1) Sovaldi (a Hepatitis C drug) was found to be cost-effective by NICE in the UK, but at £1 billion per year it is not affordable for the NHS if all eligible patients are treated. Other European countries have sought large discounts and imposed treatment caps to limit spending. 2) There are different ways to think about drug affordability - whether a cost is absolutely unaffordable, if payers need time to adjust spending, or if payers want to cap returns to "reasonable" levels through discounts. 3) Annualizing payments by charging for the drug's benefits over several years through amortization or annual fees is one way to address high upfront costs of

1. Adrian Towse
ISPOR 2015 / Issues Panel
Philadelphia • Monday 18th May 2015
Paying for cures, affordability, and
lessons from Hepatitis C

2. Paying for “cures”: lessons from Hepatitis C
Sovaldi in the UK: Cost effective, but not affordable?
• In the UK NICE found Solvaldi to be cost-effective (in
some populations) despite a high price
BUT
• NHS England estimate that Sovaldi could cost £1bn a
year if all eligible patients are treated
• Funding has been delayed – NHS England need more
time to develop the infrastructure to support expected
demand for Solvaldi
• A delay of this kind is unprecedented.

3. Paying for “cures”: lessons from Hepatitis C
Lessons on affordability from the rest of Europe
• General pattern has been to seek very
substantial discounts
• In addition:
• To impose budget caps (treatment caps,
price volume deals)
• Introduce patient population restrictions
driven by affordability rather than value
• A small number of responder PBRSAs used

4. Paying for “cures”: lessons from Hepatitis C
Ways Forward – from Amsterdam
(i) address outcome uncertainty via PBRSAs (ii)
social impact bonds (iii) need to amortise
Garrison, L.P., Towse, A., Briggs, A., de
Pouvourville, G., Grueger, J., Mohr, P.E.,
Severens, J.L., Siviero, P. and Sleeper, M.
(2013) Report of the ISPOR Good Practices
for Performance-based Risk-sharing Task
Force. Value in Health. 16(5), 703-719. Gottlieb, S., & Carino, T. (2014).
Establishing new payment provisions for
the high cost of curing disease. America
Enterprise Institute.

5. Paying for “cures”: lessons from Hepatitis C
Where does this get us to?
• Outcome uncertainty is not the main issue in
Hepatitis C, it is affordability
• Four different ways of thinking about
affordability
• Absolutely unaffordable as the cost exceeds all
available current and potential future resourcing
• Time to adjust to a different spending pattern – need
to disinvest, get efficiency improvements, or obtain
higher budgets;
• Not paying “too much” Discounts, revenue caps are
implicitly capping returns on R&D to “reasonable” or
“affordable” levels
• Annualisation - need for a way of matching payments
over the time during which benefits are realize

6. Paying for “cures”: lessons from Hepatitis C
Not paying “too much”
• Discounts, revenue caps are implicitly capping
returns on R&D to “reasonable” or “affordable”
levels
• Trade off is the signal payers want to send
about R&D
• Higher is the share of the social return going to the
innovator in the patent period, the stronger are the
incentives to find additional “cures”
• Having the same maximum revenue cap across different
diseases where the social value of a cure may be very
different sends the signal that payers are indifferent between
them. Is this an acceptable consequence?

7. Paying for “cures”: lessons from Hepatitis C
Annualisation
• Payment models that spread the potentially
high upfront costs over the time during which
benefits are realized:
• Amortisation – pay upfront but charge to the
expenditure account over the benefit period
• Drug innovator makes an annual charge for the
flow of services
• Financing arrangements which enable the payer /
patient to match repayments to benefits

8. Paying for “cures”: lessons from Hepatitis C
Anirban Basu’s HealthCoins proposal
• Conceptualise “churn” as a “free-
rider” problem
• Tradeable “HealthCoins” issued by
the public sector to those paying for
cures
• “when a patient decides to enroll in
a new health plan, private or public,
that new plan must purchase
these..”
• Needed in disaggregated US
system. Not needed in either:
(i) single payer system or
(ii) competing insurer with risk
adjustment funds
Basu, A.
(2014).
Financing
cures in the
United
States. Expert
review of
pharmaco-
economics &
outcomes
research,
(0),1-4.

9. Paying for “cures”: lessons from Hepatitis C
Conclusion – lessons on affordability
• The fundamental issue of paying for cures is not being
addressed
• In Europe the approach has been “muddling through”,
largely with aggressive discounting and budget capping
• The consequences of budget capping on incentives to
innovate have not been thought through
• We need to look at options for annualisation
• We also need to understand dynamic competition. It is
unlikely that competitors will allow an innovator to keep
earning a large social surplus for the duration of the
patent.
• Use of dynamic competition together with options for
annualisation are more efficient routes to pay for cures
than budget caps

10. Paying for “cures”: lessons from Hepatitis C
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