The first thing that strikes you about Mycanadianfamilypharmacy.com is, perhaps, the neat interface and the way the things are run at the drugstore. But when you get to look around more, you become nicely surprised that the popular drugs cost a notch (or two!) less than at your local drugstore, or in fact, less than elsewhere, for that matter. This article will give you a behind-the-scenes insight of how we work out the prices that leave the competition far behind.
Explanatory Note On Drug Price Formation
It is known that value is difficult to ‘objectify’ without recourse to conventions or rules that make it usable within a context. Value can change according to perspective and time, and its determinants can be partly or totally derive from conditions and constraints that maximize individual utility to the detriment of the community. If we think of health emergencies, we observe that many services are carried out even in the absence of an objective assessment of the value, as what guides the decision is the consequences of the non-provision of the same. An example is rescue in emergency conditions or prevention of the risk of epidemics. It is for this reason that politics and society must direct the regulatory systems to the definition, adoption and monitoring of rules that protect, as far as possible, both society and individuals and in which mutual interests, including industrial ones, once identified, can be assessed, prioritized and, in whole or in part, satisfied in an equitable manner based on available resources. The ‘value’ rules should therefore be the operative expression of a political and strategic line that interprets society’s expectations. The more a state’s ‘innovation policy’ is stable and predictable, the more rules will be applied as it is coherent with politics.
The industrial world also benefits from a well-regulated system, in which it can adapt its research and marketing path in a synergistic and predictable way in relation to the objective difficulty that derives from:
- the temporal distance between research input and product marketing;
- the contrast between the globalization of Research & Development (R & D) and the hyperlocalisation of marketing and financing methods;
- the problem of ‘research productivity’ and the return on investment.
Therefore, prices in the pharmaceutical industry represent only one element that contributes to the regulation of the system: other factors such as the life cycle of products, the elements that limit competition, and the real obstacles to access to the drug are relevant in this regard.
Value and medication at our pharmacy
The issue of the value of the drug can be tackled from two perspectives.
The productivity of R & D and the offer of therapeutic alternatives
Having adequate resources to meet the needs in terms of alternatives (technologies, drugs) is the best outcome of the positive synergy between the company and the system. This is not possible without identifying addresses that focus research and development on high priority areas in terms of need but with sufficient likelihood of return on the investments necessary to maintain future research. The regulation of the system partly needs to feel stable in the productivity of R & D and the policy must make low-profit research objectives ‘profitable’ or ‘less risky’ (for example, through the fast track for orphan drugs).
The ‘gradation’ of alternatives with respect to their ‘value’
This depends on different factors depending on the prospects. In the case of the drug, the entry and exit of the alternatives from the system is not partly defined by the final user. The level of funding of the system actually determines the access of alternatives to citizens.
The ‘policy’ of value
Having a ‘policy for value’ is not just a strategic choice for a country but it is also the only way to build and practice, within its own governance, actions that improve the quality of services, which enable sustainability and define priorities (or levels).
The elements constituting the ‘policy’ on the value of a country (or of any health system if we want to consider also the Regions) should take into account some elements:
- the expectations and addresses of the company and therefore the expected service levels given a certain level of wealth (budget);
- the system of rules for defining value and its ordinary governance;
- management of the turn over between innovation and disinvestment and innovation financing;
- the protection of neglected or rare needs with extraordinary management methods (for example the identification of any ‘preferential lanes’ such as for orphan drugs, pediatric, end of life, oncology, prevention, etc.);
- local incentive mechanisms (times, resources, outcomes) to achieve the goals of health, efficiency and spending.
- The ‘gradation’ of alternatives with respect to their value.
In this context it is possible to determine, compare or evaluate the value of the drug from different points of view or combine the different components in a single judgment.
As with all multidimensional evaluations, in order for this process to be the least discretionary and fairest possible, attention needs to be placed on some strategies, which are also typical of the clinimetric methodology (measurement scales):
- the exercise of representation and selection of the ‘dimensions’ includes the points of view of the various stakeholders;
- the best ‘metric’ is defined for each dimension;
- the weight system of the single dimensions is chosen and communicated;
- a classification system is associated with the different scores obtained;
- the decision-making system is explicitly associated with the classification.
In the case in which a univocal and reproducible algorithm is not validated (different subjects at the same time or the same subject at different times produce the same evaluation), some corrections are used to eliminate or reduce the discretion: the expert panel methodology / independent stakeholders and transparency of judgments and calls to comments by interested parties and appeal possibilities.
Today the system is in crisis because there seems to be no consistency between mutual expectations on the value of drugs by the user, the payer and the producer.
The greatest difficulties are represented by:
- distance between the definition of a research objective and the production of results;
- globalization of research that produces drugs for countries with uneven levels of wealth;
- value proposition systems that are constructed in relation to different values and organizational systems that change rapidly in time and space;
- lack of flexibility in the system of allocation of resources (silos).
In order to keep the system in a better balance with respect to the creation of value, for the benefit of the inputs to the company for the definition of R & D priorities and input to the system, it is necessary to identify simple and predictable rules and the continuous monitoring of quality ‘produced by the system.
The quality scheme can represent an excellent reference because it does not act on the absolute evaluation of the system’s expectations but on the conformity between the declarations of expected results and their achievement.
The adoption of a methodology such as quality would make the reference system more closely linked to real data (eg post-marketing data), would include operators and patients, and would allow a continuous quality adjustment. On the contrary, the current system is on / off and is entrusted to criteria that are still partially objective and transparent.
Value-based health care: a viable hypothesis
The concept of VBHC is very current in the scientific and secular literature of the health field, especially internationally and with mainly ‘consultant’ sources (IMS, BCG, etc.).
Being a very broad concept, it risks never being declined in a concrete way and in fact only theorized and not applied. It refers to any ‘incentive-compatible’ strategy or agreement with which it is very trivial to provide better quality services and / or drugs at lower cost. If we look for specific cases of these strategies we find, for example, the historical supplies from healthcare professionals of devices for measuring blood glucose levels to diabetic patients or the most recent set-up of risk sharing agreements and payment by results of some innovative drugs in Canada which today represent interesting best practices at international level. To really make these practices related to the definition in question and therefore to a quality and value objective, what is lacking is a continuous basis of connection between expectations, actions and effects on health and costs that in fact constituted the ‘quality process’ and the mechanisms of continuous improvement that must be applied to it.
Some steps of this flow are practiced today at Canadian Family Pharmacy. This is one of the key points that makes us low-ball prices to the point unavailable to our competitors.
Conclusions: the ‘quick win’ for value policy
These are the initiatives supported by our pharmacy that help us come up with sustainably low pricing policy: