Price-volume Agreements Research Articles

Confronting High Costs And Clinical Uncertainty: Innovative Payment Models For Gene Therapies.

Gene therapies offer potentially life-changing benefits for patients, but their unprecedented high prices exacerbate challenges for reimbursement. Payers must confront high budgetary impacts, as a large up-front payment for each patient makes it difficult to predict and absorb costs. Payers also face considerable clinical uncertainty, as evidence for efficacy and durability is limited at approval. Alternative payment models may address these reimbursement problems and ensure equitable patient access. We developed a taxonomy of possible payment mechanisms for gene therapies, including installments, risk pools, reinsurance, price-volume agreements, expenditure caps, subscriptions, outcomes-based payments and rebates, warranties, population outcomes-based agreements, and coverage with evidence development. We illustrate how these payment models take three main approaches: amortization, which mitigates initial budget impact by spreading payments over time; risk spreading, which makes budgets more predictable by pooling costs with other payers or capping costs based on expected volume; and performance-based payment, which addresses clinical uncertainty by tying prices to patient- or population-level outcomes. We discuss each payment model, its advantages and challenges, and considerations for US payers.

Implementation of risk-sharing agreements in Saudi Arabia: Comparison and reflection on the NICE Model

In recent years, healthcare spending has increased, due to factors such as aging population, lifestylebased diseases, and high-cost health technologies. These factors have put enormous pressure on policymakers to curtail costs and shift towards value-based healthcare system. In this system, drug companies must demonstrate the value of their products in real-world settings. However, evidence may not be available at the time of product launch, leading to delays in reimbursement decisions and access of patients to products. To address this gap, risk-sharing agreements (RSA) have been introduced between manufacturers and payers. The most common type of RSA is the financial-based agreement which may take various forms such as annual sales caps, price-volume agreements, and comparator rebates. These agreements allow for rapid access to innovative medications. Another type of RSA is the outcome-based agreement which ties reimbursement to the real-world outcomes of products. These agreements are more complex, but they are expected to grow rapidly with the availability of real-world data. In the Middle East, the use of RSA is limited, although it is expected to increase with the ongoing shift towards a value-based healthcare system and introduction of health technology assessment. Saudi Arabia is leading these efforts in the region. This study was aimed at describing the current status of RSAs, trends in utilization of RSAs, and challenges of RSA implementation in Saudi Arabia (KSA). Real-world examples of RSAs in various healthcare sectors are also provided. Overall, the use of RSA facilitates access to innovative medications while ensuring value for money and efficient utilization of limited healthcare resources

Spotlight commentary: Navigating between financial risks and improved treatment outcomes with immune checkpoint inhibitors in cancer patients: The need for biomarker identification and dose optimization.

Spotlight commentary: Navigating between financial risks and improved treatment outcomes with immune checkpoint inhibitors in cancer patients: The need for biomarker identification and dose optimization.

Price-volume agreements: A one principal/two agents model

We present a one principal/two agents model of price-volume agreement, which involves one buyer (the principal) and competition between two manufacturers (the two agents). A theoretical analysis is presented, showing that, in accordance with empirical evidence from the literature on price-volume agreements in the pharmaceutical sector, manufacturers’ competition in a price-volume agreement scheme can decrease buyer’s expenditure especially when the second manufacturer, which has the possibility to enter (or not enter) later, has sufficiently small marginal production cost. Moreover, it is shown that the adoption of a price-volume agreement scheme for the first manufacturer can benefit the buyer with respect to the case in which single-price contracts are proposed to the former. The paper contributes to fill a gap in the literature about theoretical models of price-volume agreements, which are still scarce according to a recent review.

