Challenges in GCC pharma and medical devices sector

Over the next decade, medicines expenditure in the Gulf Cooperation Council (GCC) is expected to double to US$26 billion, fueled by increased demand due to an ageing population, urbanisation, and the prevalence of chronic diseases, as well by improved coverage, infrastructure and diagnostics, and availability of new products. Medication spending per person in the GCC is now approaching US$300 a year — similar to some European countries, such as Denmark and Estonia.

In response to this rapid increase in expenditure, local governments are enacting policies to ensure the affordability and sustainability of spending commitments. Up to 70 per cent of pharmaceutical and medical device spending is publicly financed, with eligible patients receiving free support via easily accessible public healthcare facilities. As the market has evolved, patients have gained better access to therapy. Yet, several issues remain. In this article, we discuss the most prominent challenges and offer four potential solutions.

1. A complex environment

An array of areas in the value chain could benefit from improvements, including local R&D and the manufacturing, logistics, and distribution of medical supplies. However, two areas in particular offer powerful opportunities: product registration and market access

— complex areas that could disrupt access to care and put unbearable pressure on healthcare budgets if not tackled properly. Inefficiencies in these areas are causing two additional complications:

Limited registered product range: International manufacturers have registered fewer products in the region than in some other countries. This complication affects the GCC countries differently; there’s significant variability in the lists of registered medications among the countries. Although this does not mean patients cannot access the medicines they need, it does mean they may face delays, high costs, and long lead times as local care providers are forced to procure the products from abroad.

Suboptimal pricing: List prices for many registered drugs are much higher in the GCC than in large European markets, which adds pressure to the state budgets that traditionally bear the largest share of healthcare spend. This is especially, but not solely the case with generics where healthy competition has allowed other health systems to achieve significant savings for back-bone therapies, while creating financial headroom for new innovation. Some of the drivers for higher prices include limited market size and negotiation power of some of the GCC markets, lower number of generics and local manufacturers and thus less price competition on the market etc.

2. Striking a balance for market access

Market access — a national regulatory and industry framework to ensure drug safety, access, and fair pricing — is shaped by four groups of stakeholders: Regulators such as the U.S. Food and Drug Administration (FDA) develop policies to evaluate the safety and efficacy of medications. These regulators work with payers to evaluate cost-efficiency and budgetary impact and optimise prices through their reimbursement committees and health technology assessment (HTA) agencies, such as the National Institute for Health and Care Excellence in the United Kingdom. Healthcare providers and patient associations scan the horizon and raise red flags when essential medications are not available, and pharmaceutical companies develop market access strategies to ensure the availability of existing and new products to the patients that most need them.

When all four types of stakeholders are equally developed and represented, the system achieves all three of its objectives: drug safety, access to medication, and optimal pricing. This is not an easy task. In fact, stakeholders around the world are struggling to balance contradictory forces. Pharma companies are pushing for appropriate recognition of value that reflects the costs and risks of failure of modern R&D. Regulators may take a long time to assess drug safety, with different jurisdictions having widely different approval timescales. Payors have the mandate and obligation to determine cost-efficiency and budgetary impact and negotiate sustainable prices. Providers are moving towards more rigorous formularies and treatment standards, to harness scarce resources effectively, drive clinical excellence and reduce variations in outcomes. And patients increasingly have the expectation of immediate access to the latest treatments that can improve or even save their lives.

Facilitation of swift access to new medicines while ensuring patient safety remains a sensitive debate that all stakeholders need to navigate together. Pirfenidone’s approval in the U.S. is a good illustration. Used to treat idiopathic pulmonary disorder, this drug can dramatically improve patients’ quality of life and life expectancy. Although it was approved in the European Union in 2011, it took the FDA four more years to approve it in the U.S. During that time, the condition is estimated to have killed up to 150,000 Americans. Yet going to another extreme and registering drugs too quickly would hardly be a solution as the side effects could be devastating. With the price of some medications now exceeding US$100,000 per patient or course of treatment, financial considerations cannot be ignored. A balanced solution is required.

