Jill E. Sackman, PhD, is a senior consultant at Numerof & Associates, Inc. (NAI), St. Louis, MO, www.nai-consulting.com.

Jill E. Sackman, PhD

	Bio/pharmaceutical companies in the United Kingdom have recently been struggling to convince the National Institute for Health and Care Excellence (NICE) that their products are worth the price. “Although obinutuzumab is a clinically effective treatment, there were too many uncertainties in the company’s submission and we cannot be confident that it is an effective use of NHS resources” (1). The preceding statement from NICE chief executive, Andrew Dillon, refers to the UK watchdog’s recent negative ruling on Roche’s leukemia drug. Headlines such as this one are not new and are becoming more prevalent in the press. To add to this challenge, recent reports concerning Gilead’s blockbuster Hepatitis drug, Sovaldi (sofosbuvir), suggests that even if a product is truly innovative and deemed to be cost-effective, it doesn’t necessarily guarantee that the government will be able or willing to pay for it.

	If getting a positive recommendation from NICE under the standard cost-effectiveness assessment system wasn’t challenging enough, manufacturers have also had to contend with continuous discussions regarding the UK’s transition to value-based pricing (VBP) and value-based assessments (VBA) models. The UK’s pharmaceutical market has been in a state of flux in recent years, leaving manufacturers to question what it will take to ensure success. This article takes a closer look at some of the recent developments in the UK pharmaceutical market, with a focus on pricing and reimbursement challenges and strategies manufacturers should consider for sustainable success.


	In contrast to some other European markets such as Germany and France where reimbursement is dependent on a drug’s added clinical value relative to a comparator drug, the UK primarily evaluates new drugs based on quantifiable cost-effectiveness measures. Technology assessments in England and Wales are performed on request from the Department of Health (DH) and primarily include those medicines with high prices or uncertain effectiveness. Since 1999, NICE has been responsible for formal evaluation and recommendations regarding the most appropriate technology to address health issues.

	A few years ago, in an effort to slow spiraling National Health Service (NHS) expenses and to improve access to medicines, the UK’s DH unveiled plans to introduce a VBP system for innovative drugs. The transition was scheduled to become effective at the beginning of this year and would have been a radical departure from the UK’s longstanding negotiated pricing model, which gives manufacturers complete freedom to set a price. Under this new VBP system, the NHS would be responsible for setting prices according to drugs’ calculated value to a patient as well as society. When this model was proposed, one key question that immediately surfaced was how to measure “value.” As part of its standard quality adjusted life year (QALY) assessment, NICE would take additional criteria such as therapeutic innovation, burden of illness, and wider societal impact into account. Specifically, these individual factors would be used to derive a weighted QALY score and an adjusted threshold that would then inform pricing decisions. If the cost-per-QALY for a drug were less than the designated threshold, the drug would be accepted at that price; however, if the cost-per-QALY exceeded the threshold, the drug would not be accepted (2).

	The pharmaceutical industry argued against the VBP proposal citing that it would undervalue innovative medicines and that their agreement to keep NHS expenditures on branded medicines flat for two years under the new Pharmaceutical Price Regulation Scheme (PPRS) was enough to help a cash-strapped government. Amidst manufacturers’ concerns, the VBP model concept was abandoned, leaving manufacturers free to continue setting the price of their products. Even though the UK only accounts for a small proportion of global sales, UK prices are important, as approximately 17 countries reference their prices against those in the UK (3).

	When VBP failed to materialize, there were still plans to change the way NICE makes recommendations on the use of health technologies. As part of this VBA model, NICE would take the three aforementioned criteria into account when calculating the cost effectiveness of a product. These proposed changes, however, were once again met with swift resistance from manufacturers over concerns that such an approach may be discriminatory, on the basis of age or gender. In addition, manufacturers were frustrated over the DH’s abrupt decision to exclude the “innovation” element, which in their minds should be one of the primary goals of reform (4). Finally, there was shared disappointment and skepticism among manufacturers and other stakeholders that the government’s decision to no longer give special consideration to end-of-life treatments could significantly restrict access to new cancer therapies. For instance, since 2009 when NICE began giving special weight to therapies for terminal cancer patients, 14 positive recommendations have been recorded (5). In October 2014, after much deliberation, NICE decided that no changes would be made to the technology appraisal methodology in the short-term.

Technology appraisals and patient access schemes


	With broad efforts to overhaul the UK pharmaceutical market failing to gain sufficient traction in recent years, manufacturers find themselves in a rather familiar operating environment characterized by increasing price sensitivity and a growing number of negative recommendations (see 

). From 2000 through 2008, NICE recommended coverage with or without restrictions in 88% of cases. In the past five years, NICE’s rate of recommending some form of coverage has decreased to 71%. Oncology is one particular therapeutic area that has been heavily scrutinized by the UK watchdog in recent years. Between 2000 and 2008, 78% of oncology appraisals conducted by NICE resulted in recommended coverage with or without restrictions. Since 2009, however, only 47% of appraisals were associated with a positive or optimized recommendation.

: NICE recommendation breakdown for all medicines and cancer medicines between 2000 and 2014.

	In an increasingly restrictive, price-sensitive market, manufacturers have come to rely on additional market access strategies, most notably Patient Access Schemes (PASs), to secure a positive recommendation from NICE. PASs were formalized and included in the 2009 PPRS and have become increasingly common over the years, mostly coming after NICE rejects a drug in its initial appraisal. Currently, the DH has approved 48 PASs as workable for the NHS (6). While manufacturers have the option of developing more complex, performance-based schemes, the majority of PASs have been finance-based.  In fact, of the 53 proposed schemes, approximately 70% have been straightforward price-discounts with others typically including free replacement stock or rebates (see 

) (5). To date, PASs have also allowed manufacturers to maintain the UK list price, thereby protecting prices abroad through reference pricing. This protection, however, will only apply if the referencing countries continue to use NHS list prices and not the post-PAS transaction prices.

	Manufacturers of costly cancer drugs have particularly tried to take advantage of PASs. Almost 50% of all proposed PASs have been associated with a cancer therapy. It stands to reason that without PASs, the proportion of ‘not recommended’ drugs in this therapeutic area would have been even higher. At the same time, while PASs are still being taken into consideration and included in NICE’s calculation of cost-effectiveness, there are more negative rulings by NICE despite manufacturers’ attempts to reduce the cost-burden on the NHS. For instance, multiple cancer drugs (e.g., Zaltrap, Bosulif, Xalkori, Afinitor, Sutent, and Kadcyla) and their associated schemes have been rejected by NICE in recent years.