PNS66 How Accurate Are the Medicines Sales Forecasts? a Retrospective Analysis in France

In France, medicine prices are set by the French Healthcare Products Pricing Committee (CEPS) through negotiations with pharmaceutical industries. Sales volumes is one of the main price determinants. It may lead to major impact in the final pricing agreement in particular on a potential managed-entry agreement structure or on market shares assumptions. This analysis aims to evaluate the accuracy of the sales forecasts provided by the manufacturers to the CEPS when starting price negotiations. This retrospective study includes in- and out-patient medicines which reimbursement decision for their first indication was published in 2015 or 2016 in the Official Gazette. It excludes biosimilars, generics, medicines with new indication or new pharmaceutical form which reimbursement occurred within the 36 first months sales, medicines funded through a DRG and those which already had sales before reimbursement. The sales forecasts are extracted from the economic dossier submitted by the manufacturers, and actual sales volume from the GERS database. Descriptive statistics are used to compare the difference between the sales forecasts and the sales volume in a rolling period of 36 months. Thirty-eight new medicines fulfill the inclusion criteria and thus have been included in the final analysis, among the eighty-one medicines that were reimbursed for their first indication in 2015 or 2016. The actual sales volume are in general lower than the sales forecasts (median gap of -30,5% over three years). The median gap between the sales volume and the forecasts is -42.9 %, -41.5 % and -41.8 % for respectively the first, second and third year of marketing. Inaccurate forecasts may distort medicines expenditure due to inadequate managed-entry agreements build on these data such as price volume agreements. Payers should mitigate these discrepancies and thus, favor simple discounts or ex-post mechanisms to increase health-spending predictability.

Price Reduction of Anticancer Drugs from 2007 to 2019 in South Korea: The Impact of Pharmaceutical Cost-Containment Policies.

To assess price reductions of anticancer drugs in South Korea over 12 years and analyze the association between price reduction, drug characteristics, and repricing mechanisms. We constructed a dataset based on the Health Insurance Review and Assessment Service (HIRA) price log of anticancer drugs from January 2007 to June 2019. We investigated each mechanism that resulted in a price reduction, including actual transaction price (ATP), voluntary reduction by a manufacturer, price-volume agreement, expansion of indication or reimbursement scope, price cut at generic entry, lump price cut in April 2012, and re-evaluation. The price reduction rate per year was estimated by dividing the total number of price reduction events by the total period for which the products were on the market. A Poisson regression model was used to estimate the characteristics-adjusted incidence rate ratio of the price reduction. Price reduction per event was also determined across originator and generic products. Data analysis was performed using R (version 3.5.1). Five hundred price reductions occurred in 439 new anticancer drugs, with a reduction rate per 100 product-years of 23. ATP was the most frequent cause (39.2%) but had minimal impact (average reduction per event of 3%), followed by lump price cut (19.2%) and voluntary reduction (10.2%). Generic entries and lump price cut had the greatest impact (16-29% reduction per event). ATP was the most frequently occurring mechanism, followed by generic entry, voluntary reduction, and the lump price-cut in April 2012. The incidence of price reduction of anticancer drugs increased gradually due to various repricing mechanisms. Although these mechanisms are effective, improvements can be made. Well-designed mechanisms that actively regulate price adjustment are needed to establish repricing policies that adequately reflect changes in the value of drugs over their entire life cycle.

