to be cost-effective use of NHS resources compared with current NHS
practice.

Managed access
=combination of commercial agreement and data collection agreement

Companies get excited about the managed access, however it can be relatively time consuming.
Longer term data from an ongoing clinical trial is used – routinely collected clinical data.

All these criteria need to be met for a managed access recommendation

- Drug cannot be recommended due to clinical uncertainty

- Drug has plausible potential to be cost effective at the current price
- Data collection could reduce uncertainty
- Ongoing studies will provide useful data and data collection is feasible

Possible additional clinical outcomes, patient reported outcomes, or adapting existing data sources

Very challenges: new data collected on the comparator arm & new comparative data.

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Summary
NICE undertakes evaluations of a range of technologies, including all drugs approved in the UK

NICE assesses the clinical and cost effectiveness of new drugs, and has recently introduced a severity
modifier that replaced the end-of-life criteria

Managed access options for promising technologies with immature evidence to support its use in the
NHS are increasingly used, but are not without challenges

NICE is developing a proportionate approach to the evaluation of new drugs as not all evaluations
require the same process.

Questions
Looking into including sustainability issues. Really hard.

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Lecture 10: expanded access to unregistered drugs
By Tobias Polak

What is expanded access?

: a regulated pathway to access unlicensed medicines outside of trials

A pathway to access unlicensed medicine: formalized in 1987 amidst the AIDS epidemic. Patients
were without medicine, while a promising medicine was in testing. Protests with ‘FDA is killing us’

For a specific subset of patients. 1)patients who do not have registered treatment options, 2) patients
who cannot enter trials, 3) patients who are terminally ill/seriously debilitated.

It must be approved by various stakeholders

- Patient consents to experimental treatment

- Physician must be willing to prescribe
- Ethics approval is required (IRB)
- Pharmaceutical company must be willing
- Regulatory body (FDA) must approve

Also known as: expanded access, early access, compassionate use, managed access, special access
etc.

Primary characteristics

- For patients with high unmet medical need

- Where trial participation is not possible
- Access investigational drugs outside of trials
- Potential benefits outweigh the potential risks

Different types of access

- Single-patient access
- Group access
- Emergency and non-emergency

Off label is not expanded access. Expanded access

happens prior to any marketing authorization.
Efforts grow to streamline both for particular cases.
It can also be post-withdrawal access.

No formal time limit on EA.

Timing of expanded access

- No time requirements: requests increase over time, risks diminish over time
- EAP in practice: starts late phase two with named-patients. Cohort approvals after phase
three
- Post trial access: to bridge gap between phase three and market access
- Post withdrawal: how to supply drug that is withdrawn by manufacturer due to commercial
issues?

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69
The Dutch way
Putting ‘unregistered medicine’ into
‘circulation’ is prohibited. However there are
some scenarios that are allowed, e.g. as study
or individual patients in high need.

Two different regulators: ‘levering op

artsenverklaring’ & ‘compassionate use
programs’

Clear increase over time of the use and request of expanded access.

Individual member states regulate EA in the EU. Whereas the EMA regulates marketing approval via
the centralized procedure, the member states have individual regulations on the subject. Different
pathways, very difficult for patients to surf.

Where to place data collection in EA?

- Expanded access was not intended for research, it is meant to provide treatment.
- EA is a means to provide access to clinical care. However, one can’t really argue that EA is
standard clinical care either, since so many stakeholders need to give approval.
- A physician is considered an ‘investigator’
- The FDA only requires AE reporting and final summary. Only recently voiced ‘great
acceptance of data from treatment use to enhance in clinical development’.

Expanded access is a combination of doing treatment, but also conducting

research.

The data is mainly used for safety reasons – establish risk profile for different populations. Other
reasons are efficacy & pediatrics. Increasing use of data for efficacy reasons.

Is this data being used by HTA bodies?

Regulators focus primarily on risk/benefit. HTA bodies consider more factors of influence, all including
costs – so becomes more important.

High level examples of EAP data usage

- Resource use: example on that it was based on weights from US population. High costs on
spillage of vial. Manufacturer could ask more money.
- Local experience
- Real-world confirmation
- Long-term follow-up

1 in 5 HTA decisions are supported by EAP RWD.

