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The COVID-19 Pandemic: Pricing and Access Outlook for Future Innovative Drugs in Europe

April 14, 2020


Written by: Maximilian Hunt Ismail Ismailoglu, PhD Matthias Reichert Luke Wiggins

Key takeaways:

  • The COVID-19 outbreak puts healthcare systems at risk due to both acute operational impacts and broad financial disruptions, but the extent of the financial impact is still uncertain
  • Similarly, austerity measures across the EU in response to the 2008 recession resulted in more restrictive healthcare budgets and pharmaceutical spending, particularly in countries with less economic stability
  • The impact of the outbreak in western Europe is likely going to be felt stronger in countries like Italy, Spain and France, which face a higher burden from the disease and have more strained budgets in comparison to Germany and Nordic countries that have faced lower disease burden so far
  • Over the short- and mid-term, increased scrutiny on pharmaceutical spending, both for established and innovative medicines should be expected in European markets
  • Actions taken by payers to cope with restricted budgets are expected to be more drastic in countries that face a higher impact from the COVID-19 pandemic

CBPartners’ Take: When considering pricing and market access strategies in the post-COVID-19 Europe, manufacturers should account for the changing healthcare system priorities and increased scrutiny on spending in strained economic conditions, prepare for more challenging negotiations, and build more flexibility in their approach.

Pricing and Market Access Impact of the COVID-19 Pandemic in Europe

The COVID-19 outbreak has been characterized by the challenge of overcoming the immediate clinical and human impact of the pandemic while mitigating wider economic and social disruption. In particular, healthcare systems are at risk from acute operational impacts. These are already taking effect and are likely to persist throughout the duration of the crisis, as well as broad financial disruption such as a deep recession. The extent of disruption that these challenges may bring to the pricing and access landscape for future innovative drugs in Europe is uncertain and will depend on the severity of regional crises in addition to the measures taken by policymakers to manage the fallout from the pandemic. However, due to the global nature of the outbreak, potential impacts in EU countries will inevitably occur in the context of international disruption.

While we are still in the early days of the crisis, we wanted to provide a brief update about the potential impact the pandemic will have on the pharmaceutical pricing and access landscape in Europe. To this end, we have explored the 2008 financial crisis as an analogous case study. Though, any direct comparisons will need to be taken with caution, as the 2008 crisis did not have a direct healthcare component and the extent of the financial impact from the current events are still uncertain. The financial damage is likely to grow in parallel with the duration of the measures taken to control the spread of the disease. Eventually resulting in widespread economic impact, potentially comparable in size, to or larger, than the 2008 financial crisis. If the impact of the financial crisis is large, healthcare policymakers may be required to shift focus towards repairing and reinforcing systems affected from the pandemic response under strained economic conditions.

Case Study: 2008 Financial Crisis and its Impact in Europe

Austerity measures across the EU in response to the 2008 recession resulted in more restrictive healthcare budgets. Pharmaceutical spending across the region also grew at a slow rate or contracted in the years following the crisis. An analysis of three economically stable countries (Austria, Estonia and Finland) and five less economically stable countries (Greece, Ireland, Portugal, Slovakia and Spain) showed that the impact of the recession on pharmaceutical spending was larger in the latter group. This analysis also showed that the most commonly applied policies for cutting spending included: price cuts, cost sharing or co-payments, and efforts towards increased use of generics. As a result of the austerity measures, both the volume and total revenue for pharmaceutical sales increased slower in countries with less stable economies.

A separate analysis showed that Italian authorities followed similar approaches including price cuts on generics, centralized procurement, reductions in prices and margins for branded medicines, monitoring of pharmaceutical spending, pay for performance schemes, and price revisions based on efficacy. Furthermore, 10 Italian regions whose healthcare systems joined austerity measures grew spending by 0.6% vs. 9.4% in other regions, indicating that there were differences in access among the regions of the same country. In addition to these measures, Greece, as one of the most severely impacted EU countries during the financial crisis, instituted a new international reference pricing (IRP) approach (average price of the cheapest three EU markets). This resulted in average pricing reductions of 9.5%. Since >20 countries reference Greece’s pharmaceutical prices (e.g., Turkey, Brazil and Egypt), the discounts in this market consequently had a significant impact globally. Access to drugs in Greece was also impacted for years due to general challenges in the healthcare industry (e.g., hospital budget cuts, provider shortages) and payment disruptions in the supply chain.