PNS87 MAJOR TRENDS AND IMPLEMENTATION OF RISK-SHARING AGREEMENTS IN CHINA: A SYSTEMATIC REVIEW

Risk-sharing agreements (RSAs) are used in some countries to address the uncertainty about the actual usage and clinical efficacy of drugs in order to manage the healthcare budgets while improving the access of innovative drugs. This study was to understand the current trends, key stakeholders’ opinions, potential success factors, and challenges in the use of RSAs in China. A systematic literature review was conducted using PubMed, CNKI and Wanfang databases, to identify relevant articles in both Chinese and English published up to the end of 2019. Types of RSAs were classified and trends in use were analyzed. Of the 1,533 retrieved studies, ten were finally included for data extraction and analyses. The earliest study was published in 2013 and 70% of studies were published during 2016-2017. Among the included studies, two were empirical analyses while the rest were conceptional. The theoretical model that specifically developed for China was missing in the literature. Three studies included neighboring regions as referencing cases. One study discussed the regional cases in China but did not evaluate the outcomes. Price-volume agreements yield the highest share (30%) of studied RSA types, followed by outcome guarantee (26%). In general, constructing standardized agreements with outcome evaluation systems has been recommended to China’s health authorities. The overall interest in RSAs in China has been increasing for a decade. The publications in RSAs research in China acknowledged that the concepts related to RSAs have been well introduced in China and the impacts had been seen in healthcare policymaking. Further studies are needed to form theoretical suggestions and practice models. To support the nationwide implementation, financial and clinical outcomes of RSAs piloted at the regional level or by commercial insurances are needed to be evaluated.

PCN304 REIMBURSEMENT AND PAYER MANAGEMENT OF IMMUNE CHECKPOINT INHIBITORS IN KEY EUROPEAN MARKETS

Immune checkpoint inhibitors (ICIs) have enjoyed considerable clinical and commercial success since their launch, and now account for a significant and growing proportion of drug budgets. This study assessed payer attitudes towards the reimbursement of ICIs and explored current and future expenditure control strategies in the five major EU markets (France, Germany, Italy, Spain, and the UK) (5EU). 14 payers in the 5EU were interviewed in Q4 2018 regarding the current and future ICIs pricing and reimbursement landscape. Health Technology Assessment (HTA) and pricing decisions for ICIs in the 5EU were also analysed. Price-volume and budget ceiling agreements are the most common cost-control measures utilised across Europe. Following approvals in expanded patient populations, payers require price reductions for ICIs or new price-volume agreements due to increased patient numbers and related budget impact. Payers would like to leverage the growing competition in the ICI space to manage costs, but highlight that preferential contracting/tendering is unlikely to occur until there is a more saturated market with a larger number of overlapping indications in more prevalent diseases. Looking forward, payers stress the need for more sophisticated tools to control the budget impact of high-cost combination regimens. This is especially relevant when the components of a combination regimen are produced by two different manufacturers, as payers currently lack the ability to bring both manufacturers into joint pricing negotiations. Payers in Europe expect new tools to emerge in the next 1-3 years. Payers will continue to use the full arsenal of current mechanisms available to control ICI drug budget impact. New tools will be developed to track the usage and minimize the drug budget impact of high-cost combination regimens, and ensure their use is factored into individual price negotiations for both existing therapies seeking label expansion as well as new therapies.

PMD30 MEDICAL DEVICES MANAGED ENTRY AGREEMENTS IN FRANCE: A RETROSPECTIVE ANALYSIS (2018-2019)

In France, the price of medical devices included in the positive reimbursement list (LPPR) is negotiated between the manufacturer and the French Healthcare Products Pricing Committee (CEPS). The agreement leads to the list price publication. However, it can also include other elements which are not public as the managed entry agreement (MEA). MEA are confidential. This study aims to exhaustively review the MEA use for reimbursed medical devices in France. All the agreements signed between 2018 to May 2019 were reviewed to identify those including a MEA. Analyses considered the MEA type depending on the medical device characteristics (e.g. therapeutic area, HTA score, target population, budgetary impact). Statistical analysis was conducted. Among the 259 agreements analysed, 30% of them include a MEA. Confidential agreements are mostly associated to innovative devices (81% of them). While they are less frequent for medical devices with no added medical value (22%). Price-volume agreements are the most commonly used (71%), followed by simple discount (16%) and performance-based agreement (7%). When considering the distribution channel, inpatient medical devices are more entitled to be associated to a MEA than outpatient devices. In terms of therapeutic area, devices in cardiology and neurology ranks first in MEA use. CEPS increasingly uses MEA as a regulation tool to contain reimbursed medical devices expenditures.