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And how often does research through expanded access end up in PubMed?
High increase of EAP publications on PubMed over time, most in the disease areas of oncology and
hematology. Trend is also partly explained by COVID.

So there is a clear shift from mere treatment to collecting data from EAP.
The use of data from EAP has increased significantly over time.

FDA & EMA primarily utilize EAP for safety. Used to establish a risk profile in different populations.
Efficacy is limited to rare diseases, large treatment effects measured through objective outcomes in
pre-specified protocol.

NICE uses data to inform resource use.

Authorities provide detailed feedback

Rising usage: a cautionary tale

Is it a good thing to have this combination of treatment and research?

In favor: increased sample size; results from trials could be extrapolated to ineligible populations; a
more accurate assessment of resource use parameters; argument by contradiction (investigational
medicine used for non-research activities).

Against: limited added value (if it is biased for example – more is not always better); increased
burden on health systems; participant protection; lack of regulations.

Interpretation in a broader context of increasingly blurred lines between research and treatment
The rise (hype) of real world data, data is not only used for research.

Frameworks and guidance. The 21st century cures act (2016) places additional focus on the use of
real-world data to support regulatory decision making.

Potential solutions to address downsides

- Innovative design: ‘learning health system’

- Education for hospitals and IRBs: have patients determine what is considered ‘burdensome’
- Policy reform: issues of equity in patient access could be addressed through harmonization
- Randomization: one cannot and should not aim for replacing evidence from adequately
controlled and well-conducted RCTs

My tomorrows is a platform that facilitates EAP. Offers services to both pharma companies and
patients.

Problems with public pressure. If somebody is said no to access the medicine, they will take to social
media to persuade the companies.

71
Lecture 11: MCDA in healthcare decision making
By Maureen Rutten-van Mölken

Aspects influencing decision making

Decision makers take other things implicitly into account apart from cost effectiveness. Other aspects
taken into account:

 Distribution of health: vulnerable population, economically productive people or risk behaviour

(smokers)
 Maximize health given a certain budget (=cost effectiveness)
 Specific societal preferences: preference for acute or life-threatening situations over chronic
diseases. Preference for curative over preventive care. Preference (not strong empirical
evidence) to treat rare diseases (just bad luck).
 Availability of alternatives
 Budgetary and practical constraints
 Political reason, especially before elections.

Mostly happens after assessment. In the appraisal phase the decisionmaker negotiates, and other
criteria are taken into account. Decisionmakers do that implicitly – which is not transparent and it
becomes quite difficult.

If CEA is insufficient, what are alternative ways?

Very hard to include multiple criteria in CEA. We include
severity in the different heights of the threshold. Other options are
to weigh QALYs differently, or broaden current valuation
metrics.

You can also do an extra WTP for additional benefits, cost

consequence analysis (CCA) or a multi-criteria decision analysis
(MCDA)

Rational priority setting

Compare a lot of alternatives based on their criteria. Mostly
applied in the situation that you have more than two
alternatives.

Broader set of criteria than we would normally use.

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Multi-criteria decision analysis (MCDA)
Umbrella term for a set of methods that support decision making that is based on more than one
criterion, in which the relative impact of each criterion on the decision is made explicit.

MCDA allows for a systematic trade-off between multiple, and sometimes conflicting criteria
simultaneously, in an explicit, transparent and consistent way.

It determines preferences for alternative interventions on the basis of explicit objectives that are
important for the decision at hand.

For each of these objectives, you define measurable criteria to assess the extent to which the
objectives have been achieved (performance measurement)

These criteria are weighted by the importance for the decision at hand (weight elicitation)

Criteria weights can be elicited from different groups of stakeholders. Hence, it makes a difference in
opinion about the relative importance of criteria more explicit.

 Should improve transparency, consistency, accountability, credibility and acceptability of

decisions by society.

Theoretical foundation

“Money is not an adequate measure of value” (Bernoulli 1738)

Multi-objective optimization: pareto improvement or (& most likely) potential pareto improvement.

Expected utility theory: utilities are numbers expressing the subjective value of a consequence, in the
presence of uncertainty.