	With NICE continuing to crack down on new medicines and both VBP and VBA off the table, the key question becomes, what must manufacturers do to increase the likelihood that their product is accessible and reimbursed in the UK? Clearly, a successful market-access strategy begins with collecting strong economic and clinical data to support product adoption. In some cases, however, data alone may not be sufficient to warrant desired reimbursement. A PAS is always a crucial “Plan B”, but increasingly, manufacturers should consider a PAS that links payment to outcomes.  Finally, manufacturers must involve local budgetary groups who decide product adoption at that local level. These key considerations for manufacturers are discussed in more detail below.

	Requirements for economic and clinical data are becoming increasingly important to success. In October 2014, NICE publicly stated that it intends to expand the scope of its technology assessment to include all clinical-trial data and not just the data the manufacturer is willing to share with the HTA body (7). The goal behind this decision is to ensure that NICE gets a more complete picture of whether new drugs are worth their high price. Whether or not NICE’s actions will push the industry to be more transparent remains to be seen; however, to better prepare themselves for these changes, manufacturers should conduct a comprehensive review of all data generated and confirm that there is no evidence conflicting with the following statements:

		This medicine is both clinically and economically better than what’s already available.

		This medicine decreases mortality or morbidity, makes the care pathway more efficient, or reduces the total resources a patient consumes.

		These data represent hard, real-world evidence backing up the manufacturing claims.

	Manufacturers can further ensure alignment with NICE’s data requirements through collaborations with the NHS’s National Institute for Health Research (NIHR) Office for Clinical Research Infrastructure (NOCRI). These initiatives seek to create a single point of entry into the UK health system thereby reducing the complexity and increasing the efficiency of running drug development programs. Specifically, in early-phase clinical development, NOCRI provides connections to the country’s experimental medicine experts who can help companies understand the potential of their developmental drugs, devices, and diagnostics, shortening cycle times and enabling earlier go/no go decisions. In later-phase development, agreements with the NOCRI also provide manufactures with access to well-characterized cohorts of patients from within the NHS for larger and multicenter clinical studies. Unfortunately, however, manufacturers have been slow to leverage NOCRI’s infrastructure including expert individuals, research facilities, and technology platforms.

	As highlighted above, Patient Access Schemes, while still effective, have shown some recent signs of ineffectiveness in manufacturers’ negotiations with NICE. In a market that is increasingly focused on value, NICE has been clear that it is looking for more productive sharing of risk between companies and the NHS. Therefore, while simple, finance-based schemes have essentially served as the standard offering here, stakeholders’ interest in performance-based access schemes is expected to grow.

	One possible reason why so few proposals for more complex, outcome-based schemes have been submitted is because these types of arrangements often involve collection of new data, and thus increase activity for both the health system and the sponsor. These types of arrangements not only present administrative challenges, but there are also significant challenges associated with their design. Andy Stainthorpe, director of the NICE’s Patient Access Schemes Liaison Unit (PASLU) has said that “Schemes need to use outcomes that already have systems in place to measure them and companies need to find imaginative ways of fitting into what the NHS is already doing” (8). This approach will also ensure that additional cost burdens are not being placed on the system, making the offer more attractive to cost-conscious stakeholders.

	While gaining approval from NICE is a crucial hurdle that needs to be cleared to gain market access, it’s not the only challenge for manufacturers. Because NICE does not hold any budgetary authority, a positive NICE appraisal does not automatically gain product adoption at the local level. Like Italy and Spain, England has now decentralized decision-making power and budgets to local bodies (clinical commissioning groups or CCGs), each of which has unique unmet needs and definitions of value. Here, early engagement with these local stakeholders focused on evidence-based solutions to their needs is crucial. By law, market access teams can begin engaging with healthcare budget-holders three years before launch. Thus, initial discussions can help inform Phase III clinical study design with respect to patient subpopulations and endpoints, while later discussions can revolve around the product’s value message.

	Manufacturers must not only focus on when to engage CCGs, they must also re-evaluate the way they are approaching these bodies. Here, an important first step is identifying who the actual decision makers are. Unfortunately, there is no specific job title that defines the key influencers of a CCG. Such lack of clarity requires that manufacturers do due diligence to investigate who these decision makers are.

	In addition, companies must understand the strategic direction, goals, and objectives of the CCG, and align their value proposition to these inputs. In general, the message manufacturers are delivering to these stakeholders needs to shift from being product-centric to patient-centric. The NHS’ and CCGs’ tagline at the moment is ‘put the patient at the heart of what we do.’ What is the technology’s benefit to the patient? This question needs to be front and center of all discussions. Manufacturers that understand specific pain points of their audience’s patient population and are building value-added services to address these needs will be well positioned. To understand these pain points, manufacturers should rely on publically available documents produced by CCGs in conjunction with other stakeholders (e.g., Joint Strategic Needs Assessment, Joint Health and Wellbeing Strategy, CCG strategy, Commissioning Intentions, and Integrated Operating Plan). The more manufacturers can do to help CCGs engage the patient and public and remove costs from the system, the better.


	The authors thank Kate Eversole and Sarah Garner, PhD, for their insights.

Data Uncertainties Mean Nice Does Not Recommend Leukaemia Drug In Draft Guidance

Value Based Pricing--NICE to Have Key Role

		C. Rémuzat et al., “Overview of External Reference Pricing systems in Europe,” ISPOR 19th Annual International Meeting, 2014.	

UK: Is Value Based Assessment the New Value Based Pricing?

National Institute for Health and Care Excellence

		6. Northern, Eastern and Western Devon Clinical Commissioning Group, Risk Sharing Schemes (RSS) and Patient Access Schemes (PAS) (October 2014).	

NICE to Bypass Drugmakers in Search of Data To Support Pricey Drugs

		8. DataMonitor Healthcare, Spring PharmAccess Leaders Forum, post-conference white paper (July 2014).


	Jill E. Sackman, DVM, PhD, is a senior consultant and Michael Kuchenreuther, PhD, is research analyst, both at Numerof & Associates, Inc., St. Louis, MO, 

: When referring to this article, please cite it as M. Kuchenreuther and J. Sackman, "Value-Based Healthcare in the: United Kingdom," 

Articles

Bio/pharmaceutical manufacturers in the UK face challenges in proving that their drugs are worth the price.

