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Neutralize Covid-19 Impact on Drug Prices And Market Access For Faster Recovery

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Covid-19 pandemic that has not spared any facet of human lives and livelihoods, has also reignited several ongoing debates related to the drug industry. The need to urgently resolve these issues grows manifold, as the real magnitude of this health crisis doesn’t seem to be clear even to the key Government decision makers.

This is vindicated by the research paper, written by government scientists and other experts, published on September 10, 2020 in the Indian Journal of Medical Research. It reveals, India had nearly 6.5 million cases as early as May 2020. Whereas, according to the health ministry, the total number cases stood at around 180,000 in late May. This happened because, ‘large numbers of cases could have gone under the radar earlier this year, because testing was limited to symptomatic patients or states had varying testing rates,’ the paper highlighted.

From the pharma industry perspective, a pandemic of such magnitude is also causing indefinite delay in pre-planned market access of several important drugs and vaccines. Some are due to technical reasons. However, many others are related to their value-based cost-effectiveness in the new normal, when the pandemic has put enormous strain on health expenditure, across the world.

In this situation, past mechanisms of new drug pricing, are required to undergo significant changes. The new yardsticks, I reckon, will be based on two critical factors. The first – the disease treatment priorities, as will be decided jointly by both doctors and patients. And the second – the paying capacity of both payers and individual patients, based on the value that each treatment will offer – again, as perceived by patients.

As it appears, the impact of Covid-19 on the pharma industry will continue till the medium term, if not beyond. Consequently, the concept of new drug pricing – based on well-documented, differential value offerings of treatments, would need to be revisited and recalibrated. This has to be realigned with evolving patient needs. Considering the emerging scenario, this article will focus on the exigency to neutralize Covid-19 impact on new drug prices and pre-planned ‘market access’ – for faster business recovery.

Covid-19 has increased the drug price sensitivity:

The challenge of increasing drug price sensitivity – triggered by the new Coronavirus pandemic, has now assumed a global dimension. A June 18, 2020 study, flags: ‘Nine in 10 Concerned About Rising Drug Costs Due to COVID-19.’ Although, this particular study (Gallup Poll) was conducted in the United States, general public apprehension is no different in other parts of the world, including India, for various reasons.

Even in America, which is considered Eldorado for pharma business, primarily for unregulated drug pricing, is also changing with the impact of Covid-19. The reason being, reported instances of drug prices are rapidly rising, amid the pandemic. As the above Gallup Poll highlights, today ‘a large majority of Americans support direct negotiations by the federal government with the drug manufacturer on the price of a treatment for the disease itself.” Interestingly, ‘significant support exists across all major demographic groups.’

Other specialists on pharmaceutical pricing and market access, also envisage that pharmaceutical companies will be faced with increased price sensitivity, and are quite concerned with the long-term impact of the pandemic on health care systems.

Covid-19 pandemic would seriously impact pharma spending:

As quoted above, several other specialists for pharmaceutical pricing and market access have also pointed out some critical Covid-19 impact areas, including:

  • Tremendous increase in pandemic related public expenditure, could prompt further austerity measures in already strained health care budgets, besides job losses or pay cuts of scores of people for different reasons.
  • The pandemic is likely to result in a redistribution of health care funding towards infectious diseases (e.g. prioritization of antivirals and vaccines) and chronic diseases associated with worsening COVID-19 outcomes.
  • This may result in more drug pricing pressure in other disease areas, besides push for increasing use of similar cheaper generics and biosimilars, unless absolutely necessary.
  • Stricter monitoring of usage of medicines, especially in private hospitals, to ensure their use within the regulatory label and/or within the reimbursed population.
  • Possibility of mandatory price cuts either across the board or for drugs which have been on the market for a specific duration.

The report also envisages, pharmaceutical companies will be faced with increased price sensitivity and decrease in willingness to pay by authorities. Consequently, the key question in this area becomes: What impact will COVID-19 have on the future of pricing and market access? And how to address this issue, effectively? 