Multi-attribute utility theory: decisions with multiple objectives. Theory from Keeny and Raiffa
(1976)

Evidence-based medicine

Seven steps of conducting an MCDA

1. Establish the decision context and identify the alternatives to be compared
2. Identify the objectives and criteria
a. Preferentially independent: preference for one characteristic is independent of the
preference for others. Very hard: you mostly need to know something about another
criteria.7
3. Scoring: performance scores of each alternative on each criteria. They need to be
standardized to make them comparable to other criteria – different methods.
4. Weight elicitation: assign weight to each criterion that reflects its relative importance to the
decision
a. DCE is one way of weight elicitation

7
Example: let’s say the two attributes for a car are color (red or black) and style (sports car or SUV). Suppose
the decision maker prefers a red sports car over a black sports car. If the decision maker also prefers a red SUV
over a black SUV, then the color is preferentially independent of style; red is preferred over black, regardless of
style.

73
 5. Combine the weights and scores to calculate overall global scores. How you do it is
depending on what you do in step 1.
6. Examine the results: check consistency in ranking
7. Sensitivity analysis
a. Deterministic: how much do changes in weights/performance affect the ranking of
alternatives
b. Probabilistic to address joint uncertainty in performance and weights

MCDA methods
Value based methods: calculating Multi-attribute utility theory (MAUT)
overall value score for each Analytic hierarchy/network process (AHP/ANP)
alternative. Most used.
Outranking methods: pairwise Elimination and choice expressing reality (ELECTRE)
comparison of alternatives per Preference Ranking organization method for enrichment
criterion evaluation (PROMETHEE)
Goal programming: compare
weighted deviations from a priori
set goals

Multi attribute utility theory (MAUT)

Most used

Constructing a single overall value

P j ( x ) : performance of drugs X on criterion j standardized on a 0 ¿ 1 scale

w j :the weight of criterion j−all weights add up ¿ 1

Linear additive model V ( x )=w j∗P j ( x )+ …+w m∗Pm (x )

Weights should be based on explicit trade-offs

between criteria (DCE or swing weighting). Weights
should represent the gain in overall value from
replacing the worst performance score with the
best performance score on a criterion. Ratio of 2
weights (w j / wk ¿indicates the change in the
standardized performance score of criteria k that is
required to compensate for 1 unit loss in
standardized performance score of criteria j.

Example: the decisionmaker has a preference for treating lowest prevalence.

Criteria weights sum up to one, is usually the case for MCDA.

Best way to get weights: DCE – regression coefficients of each attribute is used.

74
 Swing weighting: which criteria would you first
improve from the worst to the best. Method to
simply give a weight.

Analytic hierarchy process

It uses pairwise comparisons between: criteria (to derive weights) + alternatives (to derive
performance scores)

Predetermined nine point importance skill – no scientific foundation

Criteria and sub-criteria determine the hierarchical structure

Multiplicative preferences

Consistency ratio tests the degree of inconsistency in respondent ratings. ( IR<0.1 acceptable)

ANP extension of AHP, interaction and dependence

between criteria and sub criteria.

How important is survival gain relative to costs? If

the answer is 5, you say that survival gain is five
times as high as for costs.

You fill in an entire table – see on the right.

Calculate geometric mean: multiply all the relative

weights to the power of 1/#of criteria. Criterion
weight is calculated as the total sum of all
geometric means and then divide GM with the
total sum.

Pairwise comparison of drugs on each criterion.

Determine weights as well as performance scores.

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Electre (Roy, 1968)
Outranking relationship between alternatives regarding all criteria (finding dominance)

Concordance index and dis-concordance index.

- Concordance index

C ab=
∑ of all weights for those criteria where drug A scores better than drug b
total ∑ of weights
- Discordance index
V a−V b
Dab=max of ( ¿ for each criterion whereV a< V b)¿
V max −V min
Threshold value is the mean of all values in the matrix (it should be lower than for your drug). It also
needs to be lower than the disconcordance threshold value.

Goal programming
Predefined goals defined by the decisionmakers – there are desirable levels of performance for each
criterion.

How close do the drugs come towards the goal?

Preferences can be set to:

- Minimum performance value (at least)

- Maximum performance value (no more than)
- As close to the goal as possible

Hard to put a goal. Prevalence cannot be a goal for example.

76
Weighted goal programming (minimized unwanted deviation from goals)

Weights should be based on something. In lecture mostly from assumption.

Use in practice and discussion on added value of MCDA vs CEA

MCDA papers in healthcare by decision context steeply increased after 2010. It is used in different
context: priority setting, clinical decision making, regulatory decisions and planning & R&D.

