Contracting options for pharmaceutical pricing
- October 30, 2020
Creating a new drug is a costly business, and it is therefore critical that companies optimise the return on investment of the drugs that make it to the market. This requires efficient, targeted pharmaceutical pricing and suitable contracting schemes. In response, the industry is moving towards models that focus on the value story and outcomes for patients, payers and providers.
Value-based pricing brings a number of uncertainties for both payers and industry, and these can be overcome by creating the right contracts between payers and drug developers.
Payers and industry face important questions regarding pharmaceutical pricing
When it comes to pharmaceutical pricing, both payers and industry face important questions, including:
- How will the product perform in the real world?
- What will be the real cost of the product?
- What value-added activities can improve product performance dramatically?
And to address this, most of these uncertainties can be handled with three types of contract between payers and the company. These are:
- Performance-based (reimbursements tied to conditions around producing outcomes or bridging evidence gaps)
- Finance-based (rebates/discounts for excesses in agreed-upon per-patient or sales thresholds)
- Value-added (added patient support and educational services).
Overall, while the industry moves towards pharmaceutical pricing models that focus on value and outcomes, payers remain uncertain about value-based pricing. However, to have any chance of success, contracting options must arrive at win-win agreements that meet the interests of decision-makers on both sides. Ideal contracting options will address a specific payer concerns, create/use a competitive advantage, and, of course, fall within legal/regulatory boundaries.
With expert insight and guidance from Valid Insight’s Senior Executive Advisor, Raf De Wilde, the road to flexible pricing will be a little easier to navigate. In his white paper, he explains the concerns payers have, the types of contracts they receive well, and low and high interest areas for payers. He goes into detail about targeting specific payer concerns, creating a competitive advantage, and contracting within international and local law.