Pharmaceutical Pricing and Reimbursement – Reference Pricing and Economic Evaluations Will Dominate Future Pricing and Reimbursement Strategies

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Online PR News – 04-February-2010 – – Pharmaceutical Pricing and Reimbursement – Reference Pricing and Economic Evaluations Will Dominate Future Pricing and Reimbursement Strategies

provides key data, information and analysis of the major issues affecting the Pricing and Reimbursement decisions across the globe. It discusses the major changes that have been observed at the global level. The report also covers the issues specific to particular geographies as well. The geographies covered include the US and countries within Western Europe (the UK, France, Germany, Spain, Italy), Asia-Pacific (Japan, Australia, China), Central & Eastern Europe (Czech Republic, Poland, Austria, Hungary, Romania) and Scandinavia (Norway, Sweden, Denmark). It provides a comprehensive view of the best practices followed by the governments in these countries with respect to pricing and reimbursement of the prescription as well as generic drugs. The report also provides the impact analysis of each of the issue on the four key stakeholders concerned with the pricing and reimbursement practices that is pharmaceutical companies, payers, regulatory agencies and patients/doctors. The report puts a special emphasis on the orphan drugs since the pricing and reimbursement patterns for orphan drugs are different from the traditional mechanisms. ( )

Innovative Pricing and Reimbursement Mechanisms Due to Financial Pressures Will Continue to Exert Downward Pricing Pressures in Future

Twin pressures of global economic meltdown and spiraling healthcare costs have forced several countries to adopt a conservative approach towards pricing and reimbursement of the cost of drugs. The rising cost of medicines, along with an unhealthy lifestyle of people in a number of countries, particularly developed countries, the burden on the healthcare systems to provide quality healthcare to each citizen is increasing. This increase directly impacts the governments’ ability to provide quality healthcare to its citizens, especially in countries where the healthcare system is largely government funded.
Different mechanisms, including reference pricing, cost-benefit analysis, health technology assessments and many others are being employed to bring down the price of prescription, as well as generic drugs. In addition, innovative pricing mechanisms, such as the Step Price System will continue to exert downward pricing pressure on pharmaceutical companies in the future.

Reimbursement Agencies have Increased Sensitivity for High Price Drugs
Governments, across the world, are moving towards economic evaluations as a tool to measure the economic impact of the drug. In the last few years, the pressure from various reimbursement groups, such as managed care organizations, pharmacy benefit managers, payers and government reimbursement agencies have increased due to rising costs and evidence of few medicines charging premium pricing despite the absence of equivalent therapeutic benefits.
Economic evaluation helps the government agencies to examine the price of drugs with respect to the therapeutic benefits they provide and reimburse the cost of the drug accordingly. These evaluations also help the pharmaceutical companies to get their innovative drugs listed in the formularies, justify the premium pricing and also provide substantial data to help their sales force influence the physicians. While such evaluations prove to be beneficial for the innovative drugs that can receive favorable reimbursements, it could prove economically unfavorable for the drugs that do not provide substantial benefits compared to its costs. However, economic evaluations have enabled significant cost rationalization for the developed, as well as developing countries.

Excessive Pricing of Orphan Drugs by the Pharma Companies Demands Measures for Greater Price Control
Pharmaceutical companies that manufacture orphan drugs have been leveraging the government benefits provided to them under the Orphan Drug Act 1983, which mainly revolve around greater pricing freedom and lenient reimbursements for the drugs. While orphan drug companies argue that due to small patient population they charge high prices, it has been observed that some drugs have blockbuster status and have been generating substantial revenues for their companies. In addition, some companies such as Ovation Pharmaceuticals (now Lundbeck) and Questcor Pharmaceuticals have increased the price of their drugs exponentially to reap maximum revenues. All these examples suggest that pricing for orphan drugs are extraordinarily high compared to conventional pharmaceutical pricing.
Some of the possible solutions to reduce the price of orphan drugs include developing a global agency for orphan drug development, introducing sales ceiling and flexible market exclusivity period and periodic price revisions. These measures can not only save government funds but also reduce the co-payment for patients.

Innovation will be the Key for Premium Pricing in Major Markets including the Emerging Markets
In future, negative pricing pressures from various payers would force companies to justify the premium pricing for their products. While the new processes such as ICD-10 and HTA will help the pharmaceutical companies to provide better evidence to prove the therapeutic superiority of their drugs, “me-too” and generic drugs will experience significant challenges to obtain better pricing and reimbursements. With increased scrutiny from payers to ensure cost-effectiveness of the drugs, only truly innovative products would be in a position to charge premium price for the drugs.
There has been an increase in the amount of supporting evidence required to prove a drug’s novelty to the reimbursement agencies. Besides the developed markets, in the emerging markets, such as China, the requirements for proving innovativeness of the medicine is becoming more and more stringent. This poses a great challenge to the companies that might incur extra costs in gathering evidence to prove their drug’s therapeutic superiority. However, innovation is sure to remain the key for premium pricing in future, even in the emerging markets.

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