Some less direct cost-cutting measures were introduced in more economically stable EU markets as well. For example, the German health system increased the transparency of negotiated prices across the supply chain and the French government pledged to keep drug reimbursement levels at 2012 levels.

Anticipated Impact of COVID-19 Pandemic

Disruption in healthcare systems across Europe is expected to be rife due to the COVID-19 pandemic. With increasingly strained budgets, and shifting healthcare priorities, pharmaceutical spending is at risk of decline over the coming years during and following the crisis. Overall, we expect the impact to be greater in high impact markets (e.g., Italy, Spain, France), which face a higher burden from the disease. Generally, these regions have more strained budgets compared to low impact markets (e.g., Germany and Nordic countries), as they face a lesser disease burden and are less impacted by spending restraints.

Specifically, in high-impact markets, scrutiny on pharmaceutical spending would likely be significantly higher over the short- and mid-term. Payer efforts would lead to strengthening the already existing trend to decrease pharmaceutical spending via the use of biosimilars and seeking net level discounts through managed entry agreements (e.g., PVA, budget caps). Furthermore, there is likely to be an added interest in limiting the use of new products to subpopulations with the highest unmet need or expected potential benefit, ultimately limiting access. Aligned with this approach, payers might also further restrict physician flexibility to ensure prescription practices are aligned with the European Medicines Agency (EMA) and Health Technology Assessment (HTA) opinions, e.g., in Germany sickness funds may utilize the audit pathway more effectively.

If the financial impact of the crisis deepens, payers in financially constrained markets might pursue to strengthen IRP regulations or require direct discounts across all pharmaceutical products or in targeted disease areas. Consequently, as benchmarks across the industry drop through these measures, this would mean that the pricing opportunity for new products is also likely to be lower. Lastly, regional decision-making in high impact markets is likely to slow down as healthcare systems recover from the effects of the pandemic.

In low-impact markets that have well-established HTA processes, we would not expect an abrupt and substantial change to these systems. However, formal or informal payer thresholds across markets might be tightened and result in generally more challenging negotiations with overall lower pricing and access opportunity. (E.g., EUR 20M annual budget impact in France requiring a health economic analysis, EUR 50M orphan threshold in Germany, cost-effectiveness thresholds in Great Britain / Sweden).

As healthcare systems recover from the physical and financial impacts of the pandemic, it is probable they will face increased pressure. This is due to demand for non-COVID-19-related treatments that were delayed during the outbreak rise, creating a barrier for access to drugs. As a result of limited provider capacity, treatments that decrease health resource utilization or infrastructure needs might be preferred by payers. Lastly, due to the drug supply challenges experienced during the COVID-19 pandemic, policies might be created to encourage EU-based manufacturing.

Finally, delays in reimbursement of new drugs should be expected in the short-term as payers work through the backlogs that have developed due to delayed or cancelled HTA meetings during the active pandemic period.

Considerations for Pricing and Access Negotiations in the Post COVID-19 Market

Based on the analysis of the 2008 financial crisis, the COVID-19 pandemic is expected to have a strong impact on the pricing and market access landscape for innovative medicines in Europe. When evaluating the changing healthcare system priorities, it will be important to address the increased scrutiny on spending, particularly in strained economic conditions. General strategies across markets include:

  • Consider alternative access scenarios for innovative medicines, such as targeting specific patient subpopulations, in order to bring the overall budget impact to a level acceptable by the authorities and protect the pricing opportunity at launch
  • Be open to the idea of alternative payment models. Actively seek to develop these approaches to provide teams with flexibility during negotiations and protect list prices minimizing IRP impact
  • Explore opportunities to limit resource burden for healthcare systems
  • Assess value-added services to address any provider challenges hindering access

As the COVID-19 pandemic progresses, a clearer picture of the scale and impact of the crisis will begin to emerge. CBPartners will continue to monitor the potential impacts of the situation and the implications for the post COVID-19 pricing and access landscape for innovative drugs in Europe. For further discussion about this topic, listen to our latest COVID-19 roundtable on our CBPodcast, ‘CBPartners’ Pharma Take-Away’.