Value-Based Healthcare in the: United Kingdom

*Editor's Note: This article appeared in 

	Manufacturers exploring opportunities in global markets face dynamic demographic and disease trends, changing market demands, and evolving regulatory requirements-all of which differ from one country to another. While emerging markets continue to represent a new channel of demand for pharmaceutical products, manufacturers have quickly realized that significant attention must still be given to more established markets, such as Germany. It’s no longer sufficient to expect that regulatory data from prospective randomized clinical studies alone will be enough to convince payers to provide a price premium for new products. In this article, the authors take a look at some of the recent developments in the German pharmaceutical market, identify pricing and reimbursement challenges, and discuss strategies manufacturers should consider for sustainable success.


	Germany is the third largest pharmaceutical market worldwide and accounts for approximately 23% of the European pharmaceutical market (1). Of equal importance to manufacturers, drug prices in Germany are often used as reference prices in 19 other countries. Taken together, gaining access to this market at an acceptable price has major implications for long-term success. In a cost-constrained economy, the German government has taken steps to reduce healthcare spending, and unfortunately for manufacturers, one way they have sought to do this is through The Act on the Reform of the Market for Medical Products (Arzneimittelmarkt-Neuordnungsgesetz-AMNOG). This piece of legislation was enacted in 2011 and mandates a more rigorous benefit evaluation procedure for new pharmaceuticals (and their subsequent label expansions), thereby adding significant challenges to the market access process.

	In AMNOG’s new system, manufacturers continue to set the initial price for new prescription drugs after regulatory approval. This price is valid for one year. During this time, the manufacturer’s value dossier is reviewed by the Federal Joint Committee (G-BA), which represents the self-governance structure of the German healthcare system. With the help of the Institute for Quality and Efficiency in Health Care (IQWiG), an expert Health Technology Assessment (HTA) body, the G-BA determines the level of added benefit of the new drug relative to the appropriate comparative therapy (ACT) chosen by the G-BA as well as the certainty of evidence presented by the manufacturer. A brief description of these two inputs that go into the G-BA’s final decision is included in 

. Patient-relevant criteria for additional medical benefit include improving health, extending survival, shortening the burden of illness and reducing side effects, or improving quality of life, and are outlined in the IQWiG methodology paper (2). Originally, the law was written to include the possibility that patented products already on the market would have to undergo retrospective benefit assessments; however, manufacturers were recently spared from this potential headache (3).

Decision criteria for G-BA’s/IQWiG’s benefit assessment.

Factors shown to impact categorization decision

					Number of appropriate clinical studies available; Use of valid measurement instruments; Risk of bias (e.g., non-blinding); Endpoint type (e.g., hard, surrogate)

					Major, considerable, minor, non-quantifiable, no added benefit, or reduced benefit

					Effect size at outcome level, confidence interval associated with effect

	Once the G-BA reaches a final conclusion, pricing negotiations begin with the statutory health insurance (SHI) umbrella organization, GKV
	SV (Gesetzliche Krankenversicherung-Spitzenverband), which negotiates on behalf of all SHIs and also private sickness funds in Germany. It is important to highlight that the ACT is not only used by the G-BA in its assessment, it is also the price anchor for these negotiations. For drugs found to have no added benefit, their price is capped in reference to the price of the comparator. Reference pricing to the comparator can be either advantageous if the ACT is already a high-priced therapy or devastating if the ACT is a generic drug. Thus, manufacturers looking to enter breakthrough therapeutic areas where the current standard treatment is a generic will be particularly challenged. Therapeutic products that demonstrate added benefit are priced above the ACT but may still face a minimum price reduction of 7% (formerly 16%) by law, unless it has been replaced as part of the price negotiations. Unfortunately for manufacturers, while the number of products that have gone through the entire assessment and pricing process remains small since the law was enacted three years ago, early evidence suggests only limited correlation exists between benefit ratings and price reductions. Rather, G-BA’s benefit rating has primarily served as a door opener for price negotiations (4).

Snapshot of Benefit Assessments and Pricing Negotiations under AMNOG


	As of May 2014, 79 products have been assessed by the G-BA within 169 patient subpopulations. More than 50% of these early benefit assessments have led to ‘no added benefit’ rulings by the G-BA (see

) (5). Not surprisingly, there has been considerable variance observed in the levels of additional benefit reported by pharmaceutical manufacturers and the G-BA. In contrast, the G-BA’s decisions have more closely resembled IQWiG’s recommendations with a few notable exceptions (e.g., belimumab, cabazitaxel, eribulin) (6). Reasons the G-BA has offered for ‘no proven added benefit’ include inadequate comparator, lack of a relevant study to back claims of benefit, lack of data on potential harms, and omission of data for relevant patient subpopulations. A more detailed breakdown of the G-BA’s negative rulings as of October 2013 is presented in 

 G-BA decision breakdown on “Degree of Added Benefit” for new pharmaceuticals within a specific patient subpopulation (N=169).

 illustrates, even though the outcome of benefit assessment is a key driver of price negotiations, manufacturers have not always prepared dossiers adequately. This, in turn, compromises the outcome of the assessment and subsequent price that is agreed upon. Such problems with incomplete or inadequate evidence may be overcome as drug makers gain better understanding of the requirements. To this end, the Federal Joint Committee offers consultation opportunities for manufacturers to give advice on trial design (e.g., patient segmentation, comparator selections, and endpoints). Not all manufacturers, however, have communicated with the G-BA to discuss the technical issues and challenges around preparation of the benefit dossier, or earlier to discuss the clinical trial (6).

