Sharing the Risk of the Healthcare Cost Burden

A Message from the International Research-based Pharmaceutical Manufacturers Association (IRPMA)

In recent years the utilization of risk-sharing mechanisms – also known as managed entry agreements (MEAs) – has become increasingly common in healthcare systems around the world. Britain, Italy, Canada, and Korea are prominent examples. These arrangements have been welcomed by both the pharmaceutical industry and national healthcare administrations as a means of accommodating innovative but of ten expensive new medications without causing budgets to soar out of control.

IRPMA introduced the concept to Taiwan at a Pharmaceutical Innovation & Drug Policy Workshop held in May 2016, which featured presentations by two foreign experts on risk-sharing approaches. Adrian Griffin, vice president for Health Technology Assessment & Market Access Policy at Johnson & Johnson, stressed how such programs can assist payer organizations in making decisions when they “face significant uncertainty over the clinical or financial impact of new drugs.” Adam Mitchell-Heggs, consulting associate at the global consulting firm Charles River Associates, noted that the benefits of MEAs include reduced delay for patients in access to new medications, greater financial certainty for both manufacturers and healthcare systems, guarantees regarding performance, and opportunities for discounts to payers.

Over the past two years, industry representatives have held numerous rounds of discussions with officials from the Ministry of Health and Welfare (MOHW) and its National Health Insurance Administration (NHIA) on how to best implement such risk-sharing methods in Taiwan. Last May, the American, European, and Japanese Chambers of Commerce sent a joint letter to the Minister of Health and Welfare to endorse the risk-sharing approach and request early implementation.

Those efforts bore fruit recently with MOHW’s formal announcement on September 19 setting out guidelines for entering into MEA schemes.

“This was a very important step in assuring the sustainability of Taiwan’s healthcare system,” says Heather Lin, IRPMA’s chief operating officer. “The burden of providing universal coverage should be borne not just by the government but also by the industry and by patients through co-payments.”

Risk sharing between government and industry may take a variety of forms, some based on assessing the outcome of the treatment and some geared to the financial impact. In one example of an outcome-based MEA, the manufacturer provides sufficient supply of a new drug free of charge for three months. If the drug has proved to be effective, payment would start from the fourth month. In a variation on that approach, the government reimburses for the cost of the drug from the start, but if the hospitals find the treatment to be ineffective the pharmaceutical company pays back the amount that was spent.

In a financial-based MEA, the pharmaceutical company might agree, for example, to rebate a certain percentage of the drug expenditures, to absorb the drug costs during the initial period of treatment, or to pay for other drugs used in combination therapy.

“It’s noteworthy that the MOHW guidelines don’t include any fixed numbers” regarding the obligations of each side in the agreement, says Heather Lin. “There’s no way to set such numbers in principle because the conditions for each products are different, and it’s necessary to rely on the outcome of the clinical data to determine any compensation. That situation requires a high level of trust between government and industry, and fortunately that kind of trust has been established.”

A key aspect of risk-sharing agreements must be confidentiality, so that information about treatment outcomes and costs cannot be used against manufacturers by their competitors.  “Only the government and the company will know the details,” says Lin. “Each must agree that those details cannot be released to the public, hospitals, or other stakeholders. Without that agreement, the system can’t work.”

Given the enormous investment necessary to develop a successful medication, plus the fact that drug companies often have only a few years to make back that investment for a breakthrough drug that can cure a disease, price can be a barrier to bringing new products to market. Risk-sharing arrangements offer the best hope for a win-win-win solution. Patients get quicker access to potentially life-saving and quality-of-life enhancing innovative drugs, the government healthcare organization obtains better control over its budget, and manufacturers receive more predictability regarding price and market access.

Already 10-20 drugs are in the queue to apply for MEAs. IRPMA hopes these cases will serve as successful models for many more examples in the years ahead.

For more information, please contact:
International Research-based Pharmaceutical Manufacturers Association (IRPMA)

9F-8, 188 Nanjing E. Rd., Sec. 5, Taipei 10571, Taiwan
Tel: +886-2-2767-5661   Fax: +886-2-2746-8575

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