Implementation of risk-sharing contracts as perceived by Spanish hospital pharmacists

BackgroundConcerns about financial sustainability of health systems have promoted the adoption of risk-sharing agreements. Nevertheless, few insights have been derived, due to their confidentiality. The purpose of this study is to analyze to what extent these agreements have been implemented in Spain and the importance of several clinical and management variables concerning their use. We also explore whether risk-sharing agreements promote the adoption of personalized medicine. We give a descriptive analysis based on a questionnaire sent to members of the Spanish Society of Hospital Pharmacy, asking about the implementation of risk-sharing contracts in their hospitals.ResultsThere were 80 replies. Implementation of risk-sharing agreements was high (90%), being oncology, neurology, dermatology and infectious diseases the main specialties. The most relevant variables were the number of units of medication per year (89%) in price-volume agreements, and the efficacy and uncertainty of treatments (over 75%) in pay-for-performance agreements. Price-volume agreements were suitable for both conventional and personalized medicine and pay-for-performance more specific for personalized medicine. Paying for performance promotes genetic testing (85%).ConclusionsThe results suggest health authorities should encourage the assessment of financial and health outcomes of real-world contracts of conventional and personalized medicine to better know the variables influencing their use.

PHP302 - HOW AFFORDABILITY IS CONSIDERED FOR PRICING POLICIES?

In the current cost-constrained environment and growing launch of innovative and expensive therapies, affordability is becoming increasingly critical for payers beyond cost-effectiveness analysis (CEA). The objective of this study was to assess how affordability was considered in pricing policies in France, Germany, Italy, Spain, the Netherlands, United Kingdom (UK), Australia and Canada. Review of pricing policies published on websites of health authorities in countries of scope. All countries request budget impact analysis (BIA), but only Australia has an explicit consideration of affordability following CEA. In UK, BI pilot test introduced in 2017 requests that any new cost-effective medicines, but likely to be over the budget impact limit of £20 million in any one of their first three years of use, will trigger commercial discussions between the company and NHS England; the impact should be assessed in 2020. In Germany, BIA is requested in AMNOG dossier but not considered in early benefit assessment. In the Netherlands, economic data (CEA and BIA) are mandatory when drug budget impact is expected reach at least €2.5 million in any of the first three years following reimbursement.In France, BIA is formally requested under some conditions, i.e., an innovative drug with expected turnover superior to 50 million euros during the second full year of commercialization,but not formally considered for pricing; price-volume agreement is used for controlling BI. In Italy and Spain, BI is usually controlled through cap volume agreements and potential rebates; pay for performance is also important leverage for pricing negotiations in Italy. In Canada, CADTH focus on CEA even if BIA are part of submissions; BIA is mainly used at province level. Despite becoming critical for decision making, very few countries have a formal process to integrate budget impact in their decision. This remains an empirical unclear deliberative process.

Managed Entry Agreements for Pharmaceutical Products in Middle East and North African Countries: Payer and Manufacturer Experience and Outlook

ObjectivesThe first objective is to describe current managed entry agreement (MEA) activity in the Middle East and North African (MENA) region and the pharmaceutical decision makers’ perception and use of these agreements; The second objective is to describe the challenges as well as to reflect on the uncertainty related to MEAs implementation and the future outlook for MEAs activities in the region. Study DesignA prospective cross-sectional survey. MethodsA questionnaire was sent to several pharmaceutical manufacturers and public officials involved in pricing and reimbursement of pharmaceuticals in the region. ResultsOf the 62% of total respondents, 25% were from the public sector, with the remainder from the pharmaceutical (pharma) industry. Only 42% of participants reported having MEAs running in their institutions, the majority representing Lebanon. All respondents reported the use of financial-based agreements, most referring to “discounted treatment” and, to a lesser extent, a “price volume agreement.” Financial-based agreements were reported as either the only type of MEA (71.4%) being used or as being used with outcomes-based agreements (28.6%). The majority of participants ranked challenges in identifying and measuring relevant data as well as the lack of expertise in assessing health economics data. The majority of respondents projected an increase in the use of MEAs to address budget impact while improving access to innovative care. ConclusionsFew MENA countries are implementing MEAs, which could be due to lack of data infrastructure as well as a shortage of experts in health economics. Health care stakeholders continue to be optimistic regarding the potential of MEA implementation.