Despite the market access challenges that manufacturers have experienced so far, only a few products have been pulled despite negative G-BA rulings and demands for substantial rebates. Novartis became the most recent manufacturer to do this, withdrawing its oral anti-diabetic Galvus from the German market after failing to secure a mutually beneficial price with payers (8). Given the size and revenue potential associated with this marketplace, the fact that few products have been pulled is not surprising. However, Hagen Pfundner, the chairman of Germany’s pharma lobby VFA and head of Swiss drugmaker Roche’s German unit, believes that a recent update to the AMNOG legislation could lead to “an increasing number of opt-out decisions” (9). In the past, a product’s original launch price in Germany served as the published list price for other markets. This approach is no longer the case. Since April 2014, the newly negotiated reimbursement amounts are published as visible ex-factory prices, effectively replacing the original list prices as source for referencing. Drug makers fear the information could challenge the entire pricing framework within Europe (and globally) either causing a downward spiral in reimbursement across the region or heavy parallel exports from Germany to other countries. If this new law is not overturned, it poses a significant risk to profits in the industry, especially considering that price discounts have been as high as 70% following G-BA’s benefit assessment and range on average between 1630% (10).  More broadly, the new rule reinforces the importance of manufacturers understanding the nuances of this market and having strategies in-place to achieve successful market access.


	While Germany is certainly not the only market that is enforcing more stringent pricing and reimbursement policies for new therapeutic products, it is perhaps scrutinizing the quality and appropriateness of clinical data more so than any other country. Taken together with the fact that other markets look to Germany to determine pricing, manufacturers should place a greater emphasis on G-BA’s recommendations when structuring clinical studies. To date, the majority of AMNOG submissions did not have much guiding input from the G-BA prior to clinical study design and were based on evidence generated on a pre-AMNOG world. Moving forward, proactively consulting with the G-BA to define the comparator(s), clinical endpoints and patient cohorts will be essential. Manufacturers need to do this early in product development, especially prior to starting Phase III trials. Internally, manufacturers should also enhance communication between regulatory and market access teams to strategically plan for both market authorization requirements and G-BA’s requirements.

	Even before G-BA consultations, manufacturers need to give greater consideration to the product’s indication. While the indication does not determine how the benefit assessment is conducted, completed assessments indicate that it can influence the G-BA’s comparator choice and a pivotal trial’s relevance. For products with broad indications, IQWiG and the G-BA are demanding clinical data for multiple patient subpopulations and against multiple ACTs. For example, these commissioning bodies recently distinguished between four subpopulations and ACTs for Roche’s Kadcyla (see 

) (11). Manufacturers that have failed to anticipate and include such data are seeing a significant reduction in the overall level of added benefit granted to their products (e.g., Pixuvri and Inlyta) (12). Moving forward, manufacturers will need to ensure that all relevant subpopulations have robust and statistically significant clinical endpoints to support reimbursement, with increasing demand for quality of life data. If the resources required to study multiple populations using multiple comparators are too great, pursuing a narrower indication for a clearly defined patient population and against a single comparator serves as a viable alternative.

Manufacturers will also have to keep in mind that every new indication for a product will trigger another round of benefit assessment and a new price negotiation. Here, attempts to negotiate a higher price with subsequent indications may be met with resistance by the GKV-SV and prove to be a significant challenge for manufacturers. Thus, drug makers should give greater consideration to the trade-off between a fast product launch and the highest value launch.

	Aside from data collection and defining a product’s indication, manufacturers must also develop a solid pricing strategy earlier on in the product development process and have capabilities to better predict a products negotiated price. There is currently no formula regarding the rebate amount the pharmaceutical company has to grant on its retail price.  Furthermore, while evidence demonstrating added benefit is required to avoid reference pricing, it is by no means the sole determinant of pricing decisions. Rather, the extent to which a product’s price will be marked down following a positive benefit assessment is largely dependent on its original launch price as well as the market size and price of the appropriate clinical comparator. As more products go through the product review and pricing process and as more data become available, manufacturers should consider developing algorithms to forecast the benefit assessment outcomes and the product’s final net price.

	The first three years of the AMNOG reform have proven that demonstrating added benefit is no small feat for manufacturers, and while complaints continue to be heard from pharmaceutical stakeholders, the law shows no signs of slowing down. AMNOG has not only set new rules for reimbursement and pricing of pharmaceuticals in Germany, it also forces the industry to adapt at a global level, rethinking how it brings new products to market. Manufacturers that prepare thoroughly for benefit assessment and the negotiation processes within it will be best positioned for success.


	The authors would like to thank Stefan Seliger, PhD, for his review and insights.

		German Pharmaceutical Industry Association/BPI, based on IMS World Review 2012.	

		IQWiG, General Methods Version 4.1.  (Nov. 28, 2013).	

A tweak or an outrage? Germany passes new pricing law

		LEO Pharma Germany, It´s difficult to meet HTA criteria according AMNOG - reason why?  (June 10, 2014).	

 PRMA Insights Focus: Pricing and Reimbursement Success in Germany

		F. Kermani, “Novartis Pulls Galvus From Germany After Failed Price Negotiations,”  

Germany’s stance on pricing threatens drug firm profits

,” Reuters, Feb. 18, 2014, accessed Aug. 14, 2014.	

Comparing the Effectiveness of Prescription Drugs: The German Experience

” (May 21, 2014), accessed Aug. 14, 2014.

		Institute for Quality and Efficiency in Health Care, Trastuzumab emtansine 

 Benefit assessment according to §35a Social Code Book V	

		C. Henry, “Oncology drugs under AMNOG,” 


	Jill E. Sackman, DVM, PhD, senior consultant, and Michael Kuchenreuther, PhD, research analyst, at Numerof & Associates, Inc., St. Louis, MO, 

The authors take a look at some of the recent developments in the German pharmaceutical market.

Drug Benefit Assessment Challenges Market Access in Germany

Manufacturers exploring opportunities in global markets face dynamic demographic and disease trends, changing market demands, and evolving regulatory requirements—all of which differ from one country to another. While emerging markets continue to represent a new channel of demand for pharmaceutical products, manufacturers have quickly realized that significant attention must still be given to more established markets, such as Germany. It’s no longer sufficient to expect that regulatory data from prospective randomized clinical studies alone will be enough to convince payers to provide a price premium for new products. In this article, the authors take a look at some of the recent developments in the German pharmaceutical market, identify pricing and reimbursement challenges, and discuss strategies manufacturers should consider for sustainable success.


Germany is the third largest pharmaceutical market worldwide and accounts for approximately 23% of the European pharmaceutical market (1). Of equal importance to manufacturers, drug prices in Germany are often used as reference prices in 19 other countries. Taken together, gaining access to this market at an acceptable price has major implications for long-term success. In a cost-constrained economy, the German government has taken steps to reduce healthcare spending, and unfortunately for manufacturers, one way they have sought to do this is through The Act on the Reform of the Market for Medical Products (Arzneimittelmarkt-Neuordnungsgesetz—AMNOG). This piece of legislation was enacted in 2011 and mandates a more rigorous benefit evaluation procedure for new pharmaceuticals (and their subsequent label expansions), thereby adding significant challenges to the market access process.

