New drugs, especially cancer drugs and orphan drugs, are becoming increasingly more expensive. Unfortunately, however, a higher price does not always guarantee greater effectiveness. Nevertheless, most patients prefer early access to new drugs. However, payers and patients cannot easily afford them. This problem can be found in many countries, leaving health authorities with a challenging task of balancing between two issues – early access and cost containment.
Since the early 2000s, risk sharing arrangements (RSAs) have been introduced to manage the “risk” based on both financial impact and the health outcome of new drugs [1, 2]. Payers and manufacturers share the burden of these risks to achieve a common goal: expansion of coverage. There are three categories of risk sharing schemes: (1) performance-based schemes, which consider clinical efficacy, with the outcome of patients linked to price and/or coverage of drugs; (2) financial-based schemes, which are related to the cost of drugs, such as price discount, rebate, price-volume agreements, and expenditure/utilization cap; and (3) evidence-generating schemes, which are implemented to collect more sufficient evidence in the real world.
Decisions of drug reimbursement may be deferred due to a lack of information, ultimately leading to uncertainties regarding these new drugs [3]. This deferment can be disappointing for patients who desire new drugs. However, the authorities must allocate healthcare funding over the entire population based on clinical efficacy and cost-effectiveness. Under this circumstance, RSAs can be a notable policy tool for satisfying different stakeholders. Patients receive timely access while payers (also called as insurers, governments, or purchasers) reduce a financial burden and an uncertainty of evidence. Further, pharmaceutical companies can improve market access and easily adhere to the global pricing strategy [4].
Over two-thirds of the Organization for Economic Co-operation and Development and European Union countries have been utilizing or had utilized RSAs by 2019 [5]. Goals, schemes, and implementations for risk sharing differ according to the background of each country. There are several other terms on RSAs—managed entry agreements, special pricing arrangements, patient access schemes, managed access schemes, and so on. Nonetheless, their initiatives begin at the same line – scarce resources in healthcare. Ferrario and Kanavos (2013) suggested three objectives for these arrangements: managing budgetary impact, purchasing cost-effective therapeutics, and monitoring utilization [6].
South Korea also introduced RSAs to improve patient’s access to new drugs in 2013. Since December 2006, South Korea has implemented a positive listing system for drug reimbursement, in which pharmaceutical companies should submit evidence of cost-effectiveness for most drugs. However, high-price drugs for cancer and rare diseases often miss these reimbursements due to failure to prove cost-effectiveness. As the number of these cases increased, calls from patients to improve the access to those drugs continued to increase, to which the Korean government responded by introducing RSAs.
The main purpose of this study is to describe the features and implications of RSAs in South Korea and review their effects on patients’ access to new drugs. Additionally, we aim to compare the levels of patients’ access to new drugs between South Korea and several developed countries – the UK, Australia and Italy. This may yield some implications for other countries struggling between increasing pharmaceutical expenditure and the need for early access.
Risk sharing arrangements in South Korea
In September 2013, the Ministry of Health and Welfare (MoHW) in South Korea officially announced the introduction of RSAs to help alleviate the financial burden associated with the treatment of patients with severe diseases and allow better access to new drugs. RSAs were restricted to the implementation of drugs that could be hardly accessed otherwise. To be eligible for RSAs, a drug should meet the following three criteria: (1) must be a cancer drug or orphan drug for rare diseases; (2) there should be neither alternative treatments nor equivalent therapeutic drugs available; and (3) drugs used to treat serious, life-threatening condition. Alternatively, a drug can be eligible if the Drug Reimbursement Evaluation Committee (DREC) reaches an agreement based on the severity of the disease, social impacts, influence on public health, and other factors. [7]. The period of this contract can be up to four years; however, for an extension to be granted, a re-evaluation is necessary.
There are four stipulated types of RSAs in South Korea: 1) conditional treatment continuation and money back guarantee, a type that is based on individual patient’s response after treatment. If the response meets the predefined treatment goal, the drug continues to be reimbursed by the payer, the National Health Insurance Service (NHIS). Otherwise, the company should refund the full drug costs to the NHIS; 2) expenditure cap, which sets the total annual expenditure of the drug in advance. The company pays back an agreed rate of the exceeding amount to the NHIS; 3) a refund type where the company refunds a certain percentage of the nominal price of the drug to the NHIS; 4) utilization cap or fixed cost per patient, which designates the upper limit of utilization of the drug per patient. Further, the company covers the cost of the drug beyond pre-agreed utilization. Other ad hoc types of RSAs can also be suggested by the company [8].
