Unpacking the Black Box of Payer Policy: A Demand-Side Approach for Equitable Uptake of Cost-Effective Health Innovation

Article by: Adrian Towse

People living in Middle and Low Income Countries (MLICs) do not get access to innovative treatments and new treatments meeting MLIC requirements do not come to market. These issues should be addressed through a demand-side approach— better payer policy in MLICs, supported by international actors, to speed development and disseminationAn Innovation Uptake Institute (IUI) can serve as an honest broker between country payers and suppliers. 

In a Briefing Note published by the Center for Global Development available here, authors Kalipso Chalkidou, Adrian Towse and Rachel Silverman argue that neither (i) current limited private sector markets in MLICs, nor (ii) donor push funding is delivering. The current model of push funding is problematic and may generate products that are inappropriate or unaffordable for the intended beneficiaries, frustrating donors, given the size of the investments they have made.  

With many high-burden countries facing a transition from external health assistance, and donors unlikely to expand or even maintain existing push initiatives, this suggests a grim outlook for future global health innovation and uptake. Recent CGD analysis suggests that governments are slow to increase expenditure on public health products following aid transition; instead, private expenditure—mostly out of pocket—rises quickly to meet growing demand. Scarce government expenditure is often not targeted to the most cost-effective health interventions but instead used to cover higher-level care demanded by vocal, growing, urban populations. This spend is largely unorganized, often inefficient, and almost always inequitable.   

We are likely to see: 

  • A continuing and deteriorating product pile up;  
  • Advocacy for voluntary or compulsory licensing and genericization of any successful innovations, further reducing the appetite for private investment in priority areas;  
  • Gradual (but slow) expansion of payer-side HTA-type mechanisms in MLICs, but likely to be used reactively in a cost-containment role, rather than to set priorities and support uptake;  
  • Investment of scarce MLIC domestic healthcare dollars in high-cost, hospital based high-tech innovation, despite weak systems and professional skills 
  • MLICs continuing to pay high prices even for commoditised products. 

The authors propose establishing an Innovation Uptake Institute (IUI) to serve as an honest broker between country payers and suppliers, helping payers to bolster their strategic capacity through market intelligence, capacity-building, and shared technical resources.   Specifically, they see a need to strengthen country payers through (1) better national purchasing functions; (2) effective support from international bodies and institutions to inform national purchasing; and (3) international cooperation, with large middle-income countries at the helm, to coordinate and/or pool demand. Ten tools stand out as particularly promisingTable 1 maps the 10 solution tools identified in the article along three component parts of the product lifecycle 

Table 1: Mapping Challenges with Support Tools that can offer Solutions  

Identified Challenges 

Applicable Support Tools 

Discovery and Development (LMICs need more of the “right” new products and fewer “wrong” products) 

  • Lack of clear market signals limits (i) efficient, equitable, uptake and, therefore (ii) private sector investment in R&D and manufacturing to deliver innovative products to LMICs 
  • Donor-funded push funding may be generating products that are inappropriate or unaffordable for the intended beneficiaries, who may nonetheless be pressured to adopt them. Donor funding is also limited, and many high-burden countries face a transition from external health assistance. 
  • Most MNCs respond by focusing on OOP or richer population subgroups. Donor push funding has created upstream pipelines, but donor funded market shaping has had limited impact on uptake 
  • For now, despite ongoing push investments, major gaps in the innovation landscape remain. 
  • Scientific advice/early HTA 
  • Market Intelligence Templates 
  • Appropriate use of domestic industrial/science policy 
  • Strategic procurement and contracting including Value Based advanced market commitment (MVAC) type solutions 

Market Entry (Products do not get through the barrier of obtaining a licence, or a price, or a listing for public procurement) 

  • There is evidence of improved procurement, use of evidence informed HTA, and regulatory reform, but much more needs to be done. 
  • LMICs need to spend more on health care, but, importantly, they need to spend money efficiently 
  • Horizon-Scanning 
  • Value-based tiered pricing 
  • Use of HTA 
  • Pooled strategic procurement and contracting 

Delivery/uptake (Products do not get used in an optimal way to meet local health need.) 

  • Tools used in HICs to facilitate and manage uptake such as market entry agreements and the collection of real-world evidence are rarely considered in LMICs. 
  • Adoption of high-profile new interventions can sometimes be slow or non-existent, and anticipated health gains often go unrealized. 
  • Budget planning tools 
  • Use of Managed Entry Agreements and collection of credible real-world evidence 
  • Role of private MNCs in improving access in-country, beyond pricing 
  • Pooled strategic procurement and contracting 

 The IUI would aim to crowd in private investment in disease areas currently deprioritised by conventional industry by quantifying potential market size and supporting better coordinated/pooled demand. It would have a broad remit, including products yet to be developed, under development, or already in the marketplace; and serving a broad coalition of country payers and development partners. 

Though the IUI would focus on demand-side strengthening, the IUI itself would be fiercely independent from both the demand and supply sides—from suppliers, payers, and advocates alike—in order for its products and support activities to be trusted and effective. 

The Institute would need to pursue a mixed funding model, albeit with a dependence on donor grants at early stages and when targeting the poorest geographies with very limited ability to pay.   

In a crowded, dysfunctional, and likely unsustainable global health innovation ecosystem, payer policy remains an understudied and neglected function within the innovation value chain. By systematically and strategically strengthening payer policy, potentially aided through the establishment of a dedicated Innovation Uptake Institute, the global health community can begin to address some of the deep challenges related to misaligned innovation and low uptake of new and cost-effective products—improving access and health outcomes across MLICs. 

Posted in Emerging Markets, Innovation, Pricing and Reimbursement | Tagged External publications