Need for an appropriate drug pricing models in the new normal:

Overall scenario for drug pricing model has not changed much, till Convid-19 pandemic overwhelmed the world. The age-old concept of drug pricing, being treated as almost given, is changing fast. As I wrote earlier, it started in the developed world, with newer concepts, such as, Health Technology Assessment (HTA), besides a few others. However, to illustrate the point, I shall focus only on the HTA model. It includes a multi-faceted assessment of the clinical, economic, ethical, legal, and societal perspectives that may be impacted by a new technology, procedure, drug, or process.

Application of HTA in Medicine Pricing:

The ‘Working Paper 6’ of June 2013, on ‘The Role of Health Technology Assessment in Medicine Pricing and Reimbursement,’ published jointly by the World Health Organization (WHO) and the Health Action International (HAI), is worth referring to.

The paper aims to identify and describe the role of HTA in price-setting and reimbursement of pharmaceuticals, with a focus on its use in low and middle-income countries (LMICs). However, as Covid-19 is now fueling the drug price sensitivity across the globe, and not just in the LMIC, this reference will help drive home the point, as one faces today.

While combating health care resource crunch in the face of the Coronavirus quagmire, many countries are contemplating a variety of approaches to maintain affordable access to healthcare for patients. The concept of HTA is one such common approach. It includes pharmaceuticals, vaccines, medical devices, medical and surgical procedures, besides the systems within which health is protected and maintained.

Relevance of a recalibrated HTA in the new normal:

For a new drug, as the Institute For Clinical And Economic Review (ICER) puts it, a final HTA report would attempt to answer the following questions, besides a few others:

  • Is it safe and effective?
  • Which patients benefit the most?
  • Is there a meaningful improvement in health status?
  • Can all people afford to pay who might need it?
  • Will it offer a good value in the long run?
  • What other considerations make it important?

These points need to be looked at keeping in view that Covid-19 pandemic has seriously impacted the health care spending. Thus, the process needs to be recalibrated in the new normal. In any case, HTA has the potential to play a critical role in new drug pricing, by assessing the intrinsic value of medicines that can significantly expand patient-access to care. In tandem, it could maximize the value for money in health expenditure with most efficient allocation of scarce health resources, that most countries are facing today. Nevertheless, there could well be a few company or country specific barriers to capture the value of a drug or treatment, as well. A robust plan for their mitigation needs to be well-thought through, to ensure effective implementation and achieve desirable outcomes.

HTA in India:

At least, on paper HTA exists even in India. The Government of India had created an institutional arrangement called “Health Technology Assessment in India (HTAIn)”, under the Department of Health Research (DHR). It was entrusted with collation and the generation of evidences on cost effectiveness and safety of health care interventions, including medicines and devices.

The key goals are, to reduce the cost of patient care, overall cost of medical treatment, reduction in out of pocket expenditure of patients, besides streamlining the medical reimbursement procedures. Nevertheless, it remains a million dollar question whether India would leverage this system to ensure fair pricing of new drugs in India.

Some pre-requisites to implement HTA – afresh:

In those countries, where HTA for drug pricing and reimbursement doesn’t already exist, there could be several pre-requisites. These may include, as the above paper indicates, establishing a medicines regulatory system, developing and enforcing legislation, employing the appropriate technical expertise, and the allocation of sector-wide financial resources in accordance with the decisions of the organization using the HTA.

That said, the bottom-line is, the quest to arrive at fair pricing for a new drug, could also help ‘market access’, especially in a difficult time, like today’s health care crisis. In that endeavor, let me briefly dwell on the concept of ‘fair pricing a drug’.    

The concept of ‘fair pricing a drug’:

This issue has been well deliberated by many experts around the world. However, let me quote a recent article – ‘Defining the concept of fair pricing for medicines,’ published by The BMJ on January 13, 2020.

The paper articulates, ‘a fair price for a medicine is affordable to the buyer while covering the seller’s costs and providing a reasonable profit margin. Within a fair pricing zone, a specific price may be higher or lower, possibly reflecting differential value.

