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Mediclinic News : Finding a pricing model for devices: What is the best approach?

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Finding a pricing model for devices: What is the best approach?

Date

2016-09-01

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News Description

HEALTH MANAGEMENT DIGEST Although the introduction of a single exit price (SEP) system for medical devices could be a possibility once the National Health Insurance (NHI) scheme becomes operational, there are many factors that need to be considered before such a decision can be taken. According to Dr Anban Pillay, Deputy Director General of Health Regulation and Compliance Management in the National Department of Health, the implementation of a health technology assessment (HTA) system and the regulation of medical devices by the soon to be established South African Health Products Regulatory Authority (SAHPRA) are prerequisites before discussions about price can commence. He stressed that government will only consider price regulation if it finds irregularities in the way the industry is currently operating that will require price control. However, he noted that the single purchaser system as proposed in the NHI White Paper will effectively give rise to a SEP structure as healthcare providers will procure devices based on agreements between the proposed NH1 Fund and suppliers relating to the price and types of devices needed for different levels of care. "So, even without creating a SEP, there will be a mechanism to regulate prices in the industry," Dr Pillay said. Purchasing decisions by the proposed NH1 Fund will rely heavily on HTA and will be based on factors such as how well a device performs in comparison with similar devices in terms of safety and durability, the price difference between similar devices, and additional costs pertaining to issues such as training and maintenance. In the absence of regulation, Dr Pillay recommended that the industry considers the implementation of its own voluntary transparent pricing system. Observing that a transparent pricing system will promote "true competition without any legislation being needed", Dr Pillay said such a system will involve making prices publicly accessible and providing product information, such as a description of the device and pack or unit sizes. But he warned against offering rebates and discounts on the published prices, saying it undermines transparency and results in a situation where those who get the discounts often have to subsidise those who are paying the higher prices. However, his suggestion of a transparent pricing system was criticised during question time by some delegates and also by Competition Law expert, Rosalind Lake, who pointed out that it could result in a contravention of Competition Law. Speaking about international trends in regulating the prices of medical devices, Joao Pereira da Costa from Medtronic EMEA's Legal and Compliance Counsel explained that the global move towards price referencing models are closely linked to the megatrends currently being experienced in health care, including the increase in chronic diseases, an aging population, technology advancements and economic and financial pressures. "This has increased the demand from health systems to provide better care and support to patients," Da Costa said. However, one of the main challenges for the devices industry is that there is often an attempt to apply pharmaceutical pricing models to medical devices which is not viable because of the big differences between pharmaceuticals and devices. "We advise governments is to make sure that they compare apples with apples and oranges with oranges which is often very difficult when you deal with medical devices, Pereira da Costa said. Some of the pricing models currently being used in Europe and the UK include: High value price referencing where it is only applied to high value devices and not to socalled lowvalue products or commodities as it is not feasible to do price referencing for every single product. Margin or profit control measures which are based on ex-factory prices. This model which is currently being considered by the Chinese government is highly controversial even in a country like China which requires high volumes, because it could disincentive big companies from going into that market and diminish the industry's duty to promote more innovation and access, Pereira da Costa said. Comparing prices of different countries with similar patient populations to find a benchmark price. Negotiations between governments and industry to determine what the best price should be. Other ways of limiting or controlling prices include reimbursement lists where government sets a maximum price and only accepts tenders below or similar to the set price. This price is normally determined by an HTA agency and is regarded as a pro-competition, pro-market approach for price referencing. In Europe, new HTA legislation implemented last year allows for the determination of prices based on ex ante and ex post HTA. Ex ante HTA requires manufacturers to define a final price based on clinical evidence that shows the device to provide value for money after which post ante evidence has to be submitted based on how the device performs in a real clinical setting and if it delivers on its promises. However, Pereira da Costa stressed that while HTA can play a vital role in determining prices, it can also be a very challenging process if it is applied to all devices because of the multiplicity of products and the difficulties related to comparing devices. 'To ensure that price reference and regulations promote the benefits of better patient care and access, governments need to find solutions that are not too strict such as the exfactory approach but rather focus on approaches that will promote competition and improve the quality of devices," Pereira da Costa noted.
Created at 2016/09/27 11:44 AM by Mediclinic
Last modified at 2016/09/27 11:44 AM by Mediclinic