In AMNOG’s new system, manufacturers continue to set the initial price for new prescription drugs after regulatory approval. This price is valid for one year. During this time, the manufacturer’s value dossier is reviewed by the Federal Joint Committee (G-BA), which represents the self-governance structure of the German healthcare system. With the help of the Institute for Quality and Efficiency in Health Care (IQWiG), an expert Health Technology Assessment (HTA) body, the G-BA determines the level of added benefit of the new drug relative to the appropriate comparative therapy (ACT) chosen by the G-BA as well as the certainty of evidence presented by the manufacturer. A brief description of these two inputs that go into the G-BA’s final decision is included in 

Factors shown to impact categorization   decision

Number   of appropriate clinical studies available; Use of valid measurement   instruments; Risk of bias (e.g., non-blinding); Endpoint type (e.g., hard,   surrogate)

Major,   considerable, minor, non-quantifiable, no added benefit, or reduced benefit

Effect   size at outcome level, confidence interval associated with effect

Once the G-BA reaches a final conclusion, pricing negotiations begin with the statutory health insurance (SHI) umbrella organization, GKV
  SV (Gesetzliche Krankenversicherung-Spitzenverband), which negotiates on behalf of all SHIs and also private sickness funds in Germany. It is important to highlight that the ACT is not only used by the G-BA in its assessment, it is also the price anchor for these negotiations. For drugs found to have no added benefit, their price is capped in reference to the price of the comparator. Reference pricing to the comparator can be either advantageous if the ACT is already a high-priced therapy or devastating if the ACT is a generic drug. Thus, manufacturers looking to enter breakthrough therapeutic areas where the current standard treatment is a generic will be particularly challenged. Therapeutic products that demonstrate added benefit are priced above the ACT but may still face a minimum price reduction of 7% (formerly 16%) by law, unless it has been replaced as part of the price negotiations. Unfortunately for manufacturers, while the number of products that have gone through the entire assessment and pricing process remains small since the law was enacted three years ago, early evidence suggests only limited correlation exists between benefit ratings and price reductions. Rather, G-BA’s benefit rating has primarily served as a door opener for price negotiations (4).


As of May 2014, 79 products have been assessed by the G-BA within 169 patient subpopulations. More than 50% of these early benefit assessments have led to ‘no added benefit’ rulings by the G-BA (see

) (5). Not surprisingly, there has been considerable variance observed in the levels of additional benefit reported by pharmaceutical manufacturers and the G-BA. In contrast, the G-BA’s decisions have more closely resembled IQWiG’s recommendations with a few notable exceptions (e.g., belimumab, cabazitaxel, eribulin) (6). Reasons the G-BA has offered for ‘no proven added benefit’ include inadequate comparator, lack of a relevant study to back claims of benefit, lack of data on potential harms, and omission of data for relevant patient subpopulations. A more detailed breakdown of the G-BA’s negative rulings as of October 2013 is presented in   


  While Germany is certainly not the only market that is enforcing more stringent pricing and reimbursement policies for new therapeutic products, it is perhaps scrutinizing the quality and appropriateness of clinical data more so than any other country. Taken together with the fact that other markets look to Germany to determine pricing, manufacturers should place a greater emphasis on G-BA’s recommendations when structuring clinical studies. To date, the majority of AMNOG submissions did not have much guiding input from the G-BA prior to clinical study design and were based on evidence generated on a pre-AMNOG world. Moving forward, proactively consulting with the G-BA to define the comparator(s), clinical endpoints and patient cohorts will be essential. Manufacturers need to do this early in product development, especially prior to starting Phase III trials. Internally, manufacturers should also enhance communication between regulatory and market access teams to strategically plan for both market authorization requirements and G-BA’s requirements.

Even before G-BA consultations, manufacturers need to give greater consideration to the product’s indication. While the indication does not determine how the benefit assessment is conducted, completed assessments indicate that it can influence the G-BA’s comparator choice and a pivotal trial’s relevance. For products with broad indications, IQWiG and the G-BA are demanding clinical data for multiple patient subpopulations and against multiple ACTs. For example, these commissioning bodies recently distinguished between four subpopulations and ACTs for Roche’s Kadcyla (see 

Aside from data collection and defining a product’s indication, manufacturers must also develop a solid pricing strategy earlier on in the product development process and have capabilities to better predict a products negotiated price. There is currently no formula regarding the rebate amount the pharmaceutical company has to grant on its retail price.  Furthermore, while evidence demonstrating added benefit is required to avoid reference pricing, it is by no means the sole determinant of pricing decisions. Rather, the extent to which a product’s price will be marked down following a positive benefit assessment is largely dependent on its original launch price as well as the market size and price of the appropriate clinical comparator. As more products go through the product review and pricing process and as more data become available, manufacturers should consider developing algorithms to forecast the benefit assessment outcomes and the product’s final net price.

The first three years of the AMNOG reform have proven that demonstrating added benefit is no small feat for manufacturers, and while complaints continue to be heard from pharmaceutical stakeholders, the law shows no signs of slowing down. AMNOG has not only set new rules for reimbursement and pricing of pharmaceuticals in Germany, it also forces the industry to adapt at a global level, rethinking how it brings new products to market. Manufacturers that prepare thoroughly for benefit assessment and the negotiation processes within it will be best positioned for success.


  The authors would like to thank Stefan Seliger, PhD, for his review and insights.

German Pharmaceutical Industry Association/BPI, based on IMS World Review 2012.

IQWiG, General Methods Version 4.1.  (Nov. 28, 2013).

LEO Pharma Germany, It´s difficult to meet HTA criteria according AMNOG — reason why?  (June 10, 2014).

F. Kermani, “Novartis Pulls Galvus From Germany After Failed Price Negotiations,”  

,” Reuters, Feb. 18, 2014, accessed Aug. 14, 2014.

” (May 21, 2014),  accessed Aug. 14, 2014.

