Background

While focus on lowering drug pricing as a method of national healthcare cost containment is not new, the evolving interplay between the US and the rest of world’s markets means the inter-market impact of policy change is increasing. In the context of pharmaceuticals, the US has traditionally been viewed as a “standalone” market where manufacturers typically first launch and adopt pricing strategies often independent of strategies defined by global teams for markets elsewhere.

Due to its commercial potential, the US is a major market for sales revenue that is heavily weighted in forecasts. Given this dynamic, US-focused access teams often drive critical early pricing and access strategy and go/no go decisions with relatively limited input from global teams. However, in today’s environment, with bi-partisan support, the US government has heightened its focus on drug pricing, expressing a desire to align drug prices with those of its European counterparts through the recent Most Favored Nations (MFN) proposal. This downward pricing pressure alters dynamics driving pricing of new drugs and commercial success. Specifically, two emerging dynamics are at play:

1. Rapidly evolving US drug ecosystem and corresponding revenue potential as a function of price that introduces considerable uncertainty into forecasts and, in turn, elevates the importance of a diversified portfolio of assets and markets.
2. US achievable price (and, in turn, revenue potential) being intrinsically linked to prices achieved in ex-US markets increases the need for truly globalized strategies that can account for such interdependencies.

These global dynamics raise an important question: Are current approaches to drug pricing strategy still fit for purpose?

Conceptually Logical, Logistically Challenging

Conceptually, a truly globalized approach to pricing strategy is relatively straightforward and has clear business rationale in today’s pricing landscape. Logistically it presents challenges, as most existing internal infrastructure and governance models are not set up to facilitate shared accountabilities or decision making between the US and global teams. The recent MFN US drug pricing policy proposal has highlighted a key challenge with manufacturers’ current approaches to pricing strategy. Business infrastructures are not designed to pivot quickly to reflect the increasingly complex interplay between the US and “global” markets.

Today, in most organizations, US and global pricing teams sit in different functions and often in different legal entities, reflecting the traditionally limited relationship between pricing in the US and other markets. Pricing strategies for the US and other regions are developed at different time points with varying levels of cross-team input, and the ultimate decisions fall under distinct governance processes and decision makers. As the healthcare landscape shifts and US policy has increasingly globalized implications, the siloed approach has come to represent a barrier to agile pricing strategy, profitability, and risk mitigation, highlighting the need for new ways of working.

Global Dynamics Call for Global Strategies

Future pricing strategies will need to balance an increasingly complex range of factors, including patient access, business objectives, payer coverage and reimbursement dynamics, single vs. multi payer systems, multi-market dynamics, international reference pricing, and the impacts of geopolitical volatility.

Historically, successful drug pricing strategies needed to be able to identify the optimal price point per market to balance broad patient access with commercially viable return on investment, accounting for relevant national and international market dynamics. Today, however, manufacturers also need to navigate an increasingly unpredictable policy landscape and growing interplay between historically distinct key global markets. To implement, this requires an evolution in ways of working. Specifically, to successfully execute a truly “globalized” pricing strategy the following need to be considered:

• How will the strategy holistically incorporate multi-market perspectives, including the US?
• How will the interplay between the US and ex-US markets be accounted for in the finalized strategy, revenue forecasts, and pricing models?
• What are the key pricing risks and opportunities associated with different launch scenarios (e.g., parallel launch, market-specific indication strategy, ex-US first launch, etc.)? How could these factors influence sequencing, timelines, and regulatory strategy?
• What design elements will be incorporated into the strategy to ensure flexibility to pivot based on national or international market events and policy evolutions?

Conclusion

While the long-term goal should be to embed US and global perspectives into a unified pricing strategy, in the near-term manufacturers should consider prioritizing:

• Early engagement: Pre-Phase III US and global pricing and access teams should discuss multi-market dynamics and identify key risks and opportunities; enhanced global input is recommended for early pricing strategy, and access, and go-no go decision making.
• Collaborative process: Create a pricing and access working group with representatives from both US and global pricing and access teams to facilitate knowledge/insights sharing and informed decision making.
• Coordinated decision making & accountability: Create mechanisms across the US and global leadership teams to ensure quick and coordinated adjustments can be made to pricing strategies and forecasts in the face of national policy changes, market events, or other unexpected external factors.

Connect with us to learn more about how Avalere Health’s pricing, market access, and policy subject matter experts can support you with pricing strategy across global markets.