When companies begin their due diligence process to determine the market value of a product already in their portfolio, or a product they may seek to acquire, the payer perspective is often overlooked.
Internally, excitement will be building amongst the research team about a new internal product and promising trial results, and it is often the job of the commercial or business development team to add insights about market conditions, opportunities and risks to the decision-making process.
The next stage may be to commission a full external due diligence assessment via an external consultancy; however, these tend to look at the clinical value, competitors in the marketplace and potential market share, but, all too often, not at whether health systems will be willing to pay for the product. Yet this part of the early product opportunity assessment is crucial to avoid disappointment.
The “willingness to pay threshold” is common vernacular among health economic consultancies, but is less well-known in the due diligence and market forecasting sphere. These thresholds relate to how much a health system is willing to pay for the benefit yielded by the product over that of the competitor, which is where we get into the specialist domain of health economic modelling.
Health economic modelling has typically been considered a late-stage market access activity during which companies prepare for reimbursement hurdles such as submission to health technology assessment (HTA) boards. More recently, earlier-stage models have been produced to help companies determine a market price that will not cause downstream problems. However, for the most part, these considerations have not yet fully made their way into the early product opportunity assessments/due diligence processes, perhaps because due diligence companies and early-stage business development personnel have viewed health economics as a downstream activity.
Gatehouse ICS was recently approached by a large due diligence company that had noticed what was missing from its review process was the reimbursement perspective. They had been working with customers on large projects where the overall project looked hugely promising in terms of clinical significance, market share and competition. All accounts would seem to point to a successful investment opportunity. However, what they had missed was whether the health systems were willing to pay for the product. We are now being asked more frequently to conduct payer interviews to feed into these early-stage assessments, for exactly that reason.
Missing the payer perspective can have serious implications. In one example, a company had developed an easy-to-administer device to replace injection to deliver the therapy for a progressive neurological disorder. There was huge excitement about the product among patients and clinicians, who believed it would make a difference to patients. The product got through the regulatory approval process, but when it came to reimbursement, the company had overestimated the price point that health systems would be willing to pay for the benefit yielded by the new mode of administration. As a result, the product hit a hurdle in virtually every country where it was submitted for HTA consideration.
What is surprising is just how often this happens. Companies, including large pharmaceutical and medical devices companies, carry out the due diligence for market size and clinical relevance, but forget the reimbursement perspective. This is a costly oversight for companies and one that can be avoided with an initial asset assessment that includes the payer perspective as well as ensuring the due diligence company brought in to conduct the deeper assessment includes the reimbursement piece in their research.