Price-Volume Agreements – prospects for Poland

1. Price-Volume Agreements– prospects for Poland Norbert Wilk n.wilk@aotm.gov.pl Agency for Health Technology Assessment in Poland

2. Price-Volume Agreement (PVA) • One of drug policy measures • A volume control tool • The price of a pharmaceutical is agreed between public authorities and a manufacturer on the basis of a forecast volume of sales. If the actual sales volume exceeds the forecast, the price of the pharmaceuticalis usually reviewed downwards [PPRI Glossary] • Particularly useful in situations where unit prices are higher than comparators and there is potential for high prescription volumes, or when there is significant uncertainty about the estimated volumes

3. PVA – what it is, what it is not • A penalty on success? • A penalty for inadequate market research and poor forecasting • A method of sharing risk between the manufacturer and the public payer, based on pre-agreed relation of price of the drug to the volume of sales • A method to put certain limits to sales forces („the armies of sales representatives”) • In PVA the sponsor of a particular drug agrees to a price reduction for any sales that exceed a pre-agreed sales volume • In rebate agreements the sponsor offers a rebate (of varying size) for the cost of increased expenditure over a set annual subsidisation cap / threshold

4. Rebate arrangements • Rebating a percentage of the price of each unit sold that is in excess of agreed annual set caps. • Example: The sponsor agrees to rebate x % of the cost of each unit sold for any sales in excess of $20 million in a year. • Estimating the potential use outside the PBS restriction and rebating a proportion of this use. • Example: The sponsor and the Department agree that up to y % of a particular drug’s sales may be for uses that are not subsidised by the PBS. The sponsor would thereby rebate y% of that drug’s total sales to the Government. • Agreeing to a common annual sales cap for all the drugs used to treat a particular condition and rebating any excess according to each sponsor’s market share. • Example: Four drugs are used to treat a particular condition and the agreed cap for their combined sales is $80 million per year. In a particular year, sales are $100 million, with the four sponsors having sold: $10 million, $20 million, $30 million and $40 million respectively. Sponsors rebate a total of $20 million to the government, paying: $2 million, $4 million, $6 million and $8 million, respectively, based on their market share. [PBS, Australia]

5. Rebate arrangements (2) • Absolute rebate based on the price of an alternative drug (where use of drug A above a certain level may be inconsistent with the cost-effectiveness recommendation of the PBAC). • Example: The sponsor agrees to supply drug A at the drug’s agreed price (say $100) for sales up to $15 million per year, but then supply the drug at the price of the cheaper alternative drug B (say $60) for any sales in excess of $15 million, rebating the difference in the prices to the Government. • For an additional indication to an already existing drug, limiting the total cost to the PBS for the current indication(s) plus no more than $10 million. This limits the cost to the PBS for the new indication, to $10 million per year and may remove the need for Cabinet consideration. • Example: The use of a drug already listed on the PBS, and costing $25 million per year, is extended to include treatment for another condition or indication. The sponsor agrees to pay back to the government any costs that exceed $35 million ($25 + $10) in a given year. This caps the cost to the PBS for the additional use to $10 million in any year. • Agreeing to rebate the full amount (100%) of any cost to the PBS for a particular drug that exceeds $10 million per year. This limits the cost to the PBS at $10 million per year and may remove the need for Cabinet consideration. [PBS, Australia]

6. PVA vs. Rebate arrangements • Semantics… • For a manufacturer it is easier to accept rebate idea than a reduction of price (although both may lead to the very same impact on turnover)

7. PVAs in Poland • Some attempts were made, but never came into action • Reported lack of adequate legal solutions • Fears of accusationas to inadequate protection of public interest • Credible epidemiological data coupled with sales of comparators to verify whether the sales forecasts applied for by the manufacturer to be included in PVA are not over the top • Continuation of PVAs: what if a manufacturer does not want to continue with arrangement? The payer would be put against the wall with a number of patients on that drug and nobody willing to share risk with him („free sample situation”) • Need for more pro-active approach from the MoH or the NHF

8. Price-Benefit arrangements • The risk is shared on the basis of clinical outcomes, not sales • payment for effect (bortezomib NICE, UK) • Risk sharing scheme (DMD in MS, UK) • Other ways to control costs • Claw-back • Pay-back

9. Thank you for your attention!