Blog Share risk

Even when biopharmaceutical teams engage with payers early and often through the development process, payers may still balk at the projected price of a new treatment especially if cheaper options are on the market or if the target population is large. That can be the death knell for an innovative asset. But there is a solution. If payers won’t embrace your pricing strategy, consider risk-sharing as a way to get them on board.

Blog Share riskWhen agreement cannot be reached on price or on the reimbursement terms, risk-sharing agreements allow less restrictive access in exchange for the manufacturer bearing incrementally greater financial risk, thus ensuring the asset is prescribed and used.

Some examples of risk sharing models include:

  • Outcomes-based risk-sharing: These agreements involve payers and pharmaceutical manufacturers sharing the risk associated with the therapeutic performance or cost-effectiveness of an asset. This is a viable strategy when a long-term clinical outcome or adherence benefits are anticipated for the asset and may merit preferential coverage and reimbursement. This approach may allow coverage and reimbursement which would otherwise not have been possible and can promote more rapid uptake of the product.

  • Coverage with Evidence Development: In CED agreements, initial coverage decisions are contingent on the collection of additional population-level evidence. CED is often reserved for promising technologies where some aspects of the product value remains uncertain, with the purpose of requiring additional evidence to further clarify the value proposition. In some cases, payers may require CED as a condition of initial coverage with the contingency that additional evidence is developed and a reassessment occurs at a later stage.

  • Conditional Treatment Continuation: In these schemes, treatment is contingent on the patient meeting pre-specified short-term treatment goals, which helps ensure that only the patients benefiting from a treatment continue to receive that treatment.

  • Performance-Linked Reimbursement: These schemes aim to control the cost-effectiveness of a new technology through either outcome guarantees, where the manufacturer will provide rebates, refunds, or price adjustments if their asset does not reach certain outcome targets, or pattern of care schemes, where the reimbursement level is tied to the impact on clinical practice patterns.

  • Price/Volume Agreements: In these schemes, a new asset’s reimbursement price is linked to a sales volume threshold on a population level. If the pre-agreed sales volume threshold is exceeded, the manufacturer must reduce the price of the asset or make cash payments to the Payer as compensation. This commonly applied risk-sharing approach is simpler to administer versus performance-based agreements

  • Utilization Cap: These schemes involve guarantees on asset-specific budget impact working on a patient level. The manufacturer may agree to pay for treatment utilization beyond a determined clinical threshold and the payer will cover the asset up until said threshold. This scheme may be used when over-utilization is a concern.

Additionally, some biopharma companies have built partnerships to uncover the real-world value of innovative products and to gain insight into treatment usage and adherence patterns. However, there is limited documented success on these partnerships thus it is hard to assess what health care data they are producing and what type of traction these partnerships are getting.