GSK’s recent pricing deals
As Andrew Jack of the Financial Times (FT.com) first reported Sunday, GSK has apparently reached agreement with two EU countries’ to flexibly price its new medicines based on their demonstrated cost-effectiveness. The agreements were further elaborated upon in an article Monday by Ben Hirschler of the Scotsman. Details of the agreements weren’t disclosed, nor were the identities of the countries, although France is speculated as being one.
I’m very curious about the details of these agreements. Certainly, there is great potential benefit to a pharmaceutical company if it can reach agreement prior to marketing on a pricing scheme that allows for near-automatic increases in reimbursed price based on demonstrated value. It’s a clear departure from current reference-pricing schemes that set a price based on the perceived value of a drug (relative to its reference group) at the time of launch, with little room for value-based price changes thereafter.
But there is a potential downside as well, should the drug’s value not live up to its promise. Under the scheme as described, GSK would have to reduce its prices in these circumstances.
Agreements as described raise a host of implementation questions. I assume that the initial drug price in these schemes would be determined as it is today–a reference-based price determined via negotiation. What I am not at all sure of is how prices would be adjusted for future demonstrations of value (or lack thereof). How would a country enforce its agreed to pricing adjustments if they are unfavorable to the manufaturer? Wouldn’t a manufacturer put up a hell of a fight before it subjected its drugs to price deflation? What if a manufacturer simply refused to cut a drug’s price, or the health system refused to increase its reimbursement, each citing scientific arguments supporting its decision? Would each disputed pricing adjustment end up in court, or is there an arbitration scheme built in? How would demonstrated safety or tolerability issues be reflected in the price; would quality-of-life be used to determine price revisions? What all these questions boil down to is this: How will value be determined, who will determine it and how will it be reflected in price?
