Emerging confidence

pharmafile | October 2, 2008 | Feature | Research and Development, Sales and Marketing |  emerging markets, evidence-based medicine 

The wisdom that emerging markets are vital to the pharmaceutical and biotechnology industry’s future has become a lot more conventional in recent years.

If the forecasts are to be believed, the ‘BRIC’ countries – to use Goldman Sachs’ term for the emerging economies of Brazil, Russia, India and China – will increase their share of the world pharmaceutical market from around one-tenth to a fifth by the end of the next decade.

These four markets alone are already worth some $60 billion, and last year they grew at more than twice the rate of their peers in North America, Western Europe and Japan.

Growth is not uniformly spectacular across all the emerging markets, but there are good grounds for optimism in the long term. As lifestyles change and common infectious diseases are eradicated, disease patterns in poorer countries are slowly converging with the developed world, creating fresh sources of demand and breathing new life into mass-market product franchises that have been long established in the ‘traditional’ markets. Pharmaceutical brands have gone global, and as fewer new products survive the development process, manufacturers are turning their attention to exotic new markets.

Unfortunately, this process is not a smooth one. Emerging health systems are reacting to the rapid growth in drug expenditure in an increasingly co-ordinated and determined way. Recent events in Vietnam and the Philippines, for example, illustrate that when it comes to bringing spending into line, some regulatory authorities prefer blunt instruments.

Vietnam has backpedalled on its laissez-faire approach to medicines pricing and now references foreign medicines against four neighbouring countries, and the Philippines has passed legislation that gives parallel traders a free hand to import cut-price generics. As trade between emerging economies becomes freer and the web of international price referencing spreads wider, the hazards for the global research-based pharmaceutical industry are coming sharply into focus.

Economic evaluation matters

In the West, meanwhile, the decline of the blockbuster drug has been much talked about, and high-tech, low-volume products have become a prized asset for industry, patients and payors alike. Authorities in some regulated markets – especially in Europe – have sought to reconcile clinical need with the high costs of new medical technologies. This has necessitated a ‘scientific’ approach to the evaluation of new medicines, and health technology assessment (HTA) bodies such as the UK’s National Institute for Health and Clinical Excellence (NICE) have a profound influence on payors and clinicians. Given the speed and profound consequences of this change in developed markets, it would be very easy to assume that lower-income countries are behind the curve. That assumption would be quite wrong.

The concept of economic evaluation is widely understood in developing health systems, and basic tools such as budget impact analysis are routinely used. In Russia, for example, economic dossiers are an important bargaining chip in negotiations with local price regulators, even though there is no formal requirement to demonstrate a link between health outcomes, cost and price. Regulators often take the view that if manufacturers can do the work of providing data that can then be redeveloped to suit Russian realities, so much the better.

Much depends, however, on the robustness of this adaptation process. Of course, there is a world of difference between reworking the architecture of an economic dossier and building the kind of system that can claim to evaluate new technologies in a genuinely holistic and scientific way. Even so, rapidly advancing health economies such as South Korea are learning from international experience and are sharing their experiences with NICE, among other national HTA agencies. Korea’s Health Insurance Review Agency (HIRA) has carried out a number of ‘experimental’ technology assessments, but has sailed into a storm of protest over its methodology, in particular relating to incremental cost-effectiveness ratios (ICERs).

Differences between Korean and Western medical practice, a lack of local epidemiological data, the scant resources devoted to monitoring long-term outcomes and difficulties with ‘foreign’ measures of quality of life have all added to the difficulties for manufacturers.

It remains to be seen whether the ever cost-conscious authorities in Korea will heed calls for their reviewers to be given clearer guidance on the HTA process. The current state of flux satisfies very few stakeholders.

Who pays, who decides?

In fact, the link between technology assessment and decision-making is perhaps the most important dimension in the development of HTA in emerging markets. For example, in China, leading science centres have carried out hundreds of single technology appraisals and a clear majority of these projects relate closely to the cost-effectiveness of medical interventions. But even though the concept of HTA was officially integrated into the Ministry of Health’s decision-making processes as long ago as 1999, the extreme decentralisation of China’s healthcare system and its fee-for-service model makes evidence-based policies very difficult to implement from the top down. Just like China, India has a highly complex and prescriptive pricing system for pharmaceuticals, but the importance of patient outcomes is overlooked due to structural imbalances in the healthcare sector. Out-of-pocket spending is the norm where medicines are concerned, and payors that can pool the costs of healthcare for their members have a very short history in India.

Faced with these kinds of challenges, there will always be the temptation to use pharmacoeconomics as a stick to beat structural problems in the healthcare system. At its crudest level, economic evaluation can simply buy cost-conscious regulators a little time before reimbursement – the so-called ‘fourth hurdle’ to market access in addition to assessment for safety, efficacy and quality.

There are many countries where the technology appraisal process is vulnerable to this kind of politically inspired manipulation. In South Africa, the government’s plans to create a cost-effectiveness regulator along the lines of Australia’s Pharmaceutical Benefits Advisory Committee (PBAC) are making slow but steady progress. However, it is expected that the new body will assess only technologies used in the private sector – an unusual role in the global context. In South Africa’s very fragmented healthcare market, where the overwhelming majority of healthcare costs are met by more than 200 funders, the new body will substitute private sector initiatives in evidence-based medicine and support the government’s broader social objectives. In cases such as these it is important to understand that the remit of new national bodies tasked with health technology assessment can fall far outside conventional boundaries in the Western world.