Selection of MCDA methods

Most frequently used: value based method in MCDA. Especially dominant in regulatory approval
contexts.

MAUT is best because weights of preferentially independent criteria are based on trade-offs, that
represent the full swing from worst to best level.

Discussion value-based MCDA

Strengths Weaknesses
Better evidence-informed decision making. Take New composite measure of value
into account other outcomes as health benefits.
Wider range of outcomes No uniform measure that is comparable across
disease/interventions?
Multiple perspectives As costs are traded off against the other criteria,
we don’t have an estimate of opportunity costs
of one unit of additional value
Improve transparency, consistency and One weight per outcome, irrespective of the
accountability of decisions place on the performance scale
As costs are traded-off against the other criteria Assumption that the model is additive
in the analysis, it makes their relative
contribution to the decision-making process
explicit

77
Big debate (viewpoint Karl Claxton)
Only attributes of benefit or aspects of social value that we value
alongside health gains can be defined as criteria.

- Cost CANNOT be a criterion

- Uncertainty around evidence CANNOT be a criterion

Whether costs and/or uncertainty should be included.

Cost not in MCDA, because later on we will investigate the opportunity cost of putting this in place.

If we start to include other criteria – we prefer to fund a criteria that is maybe worse in terms of
health, but better on other criteria.

Practice: costs is very often used in MCDA

The value of the additional benefit (attribute) can only be estimated by the value of the benefits
forgone (opportunity costs). Hence we need to estimate how much of an attribute is displaced
elsewhere to cover the additional costs of the additional elements of benefits. Only when we
compare the attributes of a proposed investment with the attributes of the expected disinvestment
that is required to fund the investment.

We should not use a different value framework for orphan drugs than for other drugs.

Are we prepared to trade-off health gains?

If we could include additional elements of value, we may adopt interventions that generate these
additional elements at the expense of interventions improving length and quality of life.

Big debate (viewpoint MCDA-users)

All relevant decision criteria should be included and weighted by their importance

Cost is a relevant decision criterion, and we need weight costs against the other decision criteria. i.e.
we need to know the relative contribution of costs to the decision.

MCDA is useful in addition to CEA, to optimize spending of a budget at local level, when there is a
choice between multiple available options, once the decision is to allocate resources to treatment has
been taken.

There should always be an element of deliberation8 in the MCDA approach.

8
Long and careful consideration or discussion

78
Lecture 12: economic aspects and reimbursement considerations for
the treatment of hematological cancers (focus on CAR-T)
By Frederick Thielen

Cancer in general
Cancer cases in Europe increased by 50%, while the cancer deaths have increased with 20%.

Better medicine, prevention, monitoring, diagnosis (early diagnosis). Not just better medicine. Cancer
care is 103 billion, the medicines alone are 32 billion. Huge chunk of what we spent.

General treatment options are surgery, radiation therapy, chemotherapy, immunotherapy, targeted
therapy, hormone therapy, stem cell transplantation & precision medicine.

Global burden is unknown. Cancer treatments are increasing every year, and vary between countries.
Economic burdens in % also differ between and within the European union and US. There should not
be a difference in treatment (and thus budget).

Hematological cancers in general

Also called blood cancers. A relatively common cancer sort.

60 years ago it was just called ‘disease of the blood’. We can now differentiate between the different
types of blood cancers. Not a big thing if the sorts are individually addressed (can lead to orphan
disease regulations).

Treatment options
Between 2012-2018, the FDA approved 88 new oncological therapies. 32% of those for hematologic
malignancies

The market structure for cancer medicine consists of three companies who have 50 percent of the
market share. For the melanoma market, this is 97% in the hands of 3 companies.

Costly diagnosis, many high priced drugs flood the market. Hospital care usually highest cost driver:
long periods of inpatient care.

Old medicines were much cheaper.

Three steps in costing: identify, measure, value

Huge price decrease after patent cliff. Can be even higher decrease in reality as in list price, due to
negotiations.

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Chimeric antigen receptor T cells.
Novel anti-cancer therapy: block ability of cancer cells to evade immune system, not a personal
approach. Many mutations are overseen.

CAR T cells are able to recognize and neutralize the cancer cell.

Long value chain – involvement of big pharma companies.