Interestingly, the authors also noted: ‘Applying the framework to decision making would require access to data on R&D, manufacturing, and distribution costs, which is generally not publicly disclosed. This lack of transparency about costs undermines efforts to assess the fairness of medicines prices.’

The article underscored, lack of transparency in these areas, ‘also exacerbates information asymmetry to the sellers’ advantage.’ It suggested, disclosure can be enforced through legislation, regulation, and judicial action. Or as a condition of receiving public research funds, tax benefits, regulatory approval. Or listing in a formulary for reimbursement. ‘In the absence of disclosure, decision makers may rely on reasonable estimates based on publicly available information,’ the paper concluded.

Conclusion:

As recorded in the morning of September 13, 2020, total Coronavirus cases in India have reached a staggering figure of 4,754,356 with 78,614 deaths, overtaking Brazil. This trend continues going North, as days pass by.

All-pervasive Covid-19 pandemic is fueling severe resource constraints, especially for health care. Amid this complexity, to combat this deadly virus – alongside other non-Covid related illnesses – value added drugs and treatments could help overcome many hurdles in this area. They could help improve cost-effectiveness of treatments to price-sensitive patients, besides other stakeholders.

Recalibrated HTA mechanism, which I have used in this article as an example to effectively overcome prevailing drug price sensitivity, is one among a few others. Importantly, HTA mechanism exists even in India. It can be appropriately used for new drugs and vaccines pricing, if the Government wishes to.

On the other hand, it’s up to individual companies to choose any other price-value model’ that they will deem appropriate, to arrive at a ‘fair value for new drugs’. However, the goal remains common for all - Neutralizing Covid-19 impact on drug prices and market access, to ensure faster recovery of the business.

By: Tapan J. Ray   

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

In Pharma’s Moment of Truth “What You Do is Who You Are”

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It’s a time when pharma industry will be tested, both by its external and internal customers – more than ever before. Looking back, in search of footprints on the sand is no answer either, as there isn’t any. But, a decision on moving ahead has to be made by each drug company in any case – charting a strategic pathway, in search of business excellence, if not for survival. A possibility looms large that the crisis may even overwhelm a company, if any, ill-conceived or ill-thought through steps are taken.

In that sense, the moment of truth has arrived for the industry – a time when ‘what different you do’ in the value delivery process of the business, will decide ‘who you are.’ One’s ability to lead the company or even follow the leadership, to navigate through this crisis, would determine the present and future success of the corporation. This isn’t an easy task. The evolving processes would be challenging to implement, and the traditional mindset may often act as a retarding force, as it were. In this article, I shall explore this critical area with recent examples, as far as possible.

Ability to fathom its most critical component is the bedrock for next steps:

The most critical component in this situation is the ability to make a careful and unbiased assessment of – how different would the ‘new normal’ be from the ‘old normal.’ The focus should not be on the barriers in making the necessary strategic changes, which I hear too often – but how to steer the business through this unprecedented crisis, regardless tough barriers on the way.

Covid-19 threat isn’t going to go away anytime soon:

However, one thing is for sure – no one knows, not just in India, but globally how big the crisis is, and will assume what form, when and how long. Let me give just three illustrations in this area that will be easily understood by all:

  • Initially, experts used to say, face masks are required only for those having symptoms and people close to them. “Masks are not required for those who doesn’t have symptoms. Whereas, the same experts are saying these days, “data now emerging about asymptomatic patients spreading the infection across the country, masks play an important role in containing the spread.” Thus, one is required to wear a face mask always while going outdoors.
  • Explaining the mode of disease spread, earlier, many experts, including the W.H.O, said that COVID-19 virus is primarily transmitted between people through respiratory droplets and contact routes. Thus, a mask is needed when one goes outdoors. Whereas, now the same experts, including the W.H.O, have confirmed that Coronavirus can be airborne indoors. In that case, one may need to wear a mask even indoors.
  • On April 23, 2020 the Director-General of Indian Council of Medical Research (ICMR), reportedly, claimed that the situation is stable, and the country has been able to ‘flatten the curve.’ But on May 09, 2020, Director, AIIMS, reportedly, said, “Currently, the cases are continuing to grow at a flat rate, sometimes even more. So, it is very difficult to predict when the peak will come; but it is likely to peak around June or July…” Whereas, an MIT study, which has also been reported in the press reveals, “India might see 2.87 lakh Covid cases per day by February 2021.”

