WHAT IS VALUE CREATION STRATEGY?
by Henrike Granzow
Apersy’s expertise and approach to commercial strategy and market access is all about value and value creation. But what exactly is this illusive concept of value? And how and why do you leverage value to achieve optimal pricing, speedy reimbursement and patient access? And what precisely is a “value creation strategy”?
The above is an oversimplification of course – but it gets the point across.
I also wanted to use this comparison to add another layer to the definition of value: Not only do different stakeholders have different frameworks to understand value, they may also have different reference points to compare a product’s value to; value does not exist in a vacuum.
Types of value drivers
I just mentioned different frameworks or concepts of value. Each of these has different components and value drivers of varying degree of importance for different stakeholders.
Broadly, there are at least three groups of value drivers or value propositions of a medicinal product or device:
- Clinical value (e.g. improved morbidity and mortality, safety)
- Humanistic value (e.g. improved quality of life)
- Economic value (e.g. reduced resource use)
- One may also consider a fourth that is starting to appear a lot in the context of digital therapeutics: structural (e.g. faster access, reorganisation of care).
All of these features can potentially be part of the characteristics and benefits of a health technology.
From my experience, many companies are not fully aware of the entirety of their product’s value; they may focus on one aspect too strongly so that they are overlooking other value drivers. Worst case – and I do see this regularly – they are looking at the wrong type of value proposition or the wrong benchmark context.
There are many ways to leverage different product features and anticipated product benefits to optimise the overall value proposition. Shaping a product to that extent is complex and needs to start early in the development process; this foundation work can then be further fine-tuned as development progresses.
$-value: The move from medicine cost containment to value-based pricing
The fact that more healthcare systems are starting to adopt HTA and value-based pricing for price and access decision making shows that payers recognise that focusing on cost aspects alone is not the best way forward in times of precision medicine and curative therapies.
Even in markets like the US, where we do not have a formalised public HTA, so-called Value Frameworks (yes, that term again!) are on the rise, aiming to capture how medicines contribute to patient outcomes.
Price and value
Cost containment approaches do not focus on value or patient outcomes. They rely on decreasing medicine spending and see cost as the only representation of value.
Value-based pricing does what it says on the tin (or so it tries). The evidence for all the potential types of value (see above) is being evaluated, typically in HTA processes. Further appraisal of the value in the particular healthcare system context and versus benchmarks then leads to a reimbursement decision and often also a price.
(In practice, there are no “pure” pricing systems. Different mechanisms will ultimately contribute to a final reimbursement and (net) price decision. But that might be a topic for another article)
In a value-based price world, your product benefit and the evidence that clearly demonstrate how it leads to better outcomes is your value currency. This will be the foundation of your price potential and reimbursement success.
A price tag is possibly the closest you can get to making value objective, or to at least capture it
in a “portable” kind of way. But there is another importance to the payer point of view on value:
Payers are in many healthcare systems your ultimate customers. And as a for-profit company your ultimate goal at the end of the development process is 1) to make medicines available to patients, 2) at an appropriate price.
What is a value creation, value creation strategy and why does your asset need them?
Value creation encompasses all the steps and activities to
- Shape a product with optimal use, indication, positioning (etc) to address an unmet need
- Leverage product characteristics and value drivers optimally to enhance overall value
- Prove the value of the asset by generating appropriate and quality evidence.
Then Value creation strategy is the plan, or roadmap that underlies the value creation activities. It aims to strategically define and optimise value-driving product characteristics and benefits in line with some defined (access, pricing, etc) long-term goals, and outlines the steps and actions to accomplish this.
When I work with companies at an early development stage, one of the first activities is to review the asset’s key characteristics, understand the therapeutic environment and review the product’s positioning within. This is typically where I see the first important questions arise: target patient population; precise product use, etc; here some early strategic decisions are required for the clinical development and the commercial potential.
As you can see from this example, having a well-thought out value creation strategy is important, because in the development programme, the first fundamental product shaping decisions need be made relatively early on; and eventually, there will be a point of no return: studies will start and run and changing course will become harder and costlier.
An early value generation strategy will give you the foundations to integrate value optimisation from the start and will help create an efficient action plan for evidence generation activities that can address all the different stakeholders’ approaches to value. Depending on the stage of development the focus on evidence is what I would recommend as a key second activity. These first steps bring together how product shaping and value demonstration requirements would impact the development plan. Resulting insights can create a clear direction and pathway forward for your asset, a joint understanding for the team and a credible action plan for investors and partners.
The perk and key differentiator of value creation versus many other market access activities is that it is all about actively shaping your asset and de-risking the development and ultimately the commercial stage. The later you go in your development without a plan, the more it becomes a question of “work with what you got”.
The new value life-cycle
You hear me talk about this a lot…
Because I believe that we are at a turning point in how we look at medicine development and the product life-cycle: Payers are more and more the drivers of what motivates your evidence generation; their role and opinion will be felt more strongly and further shift out your evidence generation: Evidence generation does not stop with marketing authorisations nor at a first positive reimbursement decision. Evidence generation will follow much more the life-cycle approach, instead of being just part of the product development phase. This is not breaking news, but I believe we have only seen the start. Product value needs to constantly evolve or be confirmed – else there will be a price impact or access constraint.
Market access had been originally called the “fourth hurdle”; the fifth hurdle will be “value confirmation and maintenance”.
Conditional reimbursement with evidence development, limited reimbursement timeframes, regular re-evaluations and price revisions are becoming more the norm in many of the large European markets; as are real-world evidence requirements and pay for performance approaches. We see this in schemes such as the Innovative Medicines Fund in England, or the Anwendungsbegleitende Datenerhebung, the RWE collection, in Germany. These schemes are opportunities – of course, but you need to know how to make them work and be crystal clear on what that means in terms of additional data collection efforts.
And so the value journey continues with value optimisation and value confirmation…
Value creation strategy has never been as important as now: Similar to your initial product development activities pre-launch, you want to have a plan for what follows.
I see the aspect of value creation as the underlying foundation for achieving an appropriate price, successful valuations and fundraising, as well as a tool to de-risk market access and reimbursement.
Value creation activities put you in the driver’s seat: You take active steps to shape your asset and development plan; no fire-fighting, no fudging. That’s why I wanted to specifically put VALUE at the heart of my consultancy activity. Market access is a goal, value creation is the point of departure to succeed.
Whatever stage you are at, if you are looking to build your value foundations or if this is the moment to see where to adapt and optimise your development programme for market access success, I would be interested to hear more about your situation.
Equally, if you have any thoughts or comments on how you see the future of value-based pricing and value assessment evolving, get in touch with your ideas and experience.