Institute for Quality and Efficiency in Health Care, Trastuzumab emtansine 

 Benefit assessment according to §35a Social Code Book V

C. Henry, “Oncology drugs under AMNOG,” 


Jill E. Sackman, DVM, PhD,  senior consultant, and Michael Kuchenreuther, PhD,  research analyst,  at Numerof & Associates, Inc., St. Louis, MO, 

Germany Post AMNOG: Insights for BioPharma

Global healthcare systems are currently undergoing major transformations spurred by increasing regulation, record public debt, and shrinking budgets. The United States has the dubious distinction of leading the way in this regard. The mandates of the Affordable Care Act, along with shrinking reimbursement to providers, are fundamentally changing the operation of the US healthcare system. At the same time, patients are being challenged to assume greater accountability for their own health, and the industry is moving to a model that better aligns stakeholder incentives to deliver on cost and quality.  Healthcare providers and payers that have historically been siloed and fragmented are now exploring ways to collaborate and coordinate efforts to reduce costs while improving patient safety and healthcare quality.

Amidst lower reimbursement from payers and declining productivity in R&D, manufacturers are looking to develop high-value, cost effective and targeted drugs. It has long been maintained that personalized medicine offers the prospect of improved health, better outcomes, and less harm. It should not be surprising that the concept of personalized medicine has become a buzzword throughout the industry as manufacturers increasingly see it as the solution to many of their business needs. In fact, the number of personalized medicine products has more than quadrupled in recent years, from only 13 on the market in 2006 to more than 70 in 2012, and a recent report projects that the US market for predictive personalized drugs will double, increasing from $9.2 billion in 2013 to $18.2 billion in 2019 (1). 

FDA defines personalized medicine as “the tailoring of medical treatment to the individual characteristics, needs, and preferences of a patient during all stages of care, including prevention, diagnosis, treatment, and follow-up” (2). Other definitions include specific language around using biological information and biomarkers on the level of molecular disease pathways, genetics, proteomics as well as metabolomics to stratify patients. Some examples of personalized therapies, devices, or technologies that illustrate the broad nature of the term include an implanted 3D-printed tracheal splint, an artificial pancreas device system, drugs aimed at molecular targets specific to a patient’s disease state (e.g., Kadydeco for cystic fibrosis and Zykadia for melanoma), immunotherapies that combat tumors using the body’s own immune system, and disease risk assessment through genetic testing.  

Regardless of how the term is defined, one thing is clear--data and analytics have emerged at the center of this patient-centered and personalized ideal.  Technologies that can extract large amounts of data from samples or biopsies are allowing for previously unknown factors involved in disease to be identified and used as drug targets or disease biomarkers. “Big data can help us personalize medicine, and also glean new insights from big numbers of patients in the real world like never before,” according to Geno Germano, head of Pfizer’s Global Innovative Pharma division (3). Many stakeholders including manufacturers, however, are still struggling with how to effectively leverage massive data sets to improve efficiencies, reduce costs, and advance patient-centric treatments. This article explores data analytic strategies that pharmaceutical companies are considering to capitalize on the opportunities of personalized medicine.


Pharma has always been a data-driven sector; however, the volume of data available today is unprecedented. According to Eric Schmidt, chairman of Google, we generate as much information in a couple of days as all of mankind has since the dawn of recorded history up to 2003 (4). This notion certainly applies to the life-sciences industry, which has seen an explosion of documented patient data over the past decade.  This has been spurred by dramatic changes that include advancements in genome sequencing technologies; the adoption of electronic health records (EHRs) across health systems; the sharing of clinical-trial data; and the rise in patient registries, social media networks, and medical and nonmedical device data systems (e.g., smartphones and fitness monitors). These changes have created a virtual explosion of genomic, clinical trials, claims, EHR, and research study data. When paired with the adoption of advanced analytic tools to generate insights from these data, manufacturers are positioned to create more targeted therapies and to transform the way that biopharmaceutical drugs are discovered, developed, and marketed.  

Personalized medicine is rooted in the hypothesis that diseases are heterogeneous in their causes, rates of progression, and their response to drugs. Simply put, each person’s disease is potentially unique, and therefore, that person needs to be treated as an individual. Thus, the shift toward personalized medicine has required that manufacturers develop rigorous strategies to understand the cause or origin of a disease as opposed to simply treating patients’ symptoms. Ted Driscoll, digital health director at Claremont Creek Ventures, believes that mining data on genomics, proteomics, and metabolomics alongside clinical-trial data and real-world clinical data will enable manufacturers to more thoroughly understand the particular structure of a disease. This understanding will lead to faster and more accurate identification and validation of targets and biomarkers for designing personalized therapies (5). Some forward-thinking manufacturers are already participating in public-private research initiatives to harness the power of “big data” and genome sequencing to improve the success rate for discovering new personalized medicines (

). Such strategies will enable manufacturers to implement patient-centered approaches across all stages of translational and clinical research in therapeutic areas where targeted therapies are lacking.  

Traditional clinical trials enroll a tightly selected group of patients to show, under highly controlled circumstances, that a drug’s effects are statistically significant. As manufacturers invest greater resources in drug discovery focused on the etiology and mechanism of specific diseases, diagnostic biomarkers will help target a patient population that will optimally respond to therapy. Clinical trials designed to test these personalized medicines will likely become more structured as well. Using personal medical and population genomics data, manufacturers now have tools to design more targeted clinical trials by matching cell types and individual metabolic response to the drug candidate, recruiting subjects who will be more likely to respond and excluding those likely to have treatment-limiting side effects.  

Some global manufacturers have already launched personalized medicine clinical trial strategies that could change how drugs are studied and potentially cut the time and cost of bringing them to market (see 

). Multi-drug, multi-arm, biomarker-driven clinical trials are one strategy manufacturers are putting into practice. According to Maria Freire, PhD, president and executive director of the Foundation for the National Institutes of Health, this clinical trial design establishes a model of clinical testing that more efficiently meets the needs of both patients and drug developers. “This strategy will validate biomarkers and facilitate drug development in one infrastructure, to more rapidly provide safer and more effective treatments to patients” (6).   

Table II: Examples of more personalized clinical trial strategies. 