Research started around 1960, but patents only steeply increased from 2013 to 2016. Majority come
from US and China.

Strong collaboration between industry and academia. More industry applicants than research centers
& universities.

They got a priority medicine in 2016 (PRIME), but also orphan disease status in 2014.

Benefits of orphan drug designation in the EU

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Questions to be asked
- Safety and efficacy?
- Cost-effectiveness?
- Reimburse? (how)

Approved by both EMA and FDA.

Tisagencell had two indications; Adult patient with relapsed or refractory diffuse large B-cell
lymphoma & pediatric and young adult patients. We will focus on one: pediatric and until age 25.

Was approved for PRIME9. Prime requirements:

1. Product not yet approved in EU

2. Targets condition with an unmet medical need
3. Demonstrates potential to address the unmet medical need and
is of major public health interest

56% of applications between 2016 till 2021 were orphan diseases

Benefit: agency offers early and proactive support to medicine

developers through scientific advice and accelerated
assessment.

Effectiveness was shown with a single one arm research. Few

enrollments. EMA looked at little bit more mature data (longer
median follow-up), still relatively short since severe disease.

Mistake in 2018: made a super cancer cell by accidently getting it out with the other T cells. Patients
got better, but then died. Still in a learning curve.

CAR-T cell is more expensive than 320,000, since other costs still need to be taken into account.

They did an HTA study on the cost effectiveness of the

CAR-T cell therapy.

Hard to find comparator, as the EMA had no comparator: they found one – CAR-T was much better in
terms of survival years. Total treatment is already higher than an expensive one by 2,8 times. But also
a lot of QALYs to be gained.

 CAR-T cell is for sure cost effective under the 80,000 threshold

Other research also found that CAR-T cells were cost-effective, but asked some questions on the risk
sharing payment agreement.

“…payers and innovators should develop novel payment models that reduce the
risk and uncertainty around long-term value and provide safeguards to ensure
high-value care.”

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Aim: enhance support for the development of medicines that target an unmet medical need

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Normally
Chronic diseases: you give the medicine as long as there is
therapeutical benefit

One time treatment: you give it in the first, and then later on
we will get the benefits, hard to include the benefits and until
what point. High upfront costs, but also high uncertainty/non
demonstrated benefit in the long term.

Key challenges for one-time therapies

 Payer affordability
- High upfront costs
- Uncertainty from responsibility of financing for healthcare providers in fragmented payer
systems
 Payer assessment of value and price
- Lack of tools and experience for payers and HTA bodies to evaluate potentially curative
treatments
- Uncertainty from long-term results and safety
 Compatibility with healthcare systems
- Disruption of existing treatment algorithms and infrastructure

Payment models in EU countries

In France they had coverage with evidence development (annual reassessment).

In Germany they had a payment model with outcome based rebates. 50% will be paid back if after a
certain undisclosed time the patient would die.

In Italy they have outcomes-based staged payment: payments in three instalments when undisclosed
outcomes are reached.

In the Netherlands they just don’t care about a payment model; budget impact is too low to care.

Costs are high, and will be increasing.

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Unveiling the EU-HTA Regulation: A Deep Dive Into the Joint Clinical
Assessment (JCA)
EU HTA replaces the voluntary network of national authorities

 EU HTA-regulation establishes
o the legal basis and provides a permanent framework for joint HTA work between MS
for medicines and high-risk medical devices and IVD
o To improve the availability for EU patients of innovative technologies in the area of
health
o To promote convergence in HTA tools, procedures and methodologies
o To ensure efficient use of resources and strengthen the quality of HTA across the EU
o To improve business predictability

 The framework for joint HTA work covers

 EU HTA coordination group appoints subgroups

o Horizon scanning (HS)
Helps the HTACG identify emerging health technologies expected to have a major
impact on patients, public health or healthcare system and will be subject to the JCS.
o Joint Scientific Consultation:

