Overcoming the challenge of optimizing drug pricing in emerging markets
Written by Arnaud Grunwald, global pricing & market access, strategic market initiative executive
Globally, healthcare costs are coming under closer scrutiny than ever before. In European countries, Canada, Australia and even emerging markets, medical products, services and devices are increasingly competing for smaller healthcare budgets, as governments look to relieve economic pressure by imposing price controls and exploring ways to implement value-based pricing on a grand scale.
In the UK for example, the Government and pharmaceutical companies recently agreed a new five-year pricing deal, which took effect on 1 January 2014. This introduced a fixed limit on NHS spend on branded medicines for the first time ever, with any additional expenditure above this level paid for by industry.
Although such agreements will have a major impact in mature healthcare markets, price controls are even more significant in emerging markets where pharmaceutical companies are currently targeting increased effort as sales slow down in the rest of the world.
China, for instance, which regularly conducts audits by the National Development and Reform Commission to set the upper-ceiling for patented and generic drugs reimbursed by the government, has apparently intensified its pricing audits. Although such audits - and resulting inevitable price cuts - are not unexpected, they clearly demonstrate how national payers in these newer healthcare markets are subjecting pharmaceutical companies and their pricing strategies to unprecedented microscopic examination.
Emerging markets remain attractive for pharmaceutical companies, due to their large, aging populations and governments’ promise to improve healthcare for their people. Latest forecasts show that the global pharmaceutical market will grow by 4.5 per cent a year on average to 2016, while emerging markets will experience nearly three times this level of growth, increasing by almost 12 per cent annually.
Yet there is a trade-off here, as any higher sales volumes secured by pharmaceutical companies in these emerging markets will be achieved at reduced margins. This is not necessarily bad news as any compromise which is recognised as balanced and fair creates a win-win-win for payers, patients and pharmaceutical companies alike.
The challenge of course is to arrive at the right balance. This is especially problematic, as many governments use national organisations such as the National Institute for Health Research (NIHR) in the UK to determine public reimbursement of drug therapies based on patient outcomes. Countries are increasingly using Health Technology Assessments (HTAs) in their reimbursement decisions, with healthcare payers increasingly demanding real-world evidence of value on pharmaceutical products.
And it doesn’t stop here. Added to this is the further complexity of international reference pricing (IRP), in which a product’s reimbursed price is determined by benchmarking that of the same product in other countries.
As a result of reference pricing, a price change in one country can dramatically lower the price government buyers are willing to pay in other countries. While it is common for emerging markets to reference developed markets, they are gradually changing their reference baskets to include lower-priced developed markets and other emerging markets as they look to strictly contain healthcare costs.
Previously, Mexico for example referenced developed markets only; today, by contrast, it includes such emerging markets across South America as Brazil, Argentina, Chile, Peru and Uruguay. Equally, whereas in the past Mexico did not consistently enforce its IRP rule when referencing European countries, this is now more consistently imposed since their reference basket is made of countries with a similar economic development status.
Even countries such as China that have yet to adopt IRP show signs that this may not be far off. This is not surprising perhaps, given the economic pressure on governments globally to cut healthcare budgets. The result of all this is that price erosion now has the potential to impact a pharmaceutical business across almost all its markets worldwide. And this is of even greater concern when 50 per cent of companies admit that they are under-equipped to enforce their global pricing strategies effectively and make sound global pricing decisions.
So how should they respond? Pharmaceutical companies can no longer focus solely on market share at a product level. Instead, they must view markets and products from both a global perspective and from that of each country’s overall budget, in order to influence purchasing policy so that reimbursement is commensurate with value.
Pharmaceutical companies must also take into account constraints such as local healthcare systems, epidemiology, affordability and distribution channels in order to better understand, anticipate and eventually mitigate price erosion. This is essential if they are to achieve long-term stability and success, by optimising access and profitability in each market as part of a balanced trade-off which is recognised as fair to all parties.