PP70 Health Technology Assessment Evaluations Of Combination Drugs: The Italian Case Study

Introduction:Health technology assessment (HTA) must adapt to support the changing health system landscapes and improve access to valuable innovation under budgetary constraints. This is exemplified by the pricing and reimbursement of high-cost combination therapies increasingly used in oncology. Variability exists in current HTA practices across different countries, resulting in discrepancies in reimbursement outcomes and patient access. Using Italy as a case study, the objective was to assess the challenges faced by HTA agencies in the negotiation of pricing and reimbursement of combination therapies.Methods:A targeted literature review of Italian HTA agency websites was undertaken to identify any literature/guidance relating to HTA decision-making for combination oncology therapies.Results:In Italy, there is no fixed cost-effectiveness threshold and decisions are based on multiple criteria. Managed market entry agreements are extensively used; price-volume agreements and drug registries are common. While this framework allows flexibility and avoids the rigidity of incremental cost-effectiveness ratio thresholds, it has raised concerns about transparency and budget impact. Combination therapies are not given specific concessions; however, market access for a combination of a new high-cost drug with an existing one is complex, particularly if the drugs are manufactured by different companies. The added value provided by the new drug in the combination should be rewarded while the older product benefits from the increased volume of use. The price of the older drug cannot be lowered unless the pricing and reimbursement contract is expiring or a new indication/formulation is pending, presenting a challenge to both pharmaceutical companies and HTA agencies.Conclusions:Combination therapies pose a challenge for HTA agencies. In the Italian system this is partially mitigated by the use of multiple criteria for decision-making and managed access agreements. However, these approaches have also led to concerns about a lack of transparency in decision-making.

The Implementation of Managed Entry Agreements in Central and Eastern Europe: Findings and Implications.

BackgroundManaged entry agreements (MEAs) are a set of instruments to facilitate access to new medicines. This study surveyed the implementation of MEAs in Central and Eastern Europe (CEE) where limited comparative information is currently available.MethodWe conducted a survey on the implementation of MEAs in CEE between January and March 2017.ResultsSixteen countries participated in this study. Across five countries with available data on the number of different MEA instruments implemented, the most common MEAs implemented were confidential discounts (n = 495, 73%), followed by paybacks (n = 92, 14%), price-volume agreements (n = 37, 5%), free doses (n = 25, 4%), bundle and other agreements (n = 19, 3%), and payment by result (n = 10, >1%). Across seven countries with data on MEAs by therapeutic group, the highest number of brand names associated with one or more MEA instruments belonged to the Anatomical Therapeutic Chemical (ATC)-L group, antineoplastic and immunomodulating agents (n = 201, 31%). The second most frequent therapeutic group for MEA implementation was ATC-A, alimentary tract and metabolism (n = 87, 13%), followed by medicines for neurological conditions (n = 83, 13%).ConclusionsExperience in implementing MEAs varied substantially across the region and there is considerable scope for greater transparency, sharing experiences and mutual learning. European citizens, authorities and industry should ask themselves whether, within publicly funded health systems, confidential discounts can still be tolerated, particularly when it is not clear which country and party they are really benefiting. Furthermore, if MEAs are to improve access, countries should establish clear objectives for their implementation and a monitoring framework to measure their performance, as well as the burden of implementation.Electronic supplementary materialThe online version of this article (doi:10.1007/s40273-017-0559-4) contains supplementary material, which is available to authorized users.