These instances drive home the point – although a serious threat of Covid-19 infection will continue in the foreseeable future, but the way it will manifest itself, and the fresh precautionary measures that will deem necessary, may change with time. Let me give one more example of increasing threat of getting re-infected by Coronavirus by already infected individuals has heightened today than in the past.

The battle tactics need to be updated:

Strategy for war against Covid-19 onslaught may broadly remain similar. But the battle tactics in the multiple fronts need to be updated on an ongoing basis. This needs to be based on increasing or narrowing of the spectrum of threat and other critical factors, as scientific evidences will reveal from time to time.

For example, as is unfolding today, a large number of already infected people, particularly living in areas with high population density, may not necessarily develop any long-term immunity against the Coronavirus infection. Such a possibility will have a wide impact on any business strategy in the new normal that an organization may contemplate.

The rationale for constantly updating battle tactics:

Let me now focus on the rationale for constantly updating battle tactics based on scientific evidences with a few contemporary examples. The study, published in the Nature Medicine on June 18, 2020, found that individuals recovering from Covid-19 infection may have immunity only for 2-3 months. Although, it may not necessarily be construed that a recovered person can get re-infected, but any vaccine that may eventually come may need to address such issues, which seems to be a tough call.

Alongside, findings of another large research – Spain’s Coronavirus antibody study, published in The Lancet on July 06, 2020, has also cast doubt on the feasibility of herd immunity as a way of tackling the Coronavirus pandemic. As the BBC News reported on July 07, 2020 - based on these findings, Prof. Danny Altmann, British Society for Immunology spokesperson and Professor of Immunology at Imperial College London has made similar comments on effective vaccine development initiatives.

He said, the study would, “reinforce the idea that faced with a lethal infection that induces rather short-lived immunity, the challenge is to identify the best vaccine strategies able to overcome these problems and stimulate a large, sustained, optimal, immune response in the way the virus failed to do.”

“What You Do is Who You Are”: 

As the saying goes: “What You Do is Who You Are.” With this fast-evolving scenario, pharma leadership will need to effectively address a dual strategic game plan to outmaneuver the barriers of the Covid-19 pandemic:

  • Putting in place a robust operating strategy for customer value delivery process of the business.
  • Capturing the details of new Covid19 related ongoing developments to constantly hone the battle tactics in several different fronts.

Both the above processes will involve picking up all such validated research findings, mostly on the run. Mostly because, such issues may impact both internal and external customers of the organization, besides competition. Therefore, factoring-in each of those new developments, while constantly sharpening the war strategy and battle tactics in the fast-evolving scenario, will be of crucial. And, what you think or do in this situation will determine who you are – what type leadership traits you exhibit to face the challenges of the new normal, effectively.

Two types of leadership in the new normal:

Amid challenges of the present crisis, I reckon, top leadership will find two broad types of domain leaders – ‘pro-tradition’ and ‘pro-change’ – both will have successful past track records. They need to be identified for appropriate strategic tasks.

As is known to many, a good number of successful leaders are operating through decades around the concept of physical presence of patients while consulting a doctor or other health care providers. Several of them seem to be still unsure about the extent of organizational and operational changes required to face this unprecedented crisis, head-on. Even today, some of them keep trying to impress others by citing instances of what they did so well in the past.

There is nothing wrong in that. But, the business environment and requirements of those days were different – quite different from today’s demand. Curiously, many of such good leaders, with impeccable past success records, seem to be more bothered about seemingly insurmountable barriers on the way. They are afraid of migrating away or jettisoning the traditional pathway of success. Probably, the fear of failure – after achieving success for a long time, is the reason. I consider these successful professionals as ‘pro-tradition’ leaders.

