Risk Sharing, Italian Style

With Italy’s system of outcomes-based agreements now well-established, the world’s major markets will be studying the country’s progress in the area more closely, as new disruptive forces in healthcare come increasingly to the fore

In the US and most of Europe, there is still a tentative approach to outcomes-based (or performance-based) contracts between pharmaceutical companies and payers. In Italy, however, such agreements have been in operation since 2006. Centrally managed through a web-based platform by AIFA (Agenzia Italiana del Farmaco), there are four types of outcomes-based agreements in Italy, defined as: 

• Cost sharing, for which manufacturers offer a full or partial discount for initial cycles of treatment for eligible patients.

• Risk sharing, for which manufacturers offer partial reimbursement (usually 50%) for patients not responding to treatment.

• Payment by results, the most widely adopted of the agreement types in Italy, which requires total reimbursement to the payer by the drug manufacturer for non-responding patients (and where the process of “defining the parameters of responsiveness favors manufacturer,” according to Fabrizio Gianfrate, Professor of Health Economics at the University of Ferrara).

• Success fee, the most recently introduced agreement, where payment is due only for patients who respond to treatment. 

While the Italian system is well established, Livio Garratini and Alessandro Curto pointed out in 2016 that, even after a decade, no report published by AIFA had “yet included relevant clinical outcomes on drug subject to [outcomes-based agreements].” The authors concluded that “more data are needed to thoroughly assess their effectiveness.”¹ With definitive conclusions on the success of the system still out of reach, then, expert opinion varies, with Italian academics such as Garratini and Curto remaining skeptical, while others, such as Gianfrate maintain a positive assessment of the scheme’s impact. 

Industry perspective

Andrea Landi, consultant and project manager in market access at ICON, told Pharm Exec that outcomes-based agreements in Italy have been “quite successful.” He explains: “Despite the inherent challenges in administrating and managing these schemes, a lot of high-cost products have been reimbursed under this model. It has helped to create a more collaborative environment for payers and manufacturers and to focus on the real value of products and the collection of real-world outcomes.” Gianfrate adds that the majority of pharma companies “welcome the agreements” because they expedite both the price negotiation process and the road to reimbursement. He notes that they have enabled companies to maintain a higher price. “As Italy is a reference-price country for many smaller countries-those in Eastern Europe, for example-maintaining a higher price here translates to achieving a higher price elsewhere.” 

The administrative challenges that Landi highlights, however, remain something of an obstacle to the smooth running of the risk-sharing system. In Italy, hospital consultants are required to complete four online

Andrea Landi

forms for each drug covered by an outcomes-based agreement, in order for the hospital pharmacy to validate prescriptions. The pharmacy then completes another form to release the treatment. If a patient is assessed as a non-responder, the pharmacy applies for reimbursement from the drug manufacturer, who can evaluate the request before accepting or rejecting it and formulating a payback proposal. Landi admits that “doctors are not inclined to spend a lot of time filling in forms after assessing the patient’s response,” and that there have been delays in requesting refunds from the pharma company. Even Gianfrate concedes that, “if I should find a weakness in the system, it is in the rate of update of data by clinicians at the local level.”

Landi also points to cases of “misalignment,” stemming from questions about “who is paying for the drug and who benefits from the agreement.” He explains: “Some regions are responsible for paying the cost of hospitalization, but AIFA is responsible for the national drug budget. If an agreement hinges on hospitalization savings, then the region should benefit from it, but this is an area where there has been some confusion.” 

Nevertheless, adds Gianfrate, the scheme is adopted at the national level “and all regions should follow the national decision.”

For Landi, the industry has to take its share of responsibility for addressing questions of misalignment. Where Italy has national drug registries for data collection, information regarding hospitalization, for example, is collected at the regional level. “If a company wants to use the hospitalization outcome for its product, it’s very important that it is prepared to make a significant effort to unify the two data flows, which requires investment,” he says. “This is an important aspect that I don’t think companies have been exploring enough.” 

Companies have also sometimes struggled to communicate the value of their products and these agreements to the relevant stakeholders, experts point out. The industry should be clear on defining the success criteria of a product, says Landi. “Some endpoints are not easy or objective to measure, so it’s very important to have a clear endpoint to define success for the product.”