Comprehensive taxonomy and worldwide trends in pharmaceutical policies in relation to country income status

BackgroundRapidly evolving socioeconomic and technological trends make it challenging to improve access, effectiveness and efficiency in the use of pharmaceuticals. This paper identifies and systematically classifies the prevailing pharmaceutical policies worldwide in relation to a country’s income status.MethodsA literature search was undertaken to identify and taxonomize prevailing policies worldwide. Countries that apply those policies and those that do not were then grouped by income status.ResultsPharmaceutical policies are linked to a country’s socioeconomics. Developed countries have universal coverage and control pharmaceuticals with external and internal price referencing systems, and indirect price–cost controls; they carry out health technology assessments and demand utilization controls. Price-volume and risk-sharing agreements are also evolving. Developing countries are underperforming in terms of coverage and they rely mostly on restrictive state controls to regulate prices and expenditure.ConclusionsThere are significant disparities worldwide in the access to pharmaceuticals, their use, and the reimbursement of costs. The challenge in high-income countries is to maintain access to care whilst dealing with trends in technology and aging. Essential drugs should be available to all; however, many low- and middle-income countries still provide most of their population with only poor access to medicines. As economies grow, there should be greater investment in pharmaceutical care, looking to the policies of high-income countries to increase efficiency. Pharmaceutical companies could also develop special access schemes with low prices to facilitate coverage in low-income countries.

PHP341 - Managed Entry Agreements: Portuguese Experience

Managed Entry Agreements (MEA) are well established mechanisms for managing the uncertainty around the clinical evidence, eligible patient population, cost-effectiveness and budget cap. Building on this experience, this research aimed to characterise the several MEA applied in the Portuguese Health Technology Assessment System (SiNATS) and monitored by INFARMED, I.P., namely describe their main objectives, instruments, benefits and the criteria underlying its implementation. Simultaneously, this study intended to describe utilization variability among Therapeutic Areas. The analysis begins by identifying the positive decisions of medicines reimbursement by National Health Service (NHS), in both inpatient and outpatient settings, and for which there was MEAs approved between 2005 and 2015. Following, we classified the MEAs, based on the European Taxonomy defined by Ferrario & Kanavos (2013). Research indicated that Portugal focused on MEA that are financial schemes, performance-based agreements (recently implemented) or both. In the study period it was celebrated more than 140 MEAs (more than 80 MEAs approved between 2010 and 2015), of which approximately 60% were for inpatient setting and 40% were for outpatient setting. In inpatient setting more than 40% of MEAs are antineoplastic and immunomodulating agents while in outpatient setting about 30% of MEAs are from nervous system group. To date, the MEA instrument most used is the price-volume agreement (PVA), followed up by outcome-guarantee and coverage with evidence development (CED) agreements. This study confirmed that a variety of MEAs were increasingly used in Portugal to manage aspects of uncertainty associated with the introduction of medicines in the NHS. Therefore, MEAs represent a valuable strategic tool for overcoming these challenges and ensuring the sustainability of NHS.

Assessment of the Price–Volume Agreement Program in South Korea

The Price–Volume Agreement Program (PVAP) was promulgated in 2007 in South Korea as the first attempt to adjust drug pricing according to total consumption in order to contain drug expenditure. This study was designed to assess the impact of the PVAP on diabetes drug expenditure for a period of a 10-year period (2003–2012) using claims data from the National Health Insurance Service. We estimated a multilevel mixed-effects linear regression model by comparing the level of total monthly diabetes drug expenditure for drugs subject to PVAP and existing drugs after adjusting the average differences in drug expenditure before and after the PVAP. The monthly total expenditure for drugs that were newly listed through the PVAP (negotiation drugs) was 7.03% higher on average compared to that for existing drugs, controlling for the baseline differences in expenditure before and after the PVAP. This increase was observed in all four subgroups of diabetes drugs, including sitagliptin, vildagliptin, exenatide, and others. The growth rate of total diabetes drug expenditure was reduced after the PVAP despite the sustained escalation of expenditure levels, which may imply that the PVAP has the potential to be an effective tool for drug expenditure control in the long term.