Aside from political manipulation, more basic transparency issues can complicate understanding of the decision-making process with regard to HTA. For example, there are clear reporting lines between the panel that co-ordinates appraisal projects in Brazil’s health ministry, CITEC, and top officials in government, but public dissemination of the findings from these studies is almost non-existent and, in the words of one well-placed observer, “the buck stops with the health minister”. Brazilian health economists lament the fact that appraisals have no relationship with clinical practice guidelines, making their practical impact among healthcare professionals – let alone bureaucrats – very difficult to quantify.

Opportunities for pharma

Health Technology Assessment is a new and evolving practice everywhere, and even payors in the United States are trying to strike more of a balance between the superior efficacy of innovative medicines and their occasionally high costs. Emerging health systems are different, however, in that healthcare provision can be relatively poorer in quality and coverage terms.

This would appear to be a natural opportunity for pharma to fill knowledge gaps and contribute to the development of best practice – but some effort is required if the special conditions in emerging markets are to be creatively integrated into the business model. For some companies, the challenge of responding successfully to the growth of evidence-based medicine in emerging markets will prove daunting.

Nevertheless, clinical trials, conditional reimbursement and outcome guarantees are just three areas where some biopharmaceutical companies are already finding imaginative solutions to market access issues in developing health systems. The challenge is to develop arguments that reflect local realities and maximise benefits for all stakeholders.

Orphan medicines – a special case?

Brazil and Russia are two fast-growing economies of a similar size and population and their pharma markets have doubled in little more than a decade. This performance is impressive, but not all Western firms have found their stellar growth easy to capture, mainly due to the high volume share of generics and the strength of local manufacturers. Nonetheless, they are two developing health economies where there is a strong awareness that innovative cures need to be distributed – and paid for – in a different way from the more commoditised classes of medicines. This has led to the creation of special access programmes focusing on patients who are in greatest need but have limited resources. As a consequence, orphan medicines are now a key focus area for the public health authorities in both Russia and Brazil.

Russia’s Programme of Seven Diseases is aptly named. Conceived in 2005, the scheme covers 40 therapeutic interventions for seven rare conditions, and the federal government spends more than Euro 1 billion per year treating around 14,000 sufferers of disorders such as multiple sclerosis and myeloid leukaemia. The scheme attempts to overcome some of the systemic problems in Russia’s health system by building creative partnerships between government and industry. Due to a lack of specialist treatment centres for rare diseases in Russia, pharmaceutical companies have moved beyond their traditional realm and taken on the job of screening and diagnosing patients.

Meanwhile, Brazil’s orphan disease scheme, the Access Programme for Exceptional Medicines, spends more than $1 billion each year on a list of innovative treatments that is drawn up separately from the national health service’s list of basic medical interventions. As in Russia, pharmaceutical companies play a key role in identifying patients who can only access new treatments by this route.

The most important factor pushing developing-country governments to create special access channels for innovative medicines is legal recognition of patients’ rights. As citizens push for better entitlements under their health systems, the law courts are becoming a battleground for access to new treatments.

Given the dire consequences of letting this process evolve spontaneously, the authorities are seeking to manage rights to healthcare more proactively. In Russia, the Federal Service for Healthcare and Social Development is at the forefront of a ten-year drive to standardise clinical practice, and a number of pilot projects are looking at how research can be used to improve best practice for sufferers of rare diseases.

Investigators expect that outcomes reported by patients will shape the way that services are delivered in future, and it is likely that the pharmaceutical industry will play an important role in monitoring results.

In Brazil, the situation is even more dramatic because the national constitution guarantees access to healthcare to all citizens free of charge – and not just to certain groups, as in Russia. Simply put, payors in Brazil’s public sector cannot refuse a demand for an ‘exceptional’ treatment, whether it is on the official list or not. As a consequence, Brazil’s programme for expensive medicines is moving into disease areas with large populations such as rheumatoid arthritis and Alzheimer’s. It is little surprise to find that officials are increasingly nervous that the programme could effectively collapse under the weight of demands from the law courts.

The situation is not irrevocable, however. Payors may be legally unable to limit coverage, but that does not mean that they need miss the opportunity to maximise health system outcomes by giving priority to the most effective medicines.

Health technology assessment is increasingly seen as a favoured option for rationalising spending, and it is no surprise that the first multiple technology appraisals to be commissioned by Brazil’s health ministry will evaluate groups of medicines that account for the biggest chunks of spending. statins, anti-tumour necrosis factor therapies, pegylated interferons and coated stents are all currently under review.

One of the ironies in this process, however, is that the current regulatory framework is hampering attempts to develop a robust technology assessment process: because some of the exceptional medicines that incur the heaviest costs are not even on the health ministry’s list, expert reviewers are unable to appraise them.

Pharma will be an important voice

On balance, then, it is stretching the point to say that evidence-based medicine will have a transforming influence on healthcare systems in emerging markets in the very near future. There are simply too many problems to be overcome before this can happen. What is certain, however, is that the pharmaceutical industry will be an important voice in how gaps in provision can be filled for the long-term benefit of both patients and health systems as a whole.

The trade-off for pharma is that governments in large emerging economies are coming to recognise that innovative medicines really do deserve special treatment.

Ben Shankland is the emerging markets team lead for Double Helix Consulting. For more information visit: www.doublehelixdevelopment.com