There are also examples of another type of leaders. They are generally younger, looking forward with a contemporary mindset, nurture a can-do spirit with a resilience to bounce back, even in difficult times. Which is why, any transient fear of failure doesn’t usually overwhelm them. And, these leaders, I reckon, may be broadly termed as ‘pro-change’ leaders.

Keeping aside, past success records or future success potential of pharma leaders, in the current scenario – what they actually think or do in the changing environment to steer the organization out of this never-before crisis, will indeed determine ‘who they are.’

A contemporary initiative sets an example:

Top leadership of several drug companies, such as those at Novartis, is leading the way for a change management as the new situation will demand – by setting examples for others. These leaders seem to be taking note of all changes, as discussed above, while giving shape to a strategy, and reshaping the same based on data, as and when required. Interestingly, more technology professionals are getting attracted to pharma operations during Covid-19 pandemic than ever before, as a recent research report unfolds. This is a good omen for pharma and needs to be leveraged, effectively.

The findings of a new research report:

A new research report from Novartis -  A Powerful Pairing,  emphasizes: “The global COVID-19 pandemic sparked a seismic shift in the adoption and scaling of digital technologies across the healthcare sector at a pace never before seen. Almost overnight, organizations had to dial-up their efforts to develop, manufacture and ultimately bring medicines to patients in a socially distant world.” The survey brings out some interesting points, such as:

  • 86 percent of respondents believe the time has come for digital healthcare, and many of them are interested in taking part.
  • Regardless of the sector they currently work in, the two industries that technology professionals would consider switching to, are technology and healthcare and pharma (49 percent for each). This interest rises to 58 percent for workers based in India and 55 percent for those based in China. They feel, Covid-19 pandemic has made them more aware of medical causes around the world and how important they are. Through work in this sector, they can save countless human lives.
  • 52 percent of technology talent sees innovation potential in the healthcare and pharma sector, with the top reason to apply for a job being the opportunity to innovate through technology.
  • 89 percent technology professionals say that data science is important to the development and delivery of healthcare industry solutions and services.

Conclusion:

Surging ahead to reach a million mark, as on July 12, 2020 morning, the recorded Coronavirus cases in the country reached 850,358 with 22,687 deaths. With a record high of 27,755 daily cases yesterday, the pace of climb continues.

It’s now virtually a writing on the wall that India will have to sail through the unprecedented Covid-19 pandemic for quite some time, where unprecedented leadership interventions will be of critical importance – even in pharma. This endeavor will also call for selective induction of competent technology professionals in all pharma business domains, as required. The challenge involves not just carving out the ‘war strategy’, as it were, against Covid-19, but also continually honing the ‘battle tactics’ in multiple fronts – mostly on the run, for desired outcomes.

The situation calls for taking an in-depth inventory of an organization’s existing human resources, based on success ingredients required to turn the tide, which, I reckon, should also be the starting point in this venture. In this moment of truth – standing at the cross-roads of the drug industry, there is no further room for top pharma leadership to procrastinate the decision-making process. All competent professionals should be taken on board. In tandem, both – seemingly ‘pro-tradition’ and ‘pro-change’ leaders, should be encouraged to realize that in the new normal “What You Do is Who You Are” in the future pharma business.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

For Affordable Healthcare: Synergize Resources Through PPP Models

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According to a 2012 study of IMS Consulting, the key factor of significantly high ‘Out of Pocket (OOP)’ expenditure on healthcare in India is that people are pushed into seeking costlier private care services due to imbalanced infrastructure of healthcare workers, medicines and facilities.

Currently, 74 percent of patients in ‘Out-Patient (OP)’ care and 65 percent in ‘in-Patient (IP)’ care seek healthcare in the private channels. In private inpatient care, the average cost of treatment exceeds the average monthly household income at 121 percent for the affording population and 217 percent for the poor population, forcing many families to borrow money or sell assets.

Thus, the affordability challenges for healthcare of the country, as manifested by high OOP spend, is mostly a consequence of a large patient population using the private healthcare channel due to still inadequate availability of public healthcare services.