Pharma companies should also carefully consider the risks associated when negotiating these types of agreements in Italy. “They can be like a double-edged sword, on the one hand allowing for higher list prices and potentially quicker access, on the other, carrying inherent risks,” says Landi. He notes that all reimbursement contracts in Italy are limited in duration, in the sense that the contract is usually valid for two years and then has to be re-discussed by the parties. If, during these two years, a performance scheme has demonstrated that the real-world performance of the product is poor, Italian payers are likely to leverage that information in the renegotiation, with a subsequent negative impact on the terms of the new contract and relationship with the authorities.

“So it is also fundamental for manufacturers to carry out a proper due diligence, and consider the long-term strategy and possible exit routes when planning and executing these agreements,” Landi explains.

Access to cancer treatments

So far, outcomes-based agreements in Italy have focused on high-cost oncology drugs (in 2015 cancer therapies accounted for 80% of such agreements).² As Landi points out, these arrangements are easier to manage for oncology indications, as opposed to chronic diseases such as diabetes. For patients, they have allowed for quicker access to treatment, he says; almost all the high-cost oncology drugs are currently available in Italy. For the industry, they offer an opportunity to overcome the clinical uncertainty engendered by “weak-evidence packages,” limited patient numbers, and limited observational studies associated with oncology treatments. Importantly, the success for cancer treatments is more clearly measurable than success for products targeting chronic indications such as diabetes.

For payers, says Landi, “the optimal endpoint in oncology is survival, which is easily measurable, objective, clear, and simple. In chronic indications, such as diabetes, this is usually not the case.” Levels of hemoglobin A1c (HbA1c), for example, which is the standard endpoint assessed in diabetes trials and also the main criterion considered by clinical guidelines, is not only affected by the drug but also by external factors such as diet and physical activity. Thus, says Landi, “it is very difficult to objectively attribute the therapeutic success to the specific drug, which complicates the application of any performance-based scheme.” While quality-of-life considerations in oncology are clinically important, “from a payer perspective, they are very much secondary in Italy to the objective of prolonging overall survival,” adds Landi. 

Ultimately, he says, outcomes-based agreements have been extensively applied only in oncology, as they may make more financial sense for high-cost indications, “both from the payer side, if the expected savings from the agreement are higher than the cost of supporting the infrastructure to sustain the agreement, and from the manufacturer side, when the expected increase in volume and revenues is higher than any potential contribution that the manufacture has to provide for the implementation and management of the infrastructure.”

Overall success-or failure?

Highlighting the mismanagement and procedural problems deriving from the application of three of Italy’s outcomes-based agreements (payment by results, risk sharing, and cost sharing), Andrea Navarria et al. concluded in 2015 that “the amount of money that is actually refunded through the application of such schemes is really trifling;” as of 2012, the authors noted, the amount of money refunded through the reimbursement procedures was €121 million ($151 million) out of a total of €3,696 million ($4,612 million), just 3.3%.³

Landi agrees that, from the payer perspective, problems in collecting the refunds have hindered the financial success of the agreements. But he points to AIFA’s 2013 introduction of the success fee agreement as a move to combat the administrative issues. Success fee differs from payment by results (the most popular agreement in oncology) in that the manufacturer initially provides the product for free and the National Health Service pays only after the criteria for efficacy have been met. “In this way, the administrative risks are shifted to the manufacturer,” says Landi. 

Landi continues to stress the positive aspects of outcomes-based agreements, highlighting their flexibility and importance to the value question. “From a theoretical perspective, the model allows to pay for the value of a product in specific indications,” says Landi. “In this way, you can have an indication-based pricing approach; at list price, you pay the same amount for a product, but you pay a different net price depending on what indication it is used for, so you pay for the real value of the product in specific indications.” 

Gianfrate is more strident in countering the criticisms. “How do you calculate the failures? We don’t have the evidence for the other side,” he says. “We do know that many drugs have been approved with outcomes-

Fabrizio Gianfrate

based agreements. And we know that, without them, the price negotiation process would be prolonged and many negotiations would not end in an agreement. They have offered the way to a solution between the manufacturers and the drug agency.”

Where he likens the traditional method of reimbursement to a payer buying a lottery ticket before the results are drawn (i.e., paying for a probability of success), Gianfrate compares outcome-based agreements with the payer buying the ticket after the results are known (i.e., paying for already-acquired results). 

