MFN, no more secret deals. We'll be unpacking that and looking at the wider implications for the industry. Now, I think it's fair to say that the world is changing for the pharmaceutical industry right now. It is. I mean, MFN has become like a whole global issue. Let's just look really what is happening with MFN. What is the philosophy and why is it having the impact? I use this phrase, no more secret deals. What do I mean by that? The idea behind MFN, the US administration is saying we are paying too heavy prices for medicines in the US, and the rest of the world European markets are not paying enough. So they're trying to get the balance equity, I. E. Reduce the price of medicines in the US, have other countries increase what they pay for medicines. I'll go into later why I don't think that's going to work. But what it effectively means is there is a significant pressure right now to lower the price of medicines in many European markets, particularly when you look at the basket. We know that from the nineteen or so that was originally has been whittered down to eight, and it's the second lowest price of those eight nations. That's where the first issue we talk about the secret deals is going to have an impact and we'll come to that. The question is how are manufacturers going to increase the price of medicines in those markets where there's going to be resistance? And actually, will it at all result in lowering of medicines prices in the US, which is going to be opposed by the manufacturers. So let's have a look at the implications for life sciences pharmaceutical industry. Usually what has happened in the past, and we know this, the European markets and wider often have lower prices. The only way they really achieve that is usually by some secret or confidential discount. The issue what MFN has done has made those secret discounts no longer viable. Why? Because pre MFN, you could have a secret deal, or you could go to, say, a HTA body like NICE or PBAC or ZYN and have a discount that no one was going to reveal. So you could still launch a very high price in the U. S, and no one knows what the true net price is in European markets. MFN has turned that on its head. Now manufacturers are not going to be able to do a secret deal, Adam, because it's not a secret anymore. And the issue with the secret deal is that a lot of these prices are going to be reported back to the U. S, and that will affect the U. S. Price. So what we are seeing is manufacturers are no longer willing to do these confidential discounts. They're pushing for prices to be increased. That is never going to happen. Now, I don't want to say binary never going to happen. What I'm going to say is the markets are pushing back. And we have seen that both from the work we've done at Vipora, but also from the wide publicly available information. And we'll come to a couple of the quotes, whereby manufacturers are struggling to achieve the high price that was initially planned through MFN. The markets are pushing back. And by that, I mean, most of the payers in these markets don't really care for MFN. They have their own methodology for setting prices, and no MFN is going to make them want to pay double or anywhere near US drug pricing. Many of these markets have budgetary concerns themselves around health care as well. So the idea of increasing budget and spend on medicines when they're already quite under pressure is another issue. Health care has become a zero sum game. We know that. Many new drugs are coming, asking for increasing prices. And many markets and governments, due to financial and economic global scenarios, are constricting. They're not expanding. There's not many markets today reporting economic growth. They're all showing fiscal constraint. So we've got the meeting here of a very bad situation, Adam. We've got companies being asked to increase their prices in European and around the world markets, MFN baskets. And we've got those markets constricting and saying they are budget impacted, they're financially constrained, and they're not going to pay for these medicines. So think about the implications of that. And we've seen actually many pharmaceutical companies that we've been supporting almost putting their foot on the brake. Yes. I mean, we know that there's been some very difficult confidential negotiations going on. We're seeing I've never seen this before whereby manufacturers are actually showing their cards. They're saying to payers in the MFN baskets, look, I'm really sorry to do this to you, but I have to launch at this price. Those payer bodies are saying no chance. You're never going to get that price. And so companies we are seeing sadly are walking away. This means and we discuss what the implications are delayed launch, even not launching and maybe pulling out new innovative medicines, particularly from MFN or MFN related baskets. And Adam, I know that whilst a lot of this is confidential, some companies have come out publicly, haven't they? Amgen, Novartis, I think Lilly, to name a few, have actually come out publicly and made statements about some of these pressures and the potential impact. Amgen have come out and they've said that they are delaying entry in lower priced markets until that US anchor is firmly established. Novartis have come out and they've said that actually the MFN basket makes it dangerous to launch in smaller EU nations, because of the wider implications and it's circling back to affect US prices like you've outlined. And finally, Lilly have come out and they've said that they're concerned that the MFN policies are going to force reallocation of investment away from EU countries. And that's only going to impact on access of these innovative medicines to the patients there. Well, one of the things I really want to explain to our viewers is we're not just reporting what's happening. The poorer are in the room, Adam. We're in the room for these difficult MFN negotiations. We're in the room seeing how the life science industry and the payers are behaving in real time. What are we seeing when we're in that room? Well, I mean, you're right. Difficult negotiations is a good way of summarising it, because we are seeing that companies are pushing for higher prices, knowing that it's going to affect the price in the US. And the markets are digging their heels in saying this is how we assess medicines and these are our cost effectiveness thresholds, etc. We talk about ZOPA, zone of possible agreement in negotiations. We're seeing that there's no ZOPA in some of these negotiations. They are wider part. And companies are trying to negotiate. As you said earlier, they are being open about the problems and the pressures and the feedback to the US pricing. But they're so far apart that many of them are walking away from the table. I agree. You can't do the secret deal anymore because that net price will track back to the US. You're trying to say to European payers, I'm really sorry my drug is overpriced. I'm doing it so I can get a good price for the U. S. European payers don't care about that. They just want to get a cost effectiveness and budget impact thresholds right for the value of the medicine in their market. So you're right, we're having a look at a walk away situation. Now let's flip this. What if we say, okay, Adam, so Amgen walk away, so Lilly's product doesn't get launched. So what? Well, the world will go on. There's loads of medicines coming. So what does it matter if we miss one or two products? Well, I think, you know, yes, patients will care about that individual product, but on a more macro level. You know, it is one product that may not be a huge issue, it's unlikely to be a huge issue. But one year, two year down the line, maybe there's five, ten, fifteen, twenty products or more that haven't been able to gain access in these European markets and these others in the MFN basket. And that becomes a problem. That becomes a problem because no longer is that market able to access innovative medicines. They're falling behind. And that's going to create a lot of political pressure to try and resolve that issue. Yeah. So MFN was originally started to increase price in other European and other markets. That's not happening. It was aimed to reduce the price in the US. Companies not letting that happen. So how are companies playing the game? What are they doing on the chessboard then? Well, we're seeing probably three different things. One is that companies are saying, let's launch in the US. And then we'll kind of try and work out the rest. That's probably a pause on those that are in the basket. But the main thing is let's get a good price in the US first. So there's no MFN to reference to because the drug is not available in those other markets. Eight, potentially nineteen countries. Correct. But again, that's probably not sustainable, and we'll come on to that. The next is that they are launching in the US, and then maybe some of the other markets that are not in that reference basket are becoming even more important. Like, don't forget, some of these markets have huge populations. Talking like Brazil, two hundred odd million people there, like China, they're not in the reference basket. And so companies are going to look more and more to those to really make sure that they get decent price there and it doesn't affect the US. I mean, that's a really interesting take. We've seen that in the room, Adam, haven't we? When I say seen that in the room, what I mean is clients coming to us looking for opportunities in the non MFN countries, which may not be traditional countries they've sold in. They may not have a sales force or vendors even in those areas or even the infrastructure, but they're now looking to think how can we get a product launch in markets in a non MFN basket? Well, that's potentially a new opportunity. Correct. And, you know, the third thing that we are seeing and it's good for us because this is our North Star as a company is an uptake in value based agreements and innovative contracting. Because what that can do, some of these agreements, they can mask that net price. And it's that net price, as you mentioned, that goes back to the US, gets declared, and then it's the second lowest price from those. Yes, totally. I mean, we have clients coming to us increasing VBA and innovative contracting to master that price, increasing VBA, innovative contracting to get their net price. Like the market would never do it without, say, a reassurance of an outcome base. And you know what, Adam? I really think what this has caused the access triangle is broken. We always refer to the access triangle. I mean, being a government payer for ten years, you have your access population, you have time to reimbursement, and you have your price. A lot of companies' strategy thinks they'll get all three of those. They think they'll get the best price. They believe they'll get the widest population, and they think they'll get it immediately. And there's often a dance in the negotiation. If you want the best price, you might get small population. If you want the widest population, I might reduce your price. If you're not willing to budge on those, I use time to delay your launch, and now you're losing dollars or euros or whatever you're translating in. The reason why I think that's broken is, and to your point, they're now walking away. They're now walking away. Those confidential net price agreements that gained access in many of these difficult markets, those confidential net prices aren't really confidential anymore. Or in one way or another, will track back to the US, which means they're walking away. So the access triangle, I think now is broken. Yeah, they're certainly willing to give on time and potentially access to keep that price We've seen companies, I think, even the ones you mentioned, there are others that have even put their launch on pause. They're using that phrase. Are you bringing it to market or not? They're not saying yes or no. They're just saying, we're waiting. We're waiting because of all the uncertainty. And they're waiting because of the unsustainable situation we find ourselves with MFN. So, Omar, where is this going? Well, where is this going? Firstly, I think and I've said this, it's not really going to work. Are we going to lower U. S. Drug pricing? Companies are not going let that happen. They're doing everything to stop that from happening. Are we going to raise the prices in European other baskets? Very unlikely. They're not showing any appetite to provide a high price to help the US price come down. For me, I think what's gone wrong is MFN is copying other global payer systems and adopting it into the US. That doesn't work. And there's a couple of reasons why it doesn't work. Probably the main one is, in the US, health care is a business. If you look at other, say, typical European markets, health care is like a cost. It's a taxpayer investment. It's a societal taxpayer burden. The US, health care, you follow the dollar. And everyone wants some of that dollar. If you look at the whole rebate mechanism that is resulting in the high prices of medicines, there's far too many vertically integrated health care organisations that feed off those rebates. And they all still want those rebates. So the paradox is this is not really going to work. The truth is the US really needs its own value framework. We can see the way in which US administration is going, that there is a formulaic approach becoming to be born that looks HTA like, trying to look at medicines and the value they deliver instead of and we historically have said the price of a drug in Europe is what the HDA value delivers. The price of a medicine in the U. S. Is what the market will bear, I. E. How high can you go before you break it? And that's your price. That does need fixing. But just to adopt and copy MFN countries is not going to be the solution, Adam. And for one thing, there's a number of markets in there, for example, that use the quali. Well, we know right now that the US doesn't really use the QALY at all. It's actually anti statute for some of the CMS and government pricing, and we've seen in CMS drug price negotiations. It's actually against a statute to use a QALY. So why would you try and base your US prices on elements of markets that use systems like the quali base? It's just not going to work, and it's going to be problematic. So that brings us really to an interesting point. What do we do now, Adam? There's companies watching, seeing this problem. What should they be doing? Omar, we've got great experience here. We're living this every day. If you are a company trying to get access in an MFN market or looking to launch in international markets or wanting to design value based agreements or innovative contracts, get in contact, drop us a line.