The situation is looking up:

According to IMS study 2012, currently, on an average about 54 percent of the patients are receiving free medicines from the Government hospitals. In progressive states like, Tamil Nadu, Andhra Pradesh, Maharashtra and Karnataka this number goes up to 85 percent. At the same time, in rural India, which constitutes around 70 percent of the total 1.2 billion populations of India, usage of Government facilities for OP care has increased from 22 percent in 2004 to 29 percent in 2012, mainly due to the impact of National Rural Health Mission (NRHM).

Consequently, this increase will also have significant impact in reducing OOP healthcare expenses of the rural poor.

Medicines constitute highest component of OOP:

Medicines still constitute the highest component of OOP expenses in OP care, though its percentage share has decreased from 71 percent in 2004 to 63 percent in 2012.  Similarly for IP care, the share of medicines in total OOP has also decreased from 46 percent in 2004 to 43 percent in 2012.

However, still 46 percent of the patients seeking healthcare in public channels had to purchase medicines from private channels. Recently announced drug procurement system through Central Medical Services Society (CMSS) after hard price negotiation and distribution of those drugs free of cost from Government hospitals and health centers, could address this issue effectively.

Further scope to reduce OOP:

The study highlights that OOP spend could be lowered by 22 percent with:

  • Improved availability of healthcare facilities at public hospitals and health centers, which can be achieved through effective implementation of “National Health Mission” with higher budgetary allocation.
  • Improved availability of medicine at the public channels, which is feasible through effective implementation of already announced “Free Medicine” scheme of the Government across the country.

A total reduction of ~40% in overall OOP spend appears to be possible, the study reiterates, when more people would get confidence that public healthcare can meet all their needs.

The roadmap to achieve the goal:

Fundamentally there are five ways to deal with the affordability issue:

1. Reduction in demand: Creating a better health environment,

2. Reduction in costs: Through price control, increased competition, group purchasing power

3. Increase in financial support from government

4. Increased penetration of health insurance programs

5. Increase per-capita income of households

All these five areas, I reckon, would not be difficult to address through well-structured and strategic Public Private Partnership (PPP) initiatives.

It is increasingly recognized that there are many other healthcare challenges, which do not fall exclusively under either the public or the private sectors. These challenges need to be addressed with combined efforts… with well structured Public Private Partnership (PPP) models.

Private sector should play its role:

The private sector is already a major provider of health services in India. Hence, it has the wherewithal to support implementation of Government’s flagship healthcare programs, especially in the area of service delivery, to enhance their overall effectiveness.

As the Universal Health Care (UHC) proposal made by the High Level Experts Group (HLEG) to the Planning Commission of India highlighted, the government would provide the budget, while the private sector would take the responsibility for delivery of healthcare services.

Accountability for PPP should not fall through the systemic cracks:

The above study indicates, the private parties could include individual physicians, commercial contractors, large private and corporate super-specialty hospitals, not-for-profit agencies (NGOs), pharmaceuticals and device manufacturers. Expertise of all these stakeholders should be appropriately leveraged.

It is absolutely essential to make sure that the accountability of the PPP initiatives does not fall through the cracks now existing in the system.

To control costs and ensure required standards are met, all contractual agreements for PPPs, as recommended, must have adequate built-in monitoring and supervision mechanisms of the highest order, assigning clear roles and responsibilities for each party.

Similarly, NGOs need to be given a larger role of monitoring the activities or services rendered at such facilities to make sure the designated institutions are fulfilling their obligations to the public.

Conclusion:

To make healthcare affordable in India, well-strategized PPP initiatives would have critical roles to play.

Thus, instead of resorting to blame games with Government accusing the private sector to be exploitative and the private sector continuously moaning for ‘unfriendly’ business policies of the government, there is a fundamental need for both the constituents working closely together.

As a result, patients will have greater access to quality healthcare at an affordable price, the industry will grow faster in a sustainable way and the government will have its public healthcare obligations fulfilled to a reasonable extent.

Some of the major sectors in India where PPP has been quite successful are infrastructure, telecom, irrigation, power and airports. So, why should it not work for the healthcare sector of the country, as well?

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.