From an industry perspective, as Guy Sherwin, ICON’s principal consultant, pricing and market access, points out, there are three underlying objectives for manufacturers when launching a new drug: achieving an optimal price, ensuring broad access to the right patients, and doing so in a timely manner. In this context, these types of agreements are a useful tool to facilitate coverage of a new drug,

where reaching a mutual consensus between stakeholders can be challenging. Sherwin explains: “They can mitigate financial risk while maintaining an optimal price point, help address concerns around clinical/performance uncertainty by ensuring linking payment to an outcome, and, lastly, ensure that the treatment reaches patients in a timely manner without significant delays to coverage.”

Italy and beyond: The outlook for outcomes-based deals

There has been some pullback from outcomes-based agreements in Italy over recent months, with AIFA opting for more financial-based agreements that function on price/dose discounts, but these decisions have been related to specific cases that have better lent themselves to the financial arrangement, or to products whose value and efficacy have been monitored under previous agreements. Esbriet (pirfenidone), for example, was the first product negotiated under the success fee, but after two years the drug was renegotiated, with the performance-based agreement replaced with a higher net discount. As Landi explains, “Once payers have data supporting the efficacy of products in the real-world population, they may prefer a simpler agreement to improve manageability and budget predictability.” Thus, outcomes-based arrangements can pave the way for future financial agreements.

In the future, with the global immuno-oncology pipeline set to deliver more immunotherapies, outcomes-based agreements are likely to feature more prominently, not just in the Italian healthcare system, but far beyond. As Sherwin explains: “There are a number of disruptive forces affecting the industry and we’re seeing a number of trends with innovative new therapies, for example, the recent launch of high-cost

Guy Sherwin

immunotherapies, which manufacturers are going on to develop in combination.” If launched, the combined cost of using two or more high-cost drugs will critically impact payer budgets in Europe, Sherwin says. Eventually, this “will reach an inflection point, where healthcare budgets are not going to be sufficient for these combinations and there will have to be a degree of risk sharing,” further opening the door to outcomes-based agreements. 

He adds that there is a similar “magnitude of disruption” with the introduction of gene and cell therapies, which potentially provide a lifetime of benefit and value, but require incredibly high upfront payments for a potentially large number of patients. “Payers’ budgets, particularly in Europe, are not set up for this kind of financial requirement,” says Sherwin. “Therefore, other types of outcomes-based agreements with novel payment mechanisms will be required.”

Improved digital capabilities present another disruptive force, says Sherwin, that will tackle the administrative problems that have surrounded not only the agreements in Italy, but the wider issue of collecting large amounts of data consistently and accurately in heavily fragmented healthcare systems both within and across Europe. 

“As our data collection capabilities improve, and as other digital players such as Google and Amazon enter the market, there will be an increased ability to collect and analyze the data and enter into these type of agreements, where companies can more accurately look at the health outcomes that they are improving,” says Sherwin. 

For this to happen, however, the current focus in Italy, and more recently in the US, on specific endpoints may have to change. “I think the future lies with more focus on the improvement of overall health outcomes,” says Sherwin. “It won’t be about just monitoring progression-free survival or overall survival, but looking at the patient pathway as a whole and seeing where manufacturers can take greater ownership in delivering improvements. Consequently, pharma companies will need to change their business models, taking greater ownership of the care pathway and improving the overall health of specific patient populations.”

Italy continues to journey through its second decade of outcomes-based agreements. As new disruptive forces in healthcare come increasingly to the fore, the world’s major markets will be studying the country’s progress in this area ever more closely.  

Julian Utpon is Pharm Exec’s European and Online Editor. He can be reached at julian.upton@ubm.com

REFERENCES

1. Livio Garattini, Alessandro Curto, “Performance-Based Agreements in Italy: ‘Trendy Outcomes’ or Mere Illusions?,” PharmacoEconomics (2016) 34: 967–969.

2. Ibid.

3. Andrea Navarria, Valentina Drago, Lucia Gozzo, Laura LongoPharm, Silvana Mansueto, Giacomo Pignataro, Filippo Drago, “Do the Current Performance-Based Schemes in Italy Really Work? ‘Success Fee’: A Novel Measure for Cost-Containment of Drug Expenditure,” Value in Health, Volume 18, Issue 2, March 2015.