Surprised and stunned by the U.K’s vote last Friday to exit the European Union, the world is experiencing a collective panic. However, currency and stock devaluations have mainly been driven by uncertainty rather than solid projections of corporate performance gaps, all of which has been further enhanced and inflamed by the media in their constant quest for better ratings.
Discussion of the impact of Brexit on the pharmaceutical industry has largely been centered on the (re-) location of the European Medicines Agency (EMA), the EU’s organization for evaluating medicinal products. Many assume that the EMA will have to move from London to one of the remaining EU countries, which will require a painful transition and a potential need for drug companies to file for registration in the U.K. separately, with different local requirements.
What will the impact be on European market access and pricing (MA&P) for prescription drugs? Let’s consider the following most important elements: pricing, health technology assessment (HTA) methodologies and parallel trade.
Those who expect a dramatic report with earth-shattering predictions may be disappointed. Even if the U.K. exit is fully implemented without measures to soften the impact, MA&P-related evolutions due to Brexit will likely be more gradual and subtle. However, in a time of uncertainty, it’s important to monitor these aspects closely.
The U.K. is one of the very few developed countries that allows for the “free pricing” of prescription drugs, at least at initial launch. Recent attempts by the National Health Service (NHS) to introduce price controls through value-based pricing have stalled, but in reality, this has only had an effect on oncology drugs, where the NHS has been hesitant to enforce the relatively tough cost-effectiveness requirements from the National Institute for Health and Care Excellence (NICE).
Since the overhaul of the Cancer Drugs Fund, oncology drugs are no longer automatically covered for all patients. Maintaining pricing freedom allows for an opportunity to maintain an internationally consistent price despite a reimbursement rejection by government payers. Even though the U.K. revenue potential at this price will be very limited, at least it won’t negatively impact other countries through price referencing or parallel trade. As such, it offers opportunities for drugs that do not meet cost-effectiveness requirements at launch to qualify later—when more data is available—while maintaining a higher price, albeit at very limited sales volumes.
Maintaining pricing freedom in the U.K. is even more important after the devaluation of the pound under Brexit. The combination of this devaluation and the fact that the £20,000 to £30,000 per QALY cost-effectiveness cut-off points have never been adjusted for inflation since the institution of NICE in 1999 will further diminish the commercial attractiveness of the U.K. prescription drug market.
Over the last five years, two camps of HTA assessment have formed. The U.K. has been a leader in the cost-effectiveness camp, which uses cost-effectiveness as a means of evaluating value for money. NICE, on the other hand, has been a global advocate of the use of cost per quality-adjusted life year (QALY) limits—and has been actively advocating this across the world. Sweden and some other European countries are using cost-effectiveness evaluations sometimes nationally and more often regionally. In many cases, there’s less of a focus on a cut-off number, but rather the QALY limits are used as an additional factor that impacts the final pricing and reimbursement decision.
France and many other national payer authorities have been more focused on a benefits rating system, which is used in therapeutic referencing systems to determine a price premium over a chosen drug comparator. The introduction of this system in Germany under the Act on the Reform of the Market for Medical Products (AMNOG) a few years ago has further strengthened the use of a benefits assessment approach for pricing and reimbursement determinations in Europe.
HTA collaborations such as the European Network for Health Technology Assessment (EUnetTHA) were instituted to build consensus on MA&P evaluation methodologies. Since individual countries’ budget-holding authorities strongly resist the centralization of pricing and reimbursement approvals, the focus of European coordination among HTAs has been on the alignment of the underlying assessment methodologies. While differences between systems are often shades of gray, an exclusion of the U.K. (NICE) from this collaboration could reduce the push toward strict cost-per-QALY cut-off points in coverage decision making. It could result in more weight on the German/French benefits assessment approach, although cost-effectiveness and, particularly, budget impact considerations will continue to play a defined role in most countries.
Reimbursement evaluations in the U.K. under NICE and the Scottish Medicines Consortium tend to lead to a lower acceptable price level than in other large EU markets. The risk of parallel trade often is withholding drug companies from accepting lower prices in the U.K., even when this results in reimbursement restrictions in the U.K. Brexit could, in its extreme case, result in the abolishment of parallel trade between the U.K. and the EU. This would theoretically allow drug companies to price drugs in the U.K. and the EU at different levels that optimize revenues and patient access in each. However, many EU countries use international price referencing in addition to parallel trade mechanisms to minimize price differences between countries. Price referencing is not linked to a formal EU status and can easily be applied to any set of countries. Hence, the impact of U.K. pricing on the rest of Europe is limited to the direct impact of the devaluation of the pound, which may be temporary.
How all of the above will unfold is very dependent on how the Brexit decision will result in actual negotiations. In any case, the impact on MA&P is likely to be gradual rather than revolutionary. That’s too bad for the CNN news channel, but it’s great news for the rest of us.