Since the introduction of RSAs in 2013, the Korean government has allowed this agreement based on product alone but not indication. Accordingly, only one agreement was allowed for each RSA drug despite its indications being two or more. Since October 2016, however, adding new indications to the existing contract of RSA drugs has become possible. As a result, the new indication had to be appraised by the DREC, which can amend the terms of the contract through a negotiation between the NHIS and a pharmaceutical company for the remaining contract period. All RSA drugs should be monitored for their utilization at specific intervals. At the end of the period, re-evaluation of the eligibility for extension of the contract should be performed. If there is a therapeutic alternative to a specific RSA drug, the contract cannot be extended. If its generic is listed during the contract period, the contract must be immediately terminated.
Despite these approaches through RSAs to expand the coverage of the Korean national health insurance (NHI), some drugs are still not reimbursed by the NHIS. In the case of ultra-rare diseases, it appeared almost impossible to generate evidence for cost-effectiveness. In December 2014, the MoHW introduced an exemption of economic evaluation (EEE) policy and implemented it with very strict criteria. Only cancer drugs or orphan drugs could receive a waiver of economic evaluation when they satisfy three requirements: (1) the condition is so severe that patients’ lives are threatened and there is no alternative intervention; (2) the number of patients is too small to generate evidence; and (3) the drug is reimbursed in at least three of the following seven countries: the UK, Italy, France, Germany, Switzerland, the US, and Japan [9]. Moreover, since September 2016, every new drug introduced by the EEE policy should share its risk in the form of an expenditure cap.
Risk sharing arrangements in the UK, Australia, and Italy
National health service (NHS) England has patient access schemes (PAS) to manage the risk of uncertainty and cancer drugs fund (CDF) to provide patients with faster access to new cancer treatments [10, 11]. Tracing back to its origin in 2002, there was an agreement between the Department of Health (DoH) and pharmaceutical companies on the long-term cost-effectiveness of multiple sclerosis patients [12]. In 2007, the DoH and the National Institute for Health and Care Excellence (NICE) proposed a legislation of PAS which was applied in the context of value-based pricing under a pharmaceutical price regulation scheme [13]. There are two broad categories in PAS: a simple discount scheme and a complex scheme [10]. The simple discount scheme involves discounting the price of a drug while complex schemes involves all other types including rebates, stock supplied at zero cost, dose capping and performance-based risk sharing. The patient access schemes liaison unit reviews the PAS proposals submitted by pharmaceutical companies, which are presented at the consultation with the NICE. To contain drug cost, simple discount was the most frequent type of PAS [14, 15]. In April 2011, the CDF was established, as a temporary measure until March 2016 [11], to provide early access to cancer drugs not recommended by the NICE. However, before long, the NHS faced financial pressure and CDF was completely amended in July 2016. As a key part of CDF, CDF-managed access agreement is considered to collect data. This contributes to the management of clinical uncertainties related to the NICE appraisal [16]. Thus, the current new CDF operates under population-level coverage with an evidence development (CED) scheme [5].
In 1998, the Department of Health of Australia reached an agreement with a pharmaceutical company to minimize the risks related to appropriateness and cost-effectiveness of drugs reimbursed by the Pharmaceutical Benefits Scheme (PBS) [17]; this served as the first agreement. The deeds of agreement was then introduced in 2003 to cover the two types of arrangements: special pricing arrangement (SPA) and risk sharing arrangement (RSA). SPA has a dual price — published price and real, confidential price. The refund by the companies should follow according to the difference between these two prices. RSA addresses various risks derived from the reimbursement of a new drug. Cost-effectiveness, overall cost to the PBS, overall health gain requiring data collection and monitoring, and overall utilization related to the number of patients are representative risks handled via RSA [18]. These two arrangements mainly manage financial-related risks and are sometimes used in combination schemes, refund with subsidization or expenditure cap [4]. Since 2011, the Australian PBS has operated managed entry schemes (MES) to share the risks associated with uncertainty for efficacy and help patients receive earlier access to drugs [19]. New drugs with high clinical needs are eligible for MES. Under MES, an initial price of the drug is established and evidence from clinical trials must be submitted to the Pharmaceutical Benefits Advisory Committee (PBAC) within a specified timeframe. By reviewing resubmitted data, the PBAC can propose a final recommendation for the PBS listing and the drug price will be reset at this future time. Although not a form of risk sharing, the life saving drugs program (LSDP) has helped Australian patients access drugs for life threatening and rare diseases since 1995 [20].
Italian NHS (Servizio Sanitario Nazionale, SSN) named its risk sharing policy managed entry agreement (MEA) for cost containment and patients’ accessibility. MEA provides its application via two schemes—performance-based and financial-based [21]. In July 2006, the Agenzia Italiana del Farmaco (AIFA) agreed on its first MEA. Italian MEAs are classified into four types. Payment by result and risk sharing are classified as performance-based schemes while cost sharing and capping are classified as financial-based. If patients do not respond to treatment, risk sharing model proposes a discount to treatment cost. However, under payment by result model, the pharmaceutical company should offer 100% payback. Cost sharing model discounts treatment cost of medication while capping forces the expenditure limit.