Finally, as greater volumes of patient reporting information are captured and tracked, manufacturers should be reviewing that data and correlating the real-world reactions of patients with their clinical data to ensure that the intended outcome of the drug or device is actually happening. This especially holds true for manufacturers of companion diagnostic tests as it is often more difficult for these developers to achieve broad coverage and value-based reimbursement for their product. To this point, some manufacturers have already created proprietary data networks through partnerships to gather, analyze, share, and respond to real-world outcomes and claims data. One example involves Genomic Health’s Oncotype DX for breast cancer recurrence, where the manufacturer analyzed the real-world outcomes and costs of 925 Humana patients managed with diagnostic and demonstrated significant cost savings (7).   


The volume of health-related data is exploding at an unprecedented rate. While having access to these data is important, access alone does not advance the science. The real challenge that manufacturers must address is asking the right questions and effectively discerning which data are of value in answering these questions. Given the sheer volume of information available, framing appropriate questions along with data and analytic capabilities will be key differentiators in personalized medicine. Some organizations may be able to do these analytics in-house, while others may need to consider investing in data through innovative partnerships with healthcare-focused and even non-healthcare focused entities. Regardless, manufacturers at the leading edge of personalized medicine will be those that invest resources to determine where true medical unmet needs exist and what data and analytics can answer key questions around improving patient outcomes.  

From a drug discovery and development standpoint, the ability to manage, integrate, and link data across functions (e.g., safety, clinical studies, regulatory, patient reported outcomes, etc.) will enable manufacturers to conduct comprehensive data mining that can facilitate lead generation as well as identify related applications or potential safety issues.  In order for this to be possible, however, silos that have historically separated internal functions will need to be removed to allow for end-to-end data integration. R&D heads can also use genomic data, clinical-trial data, and real-world data to prioritize investments in specific disease areas. Criteria such as potential clinical relevance of biomarkers and feasibility of discovering biomarkers should also be considered given the increasing importance of biomarkers and companion diagnostics in personalized medicine.  

As manufacturers continue to develop more targeted therapies, clinical trials must be more targeted as well. Essentially, clinical trials must be designed so that they can show, early on, if a drug is efficacious for the first cohort of patients. Manufacturers must identify appropriate patients using more data sources (e.g., patient registries and social media) and additional criteria (e.g., genetic composition). Targeting specific populations will allow for trials that are smaller, shorter, less expensive, and more powerful. When appropriate, manufacturers that develop or invest in companion diagnostic tests early on in their R&D processes will be better-positioned to conduct such studies.
With payers increasingly driving value-based reimbursement strategies for services, therapeutics, and devices, the availability of data around individual patients’ medical history, clinical interventions including prescription history, outcomes, and cost will help drug manufacturers develop better target therapies and stratify populations thereby optimizing value and patient outcomes.  

What You Need to Know to Create or Sustain a Personalized Medicine Strategy for Your Company

Paving the Way for Personalized Medicine: FDA’s Role in the New Era of Medical Product Developmen

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Jill E. Sackman, DVM, PhD, is a senior consultant, and Michael Kuchenreuther, PhD, is a research analyst, both at Numerof     & Associates, Inc., St. Louis, MO, 

Data analytic strategies can help companies capitalize on personalized medicine.

Marrying Big Data with Personalized Medicine

Recognizing that emerging markets continue to play a significant role in terms of future growth, most major pharmaceutical companies have accelerated efforts to strengthen their presence within these markets through R&D investment, licensing deals, acquisitions, or other partnerships. However, with global markets facing dynamic demographic and disease trends, changing market demands, and evolving regulatory requirements, it has been hard for manufacturers to devise the strategies needed for success in each of these areas. 

India, a member of the BRIC nations (Brazil, Russia, India, and China), is much more comparable to the United States in terms of market size and must be included in this list of promising potential markets for global pharmaceutical manufacturers. Recent changes in India’s population and economy have contributed to a shift in the country’s epidemiological profile towards ‘lifestyle’ diseases that are more prevalent in Western markets. Such changes have increased the demand for better healthcare and for medications that address chronic diseases. Furthermore, India’s own pharmaceutical industry, a recognized world leader in the production of generic drugs, offers manufacturing expertise to organizations looking to outsource or create networks of collaboration and discovery. However, a more granular assessment of India’s pharmaceutical market reveals growing concerns over patent protection, price capping, quality, and safety. Understanding this country’s complex market dynamics will be crucial for manufacturers exploring new opportunities for growth in India.  

India health and pharmaceutical market overview


India is the second most populous country in the world with about 1.27 billion people, and is projected to surpass China by 2028 (1). As the Indian population has continued to grow in recent years, so too has the country’s economy. Over the past decade, India’s economy grew above the Organization for Economic Co-operation and Development (OECD) average, which can be attributed to rising average income levels, an expanding middle class, and a drive toward urbanization (2). These socio-economic changes are contributing to a significant shift in India’s epidemiological profile. With working-age adults accounting for the majority of the overall population and more people becoming affluent and living longer, Indian health service users are facing increasing challenges associated with the prevention and treatment of chronic diseases such as obesity, heart disease, stroke, cancer, and diabetes (3).   

At the same time, India continues to be challenged by a range of infectious disorders. Despite economic advancements, significant income inequality still exists throughout the country. In fact, per capita gross national income in India was only $3,391 in 2012 when adjusted by purchasing power parity (compared to $50,000 in US) (4).  In rural areas, where two-thirds of the nation’s citizens are located, hundreds of millions of people are still living in severe poverty, and vaccination coverage for children remains poor.  

Taken together, this high incidence of infectious and chronic disease and the large number of disadvantaged communities have created an even greater need for patient access to quality healthcare delivery as well as new and innovative therapeutic products. Historically, India has had one of the world’s lowest levels of health spending as a proportion of gross domestic product (GDP). In 2011, India’s total health expenditure was 3.9% of GDP (public expenditure was only 1.2% of GDP) compared to 10.1% of GDP, an average across all G-5 countries (4). The lack of government funding in healthcare has led to significant gaps in the quality and availability of public facilities and has pushed an increasing proportion of Indian patients to use private healthcare facilities that are associated with high costs. Where other countries have a well-established insurance sector that seeks to reduce this economic burden, health insurance in India is still in its infancy.   

Approximately 243 million people are covered by different forms of government-sponsored insurance schemes while approximately 55 million rely on commercial insurers (5). With the vast majority of people in India uninsured, out-of-pocket payments are among the highest in the world. According to the World Health Organization (WHO), 70% of Indians are spending their entire out-of-pocket income on medicines and healthcare services (6). On top of this, most insurance plans only provide coverage for inpatient healthcare services and do not include coverage for outpatient treatments, including prescription medicines. Thus, it is no surprise that approximately 90% of India’s pharmaceutical market is currently made up of branded generic drugs (7).  