Five minutes with Stanley Healthcare's Troy Dayon
Stanley Healthcare provides technology solutions for caregivers, whether they are in a hospital, a care home, or at home. Here the company's President Troy Dayon explains the challenges carers face and what role technology plays in care for the elderly.
The healthcare workforce is shrinking while the population is aging. How can this be addressed?
Not only is the healthcare workforce shrinking, but the industry is facing the issue of overload and burnout among healthcare professionals.
One major approach to address this is to help each caregiver to accomplish more – not by pushing them harder but by focusing their attention on the things that matter most, harnessing technology such as AI and machine learning.
This technology provides caregivers with information on what care is needed, and which patients or residents to focus on first based on risk or acuity. The insights that it provides can help caregivers to be more efficient and address issues that would usually require more of their time, such as critical asset location, which takes time away from giving the care where it’s needed most.
What do healthcare providers need to do to address clinician burnout?
It is key for healthcare providers to understand the setting and the specific environment in which clinicians have been working. Many hospitals across the globe reconfigured entire wards to treat COVID-19 patients, and for more than a year, clinicians have been working in crisis mode.
They need the opportunity to return to regular, sustainable routines, supported by technologies that help make them more efficient, but also more fulfilled because they maximise time with patients, applying their hard-earned education and experience to work at the top of their license.
In aged care, the experience of managing a highly contagious and deadly virus has reinforced the need for a proactive approach to managing the health of residents. Caregivers need predictive tools like the Foresite solution to help them understand which residents are at greatest risk, so they can focus their efforts where they can have the most impact.
How can technology support older people?
AI-based technology such as Foresite harnesses a range of passive monitoring technologies to develop a baseline profile of a resident in aged care that highlights changes in health or behaviour. This information can help caregivers see where and when they need to spend their time, identifying heightened risk for falls and early indication of heart issues and even infections.
In fact, the technology has been shown to accurately predict events like falls, which allows intervention prior to an event occurring, rather than just automating routine processes.
Beyond this, connecting caregivers remotely to seniors to provide efficient care outside of traditional care settings is crucial. During the pandemic, there was a marked increase in the use of telehealth and remote monitoring of vitals, medication management and daily health.
These technologies fill a major gap in healthcare delivery: care for patients once they’ve been discharged from hospital, or for seniors who need some level of care but don’t need to be in an aged care home. By caring for people effectively in their own homes, we can help reduce the burden on hospitals from readmissions and leverage the expertise of aged care organisations beyond the confines of the four walls of the facility.
A lot of care is in fact delivered by unpaid carers. How can they be better supported with tech?
The remote monitoring technology that professional caregivers have access to can, in turn, also provide information and support to unpaid caregivers. For example, helping ensure a loved one is taking their medication, or knowing when they might be experiencing a change in health that can put them at risk.
Human observation is inherently limited, no matter how often you see a loved one, and you can’t always rely on what a senior says about themselves. It’s very common that they downplay problems, because no one wants to be a burden or relinquish their independence.
Remote solutions that connect family to an older relative help increase safety and wellbeing for the senior and reduce the burden on caregivers. They also make possible care decisions based on facts. At some point, a senior may need to transition to an aged care setting, which is often a difficult family conversation. This is an area where we can offer support to unpaid caregivers – reassurance during what is typically a very stressful period for the people providing that care.
In Japan several large hospitals are deploying robot nurses. Is this a potential solution?
I think the best path for robotics in healthcare is to focus on the root problem. It’s about dealing with a limited number of caregivers for a population that’s rapidly aging. Robotic technologies offer solutions that support the human healthcare providers with the information they need to make better and faster decisions about care. It’s about convergence and use of technology rather than a specific solution such as a robotic nurse.
This technology could be in the form of AI and machine learning or a robotic agent for routine administrative tasks. Removing low-value activities that distract caregivers from giving care is a key focus when it comes to robotics in healthcare. This automation can free up time for caregivers to spend more time with patients while optimising workflows.
Robots in this sense don’t replace humans. They are leveraged for what they do well – repetitive routines done with speed and precision – while humans are given the time and space to deliver what ultimately we all want: human-centered care.