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  refers to the opportunity of HTA to consult the MS Coordiantion Group in
order to obtain guidance on the information, data, analysis and other
evidence that are likely to be required from clinical studies.
 Early dialogue between manufacturer and HTA bodies facilitates the
development of robust evidence packages that meet the needs of the
stakeholders. JSC will take place in parallel with EMA’s Scientific Advice.
Request for JSC will be selected based on: 1) unmet medical need (not
defined), 2) first in class, 3) impact on pt, public, system, union-wide major
added value, 4) union-wide clinical research priorities
 Joint Clinical Assessment (JCA): ensures consistency and avoids duplicate efforts across MS
o MS obliged to take JCA into due consideration the EU JCA but national HTA processes
remain in place and determination of value is a national responsibilityu
o JCA is an one assessment of the clinical benefit of the new drug that is the basis for
all EU MS
o It does not replace the national market access processes rather it comes on top
o The result of the assessment will be an evaluation of the efficacy and safety of the
new drug in comparison to the appropriate comparators as defined by the EU HTA
process
 JCA is NOT an assessment of non-clinical evidence (economic, ethical, societal,
organisational)
 With JCA appraisal and value determination remain under national responsibility and
will require additional evidence which is not in the JCA
 Voluntary Cooperation: the regulation allows MS to cooperate voluntarily on HTASs for
specific technologies and an opportunity to pool resources and share best practices. It was
recommended that voluntary cooperation areas should if possible, link to the mandatory
aspects of the regulation
 Post-launch evidence generation and digital medical devices were mentioned by
several MS as potential topics for voluntary cooperation

Steps in Joint Clinical Assessment process:

When does the JCA start?

When the new dossier is presented to EMA

2. Assessor and co-assessor are appointed

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 o They should not be the same as those involved in the JCS
o They are part of HTA bodies
o One member of assessment team must have scientific expertise in
information retrieval and one member in statistical analyses
3. Scoping PICOs
o During the scoping process the appropriate PICOs are established
 In the scoping phase the Inventory of need of the MS are established

4. Develop dossier

5. Submission of the dossier

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 6. Dossier Assessment
 Dossier assessment report will not contain a value judgement or conclusion on the
overall clinical added value of the assessed health technology and shall be limited to
a description of the scientific analysis
 The results sections will provide an assessment of the appropriateness of the
methods used by the developer in the submission dossier.
 The degree of certainty of the relative effects by PICO question, considering the
strengths and limitations of the available direct and indirect evidence will be
described.
 The results section should also describe what relevant information is missing.
 The assessment will be done in conformity with the existing methodological
guidelines in place at the time of assessment.
 Dossier assessment will rely on methodological and transversal guidance documents

7. Final JCA report

Five areas for clarification and improvement:

1. Developing a feasible number of lead-PICOs

2. Evidence from non-randomised/single-arm studies

o RCT is the standard, but not all therapeutic areas have to be treated the
same
o Especially for oncology drugs and ATMPs the number of
accelerated/conditional EMA approvals based on non-randomized / single-
arm studies is growing
o Challenging to estimate unbiased treatment effect
o One measure to mitigate bias is to use an endpoint that doesn’t change
without treatment
 Tumor response rate, where response without treatment is unlikely when people are
not treated
o However, HTA and JCA require:
i. Final outcomes, especially in MS using the QALY-framework
ii. A comparator
o To meet these requirements, external data are necessary

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 o This requires consensus on the appropriate methodology for the selection and
matching of external data
o Role non-randomized evidence will only become more important (personalized
medicine, rare diseases, curative treatments)
o ATMPs (advanced therapy medical product) may claim long-term health benefits and
large lifelong savings in costs. However, these are rarely demonstrated in short term
clinical trials. The claims need to be validated with RWD. The EU HTA-regulation
does not address post-marketing studies.
3. More room for innovative methodology
o Methodological guidelines mainly give an overview of methods that are acceptable
or should be reported, and have been written for the assessor but not the submitter
of the evidence
o Focus on “classical” methods with littles room for the latest scientific methods
4. Common judgement of scientific validity of the evidence
o Because uncertainty can be weighed differently, the assessment of the scientific
validity of the evidence (indirect comparisons, surrogates endpoints, sensitivity
analysis, proportional hazard assumption) is left to the MS
o In case of single arm studies, external data gives some insights into uncertainty (96%
CI)
o However, we need to develop common understanding of the acceptable level of
uncertainty
o JCA reports would include a clear assessment of the scientific validity of the evidence
to provide MS with a common basis for decision making
5. Aligning regulatory, EU HTA, and national HTA procedures
What will the collaboration with EMA look like? How exactly will the timelines of the process
look like?
How will the EU HTA and antional HTA procedures be aligned?

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