Against this backdrop, India’s Ministry of Health has been focused on improving access to healthcare facilities, increasing population coverage by way of healthcare insurance, and creating initiatives for the prevention and early stage management of chronic diseases. In 2012, as part of the country’s 12th Five-Year Plan, the government proposed to double its public expenditure on healthcare to 2-3% of GDP in an effort to boost local access and affordability to quality healthcare. In light of these efforts, the Indian healthcare industry as a whole is expected to reach $158 billion by 2017 (8).   

India’s pharmaceutical market accounts for about 10% of the global pharmaceutical industry in terms of volume and represents a major component of growth for the country’s healthcare industry (9). The Indian pharmaceutical market was estimated at $18.4 billion in 2012 and is expected to almost double by 2016. Although India’s market is currently dominated by generic drugs, rising incomes, enhanced medical infrastructure, and insurance coverage could provide a valuable opportunity for manufacturers’ higher-priced branded healthcare products moving forward.     

 Similar to many other countries, India’s medical regulatory structure is divided between national and state authorities. The Drug Controller General of India (DCGI) is the national authority responsible for the regulation of pharmaceuticals. The DCGI registers all imported drugs, new drugs, and biologicals in selected categories and has responsibility for approving clinical trials and quality standards in the country. Recently, these standards have come under question by FDA, citing quality-control problems ranging from data manipulation to sanitation. While FDA and regulatory bodies in other countries step up inspections of Indian plants in response to these developments, global manufacturers have had to reassess their contracted relations with these plants and give careful consideration to developing new strategic partnerships in this country moving forward (10).    

Concerns over quality and data integrity have also impacted manufacturers’ perception of India’s clinical trials system. India’s large and diverse patient pool and low drug trial costs have made the country an attractive destination for multinational pharmaceutical clinical trials. However, India has recently seen the number of clinical trials fall dramatically among allegations that protocols were not being conducted properly and that companies were taking advantage of disadvantaged patients (11). In response to these developments, manufacturers have been forced to either shift their trials to another country or encounter significant delays in clinical trial approval--both of which are holding their organizations back.

 The high prevalence of self-pay generic drugs throughout the country has created little incentive for the development of certain market access disciplines such as health economics and outcome research (HEOR) and reimbursement. Government affairs and pricing functions, on the other hand, play an important role and have been broadly cited as the most crucial challenges global manufacturers face in the Indian marketplace.

India’s National Pharmaceutical Pricing Authority (NPPA) controls product pricing throughout the country. In 2013, the NPPA expanded the National List of Essential Medicines (NLEM) to include 652 drugs, a substantial increase over the 74 drugs previously listed. These products will now be subject to price controls that are projected to reduce prices by more than 20% for half the drugs (12). As if this did not challenge manufacturers enough, the Indian government recently decided to revise the NLEM later this year in response to complaints that the list should include all dosages, strengths, delivery mechanisms, and combinations of these previously identified drugs (13). The NPPA is also allowed to control prices of patented drugs that lie outside this list, and last month the government began exploring the possibility of using a reference pricing system for these products (14).  With intense generic competition already driving down drug prices in India, these additional controls pose a significant threat to international manufacturers’ ability to generate revenue.

 Aside from pricing, patent protection has also come under the microscope as of late. In an effort to ensure greater accessibility to higher-cost, branded drugs, India, as well as other BRIC countries, has begun to allow generic-drug manufacturers to market these drugs at dramatically reduced costs without consequence through compulsory licenses.  While only one compulsory license has been approved by India’s government to date (Bayer’s Nexavar), other manufacturers have recently had their patents weakened, revoked, or rejected. While appeals to some of these rulings are still in process, precedents have been set, leading manufacturers to question their future investment in India. 

Implications for successful market entry 


Despite the aforementioned challenges, major pharmaceutical companies recognize the long-term prospects of this market and continue launching new patented drugs and pursuing unique business opportunities in India. To encourage future investment, the government has made tax breaks available to the pharmaceutical sector, including a weighted tax deduction of 150% for any R&D expenditure incurred. In addition, the government recently declared that all drugs that offer some form of innovation would be exempt from price regulation for the first five years following approval. Here, innovation refers to drugs or drug delivery systems that arise from native R&D efforts or existing drugs that are improved upon by an Indian company. This measure is aimed to spur growth in the domestic pharmaceutical market and to ensure that pricing regulations do not turn global manufacturers away from India. Thus, companies that develop strategic partnerships with local businesses and outsource some of their R&D and manufacturing activities will be well-positioned to maximize revenue by avoiding steep price cuts. This opportunity for manufacturers will only apply, however, for those products that offer true innovation by providing economic and/or clinical value.  

Uncertainty over patent security and obstacles to clinical trials are discouraging Western companies from conducting drug research in India. With that said, the government has already initiated clinical research reform efforts through new amendments and regulations that could quickly restore the growth of clinical trials throughout the country.  At the same time, there is speculation that a transfer of power in India’s upcoming election could dampen fears of additional compulsory licenses (15). Manufacturers should closely monitor these internal developments and react accordingly.  


A growing middle class that is projected to see a significant rise in noncommunicable diseases provides an excellent opportunity for global companies to launch their premium products and expand their market share. India’s underdeveloped insurance industry and high poverty rates, however, require that manufacturers first develop a careful pricing strategy. Pricing products appropriately can go a long way towards ensuring future growth as well as avoiding disputes over patent protection and licensing agreements.  In a country that holds about one-fifth of the world’s population, India’s market is too big for pharmaceutical companies to shy away from, despite all of the hurdles placed in front of them.  

UN: India to be world’s most populous country by 2028

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  Jill E. Sackman, DVM, PhD, is a senior consultant at Numerof & Associates, Inc. (NAI), St. Louis, MO, 

. Michael Kuchenreuther, PhD, is a research analyst at Numerof & Associates, Inc.  

An established drug-manufacturing base with quality and safety issues, and patent protection and price capping concerns complicate efforts to do business in India.

India Offers Biopharma Opportunities and Challenges

Biopharma companies should not overlook India's growing market.