PharmExec Blog

Wins and Losses from Risk-Sharing Agreements

Can you manage the external market impact?

Risk-sharing agreements – where companies contract with reimbursement or assessment authorities to guarantee a new drug’s performance, often against specific outcomes measures, in return for access to patients – are among the latest innovations in managing health care costs. Use of the tool is standard in Australia, is taking root in Europe and is attracting significant attention in the US.

Last month, Pharm Exec’s sister conferencing unit, CBI, hosted a two day conference on risk-sharing in London to help industry and payers answer a fundamental question:  do these agreements work and, if so, who benefits?
Response of the group was mixed.  There was a basic consensus that risk-sharing deals should have limited application as a stop gap measure when standard negotiations linked to clinical benefit and price fail to provide patients and providers with timely exposure to new therapies. An underlying perception among industry is that the current global fiscal crisis will induce a harsh “pile-on” effect, with risk-sharing proposed after lower mandated prices are imposed, compounding the negative impact of international price referencing across countries.

From my point of view, in moderating a lengthy panel discussion on practical experiences with risk-sharing, there were several key take-aways:

•    Differing perceptions on what constitutes basic ground rules for the design and execution of this tool limits its appeal for both industry and the regulator.

Participants documented at least 15 different ways to “define” a risk-sharing agreement, leading to the conclusion that a key potential benefit – predictability in exposure to long-term pricing risk – would remain elusive.

•    Obligations incurred by industry under risk-sharing can be costly and subject to interpretations that create uncertainty on assuming responsibility for contingent liabilities for “failure to perform.”  There is a basic question at the heart of this discussion:  can companies make money as a guarantor of a total “health solutions” approach to securing access to patients for a new therapy with limited real world exposure to patients?  Is it possible to establish a high level of clinical differentiation that can produce verifiable data to prove a solid public health outcome?  This is a particularly important test for deals in some of the most promising emerging therapy areas like oncology.

•    Full transparency in the execution of risk-sharing agreements is a matter of debate.  Parties accept the need for it, but there is also a case to be made for confidentiality as a confidence builder. This is a concern for industry due to the potential for specific price provisions in a risk-sharing deal to leak to other markets, inducing a “race to the bottom” on price and with no guarantee of increased access elsewhere.   In other words, do we want our risk-sharing deal with the UK National Health Service [NHS] replicated in Lithuania?

Significantly, representatives of payers and industry did secure common ground on this  point.  A representative of the UK National Institute for Health and Clinical Excellence [NICE] acknowledged the threat from international price referencing and proposed NICE is willing to be more flexible in approving deals with confidentiality clauses covering simple discounts as well as the agreed conditions for rebates or providing a medicine for free if performance/outcomes criteria are not met.

NICE and other European payer representatives also documented their own expectations about negotiating a strong risk-sharing agreement, focusing on three critical criteria:  (1) keep it simple; (2) be fully costed; and (3) provide clear metrics that relate to the sponsoring organization’s mission and budget. Industry panelists said the three elements could serve as their own blueprint for success as well.

Likewise, there was consensus that the PR element in risk-sharing has been neglected by both sides, and that industry in particular has to balance its interest in confidentiality with at least a back-up strategy to engage the media and the public, where necessary.

The Best Advice…Each Deal is Unique
Finally, an implicit – but vital – conclusion of the CBI conference is that the practical utility of risk-sharing has to be based on a frank and realistic assessment of each local practice environment.  This is critically important in Europe, as differences among markets can be profound.  A good example is understanding where the patient perspective fits in when risk-sharing deals are being negotiated. In the UK, this can spark an animated discussion and must also include the media as a new potential stakeholder, whereas in Italy or Germany the very notion of patient engagement is greeted with a blank stare.

William Looney


What is more important in negotiating a succesful risk sharing agreement:
Strict confidentiality/disclosure provisions?
Simplicity and freedom to respond with flexibility to demands of third party stakeholders?

Please share your thoughts below.

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