Pharmaceutical Pricing and Reimbursement Strategies Over the Whole Product Life Cycle

Abstract

Despite the significant increase in spending on pharmaceutical research and development that we have seen in real terms over the past 20 years, this has not been matched by an increase in new chemical entities (NCEs). Therefore, each NCE has to produce ever-increasing financial returns to the company in order to fund further research to maintain the viability of the industry. However, the payers in the marketplace have limited pharmaceutical budgets and have introduced various cost containment strategies to limit access to all new pharmaceuticals until they are proven to be a cost-effective replacement to the current treatments. The impact of these cost containment strategies is seen at the national, regional and/or local (formulary) approval level. Therefore, for companies to ensure rapid market access with an NCE that will be reimbursed at a suitable level, and take market share from a current market leader, they must have proof of comparative cost effectiveness at launch. To achieve this goal, companies need to address the pricing and reimbursement strategy at each stage of development to ensure that they have the critical data collected to prove comparative value in use. In reality, however, not all potential NCEs will have the ability to deliver the comparative level of improvement over available treatments needed to achieve the required price, at the necessary level of reimbursement and at sufficient volume to satisfy the financial targets. Therefore, companies need to invest in collecting and analysing market data at each stage of development, from project selection through to phase III, to ensure that they can make informed decisions. This market place data will help to determine the returns that can be achieved from different product profiles, thereby enabling ‘go/no go’ decisions to be put in place. The indication, subpopulation and launch sequencing are other critical factors that need to be addressed by the company.

To make these significant improvements it is not a simple investment in market research alone. The whole of the research and development function need to accept that they have to address the pricing and reimbursement data requirements in the same way as the collection of regulatory safety and efficacy.