1. Finding a Solution

Regulatory authorities around the world are working to design optimal market access solutions. Three measures focus on simplifying the drug registration and marketing approval process:

Accept clinical evidence developed abroad, eliminating the need for local studies. Accepting international safety and efficacy data can range from acknowledging clinical studies to simplifying the registration process for products approved by international regulators. The latter approach is common for developing healthcare systems, such as those in the GCC. The commitment to on-going ‘real world’ and local data collection on safety and efficacy post launch (increasingly common in most developed markets) can provide an essential way of ensuring safety and value.

Adopt managed entry agreements for life-saving drugs to provide early access to patients who really need it. For high-cost drugs or where the evidence base may be uncertain, many markets are now turning to managed entry agreements. There are two types of agreements that could be highly relevant across the GCC:

• • Outcome-based. These agreements are a step toward value-based care, where only effective treatments result in payments. These registries serve two purposes: tracking drug performance for reimbursement and collecting data to improve treatment methods.
  • Financially based. These agreements, which mainly involve discounts and price-volume agreements, are easier to execute because they do not necessarily require drug registries. They give patients early access and allow pharma companies to collect data about drug performance.

Use reference pricing and health technology assessment function to determine fair prices. HTAs and reference pricing provide two different ways of ensuring fair and appropriate pricing for pharmaceuticals. In HTAs, new costs and outcomes are compared with existing standards of care through pharmacoeconomic studies. This process is usually carried out by an independent agency to ensure objectivity and independence. Reference pricing involves comparing prices across a basket of countries (external reference pricing) or across a group of similar medications within a focus country (internal reference pricing). In both cases, the idea is to limit the price of the new entrant using relevant benchmarks. An HTA approach can be applied to any medical technology, while reference pricing works best on products with multiple clinical alternatives.

These measures develop a balanced ecosystem for countries that meet the following requirements: large internal markets, available data and data solutions, and well-developed communication between regulators and providers. However, if a country has less negotiating power or has insufficiently developed processes and data infrastructure, transitionary approaches may be required to ensure that patient access to medicines is not adversely impacted.

1. Improving market access

We believe that six key moves can stimulate local pharma and medical device markets in the GCC, and ensure a sustainable financing outlook for governments and payers:

Create a common market with a streamlined registration and pricing process. International pharma companies and medical device manufacturers focus their limited market access resources on larger markets first, leaving the long tail of smaller countries for later. One combined market will look more attractive to the multinational corporation and provide better leverage.

Develop reference pricing and an HTA function and set up a framework for managed entry agreements. This can be done either for the entire region or for each country. The arguments in favor of a centralised service include efficiency (the method, organisation, and processes would need to be built once) and leverage from the larger market. The argument against coordination is the complexity of establishing a multinational regulator, accessing the local population health data, while preserving local accountability.

Widen the range of accepted certifications. Include those from recently emerged pharmaceutical and medical device manufacturing economies, such as South Korea, Turkey, or Brazil. This would increase the supply of both established products (generics and biosimilars) and innovative technologies at lower prices than those offered by multinational corporations and would likely boost joint ventures and technology development between countries. This move would require extensive due diligence of the R&D and manufacturing processes.

Ensure a rapid and effective transition from regulatory and HTA approval to clinical adoption. The use of HTA at a national level should facilitate the removal of local formularies and ensure a more rapid and consistent uptake of technologies with proven value, removing variations in patient access to care and procurement efficiencies.

Develop a communication platform that physician and patient organisations could use to flag technology access constraints. Physician and patient organisations constantly scan the horizon for therapies in key disease areas; they are aware if innovative therapies are not available in the market and can notify authorities. What’s often missing in the GCC countries is a consistent communication channel linking appropriate authorities with healthcare community.

Stimulate a competitive market for generics. Generics (i.e., products whose patents have expired) have been described as the ‘gift that keeps on giving’. Products that are 20 or 30 years old are still the mainstay of many therapies and first line treatments, because they work. Most developed health economies recognise the importance of encouraging intense competition to drive down prices and quality supply, enabling cost-effective coverage for common therapies and creating spending efficiencies to allow re-investment in accelerating access to new technologies.

Improving market access can have a powerful impact, including wider access to treatments, better health, and sustainable budgets. Armed with an understanding of the market and the solutions, GCC governments will be able to meet the growing demand for pharma products and medical devices while alleviating the pressure on state healthcare budgets