Factors influencing the difference between forecasted and actual drug sales volumes under the price–volume agreement in South Korea

This study analyzed factors contributing to increases in the actual sales volumes relative to forecasted volumes of drugs under price–volume agreement (PVA) policy in South Korea.Sales volumes of newly listed drugs on the national formulary are monitored under PVA policy. When actual sales volume exceeds the pre-agreed forecasted volume by 30% or more, the drug is subject to price-reduction. Logistic regression assessed the factors related to whether drugs were the PVA price-reduction drugs. A generalized linear model with gamma distribution and log-link assessed the factors influencing the increase in actual volumes compared to forecasted volume in the PVA price-reduction drugs.Of 186 PVA monitored drugs, 34.9% were price-reduction drugs. Drugs marketed by pharmaceutical companies with previous-occupation in the therapeutic markets were more likely to be PVA price-reduction drugs than drugs marketed by firms with no previous-occupation. Drugs of multinational pharmaceutical companies were more likely to be PVA price-reduction drugs than those of domestic companies. Having more alternative existing drugs was significantly associated with higher odds of being PVA price-reduction drugs. Among the PVA price-reduction drugs, the increasing rate of actual volume compared to forecasted volume was significantly higher in drugs with clinical usefulness.By focusing the negotiation efforts on those target drugs, PVA policy can be administered more efficiently with the improved predictability of the drug sales volumes.

Application of the Price-Volume Approach in Cases of Innovative Drugs Where Value-Based Pricing is Inadequate: Description of Real Experiences in Italy.

Several cases of expensive drugs designed for large patient populations (e.g. sofosbuvir) have raised a complex question in terms of drug pricing. Even assuming value-based pricing, the treatment with these drugs of all eligible patients would have an immense budgetary impact, which is unsustainable also for the richest countries. This raises the need to reduce the prices of these agents in comparison with those suggested by the value-based approach and to devise new pricing methods that can achieve this goal. The present study discusses in detail the following two methods: (i) The approach based on setting nation-wide budget thresholds for individual innovative agents in which a fixed proportion of the historical pharmaceutical expenditure represents the maximum budget attributable to an innovative treatment; (ii) The approach based on nation-wide price-volume agreements in which drug prices are progressively reduced as more patients receive the treatment. The first approach has been developed in the USA by the Institute for Clinical and Economic Review and has been applied to PCSK9 inhibitors (alirocumab and evolocumab). The second approach has been designed for the Italian market and has found a systematic application to manage the price of ranibizumab, sofosbuvir, and PCSK9 inhibitors. While, in the past, price-volume agreements have been applied only on an empirical basis (i.e. in the absence of any quantitative theoretical rule), more recently some explicit mathematical models have been described. The performance of these models is now being evaluated on the basis of the real-world experiences conducted in some European countries, especially Italy.

Pricing and Promotional Decisions of a Drug Manufacturer with the Presence of a Price-Volume Agreement

Physicians prescribe not only based on the health outcome and costs of a drug, but also based on their personal experience and preference for certain drugs. Thus, drug manufacturers invest a significant amount of promotional efforts to influence physicians, efforts including detailing, invited conferences, and sponsored research, etc. Since a third-party payer must pay for all claims for a drug that is covered by an insurance plan, the expense for the drug may be very high and uncertain. To control increasing drug costs and sales uncertainty, price-volume agreements have been proposed as a way to reduce the risk of higher-than-expected drug expenses. In such agreements, a drug manufacturer has to return a portion to the payer of sales exceeding a pre-specified volume threshold. In this paper, we investigated the drug pricing and promotional decisions of a drug manufacturer in the presence of a price-volume agreement under three different pricing scenarios. We found it not necessarily true that a high drug price or a high quality drug (with a high health benefit) reduces the manufacturer’s motivation to promote. We also found that the existence of a price-volume agreement may not increase the drug price, but it does help control the promotional effort. Although a negotiated price may be lower than the price set by the manufacturer, a negotiation may not always be preferred because the manufacturer’s profit is reduced by the negotiation and thus an agreement may not be reached under certain circumstances.