Key takeaways

  • COVID-19 is increasing pressure on already stretched healthcare budgets, emphasising questions about drug pricing and market access conditions and reinforcing ongoing payer attempts to contain spending.
  • The impact on pharmaceutical spending will vary by country, depending on the COVID-19 burden and the existing budget situation.  It is likely to be particularly pronounced in Spain, Italy, France and the UK.
  • COVID-19 is likely to affect pharma pricing and market access conditions along three key dimensions: health technology assessments (HTAs), pricing, and utilisation and supply.
  • Pharma companies can prepare for the new environment by reviewing launch timing and sequencing, preparing for increased payer interest in supply chains, and being flexible when interacting with payers who are under pressure.
  • Longer term healthcare cost containment-related initiatives will also play an important role, including adapting the pricing approach to country-specific requirements and reviewing the payer’s value proposition to ensure they receive compelling evidence.
  • Healthcare systems are facing a sharp increase in demand for particular areas of care, triggering a short-term shift in priorities and capacity constraints. COVID-19 is also putting a renewed emphasis on the security of drug supply, leading pharma companies to review their go-to-market approaches more broadly

On 3 June 2020, Médecins Sans Frontières (MSF) issued an appeal urging world leaders to ensure that pharmaceutical companies sell any COVID-19 vaccines at cost. This appeal came as Gavi, the Vaccine Alliance, prepared to launch a fund to pay for coronavirus vaccines for developing countries, with billion-dollar government contributions. Kate Elder, senior vaccines policy advisor to MSF, demanded that: 

“governments must ensure any future COVID-19 vaccines are sold at cost and [are] universally accessible to all”. 

With affordability and maximum patient access a prerogative, debates are rife about how much pharma companies should charge for COVID-19 vaccines and treatments. Gilead announced that it was donating its entire current remdesivir supply to states with high need and limited healthcare budgets, although it has since been criticised for agreeing to a price of $2,340 per five-day course with the U.S. government1. Similar donation programmes and international group purchasing schemes are likely to influence the pricing potential for COVID-19 interventions. 

The urgency and extent of the pandemic are increasing pressure on already stretched healthcare budgets, emphasising questions about drug pricing and market access conditions and reinforcing ongoing payer attempts to contain spending. This Executive Insights explores the likely short- and longer-term impact of COVID-19 on drug pricing and reimbursement in Europe, and discusses potential pharma responses to adjust to the new normal in a post-COVID-19 world. 

Shifting priorities and financial strain

The COVID-19 pandemic has delivered a profound shock to healthcare systems, with attention drawn to the sharp end of the crisis: the rising death toll, the burden of care for coronavirus patients and testing challenges. Healthcare system priorities have shifted to COVID-19-related spending. Even as infection rates moderate, sustained budgetary pressure from COVID-19 is likely, including spending on large-scale vaccination programmes, track and trace efforts to manage infection spread, systematic testing of at-risk sub-populations, and a potential redesign of healthcare delivery models (e.g. separation of facilities for infection management, virtual consultation tools, etc.).

The macroeconomic impact of the crisis will add to the strain on public finances and intensify the pressure to contain healthcare costs. In its Spring 2020 European Economic Forecast, the European Commission revised its estimate for the 2020 EU budget deficit from -0.8% as per the Autumn 2019 forecast to -8.3%, primarily due to automatic stabilisers and fiscal measures aimed at cushioning the economic impact of the pandemic. A decline in the deficit to -3.6% is forecast for 2021, due to a projected rebound in GDP and a scaling back of fiscal measures. However, the 2021 deficit estimate remains significantly above the levels expected in the Autumn 2019 forecast (see Figure 1).

Payers interviewed by L.E.K. Consulting expressed their concerns about the resultant pressure on healthcare budgets. A commissioning pharmacist in the UK commented:

“There is no question about financial pressure going forward. In April, we were told to spend whatever we needed to get the COVID-19 situation under control, but of course that’s got to be paid for at some point. The pressure to contain spending is going to be even greater post-COVID.” According to a payer within the German statutory health insurance system, pharmaceutical spending will be particularly affected: “We are worried about the mid-term economic impact of the pandemic. Higher unemployment rates and lower gross salaries will directly translate into less money for public health insurance in Germany. And it’s the pharmaceutical spending that will be hit the most ― more than other areas such as inpatient or outpatient care.”

The impact of the crisis on pharmaceutical spending will vary by country, depending on the COVID-19 disease burden and the existing budget situation. For example, high infection numbers and forecast budget deficits, combined with limited fiscal manoeuvrability under the rules of the EU Stability and Growth Pact, suggest that pressure on healthcare budgets is likely to be particularly pronounced in Spain, Italy, France and the UK (see Figure 2). 

The 2008 financial crisis is a parallel: across Europe, pharma spending growth per capita slowed to -1.1% p.a. in real terms from 2009 to 2014 vs. a spending growth of +1.4% p.a. from 2005 to 2009. Some countries saw significantly steeper declines than others: according to the OECD, per capita pharma spending declined by 8.5% p.a. in Greece and by 7.5% p.a. in Portugal from 2009 to 2014 vs. a spending growth of +1% p.a. and +0.9% p.a., respectively, in Germany and Austria. Many governments made cuts to pharmaceutical expenditure a priority during the crisis, with pharma spending growth significantly below growth in other areas of healthcare (e.g. inpatient and outpatient care). 

Payer reactions to COVID-19 ― what can we expect? 

COVID-19 is likely to affect pharma pricing and market access conditions along three key dimensions: health technology assessments (HTAs), pricing, and utilisation and supply (see Figure 3).


HTA delays 

Pricing and reimbursement (P&R) timelines face delays as HTA agencies are clearing backlogs caused by cancelled meetings during the active pandemic period. With many HTA stakeholders involved in formulating and managing responses to the pandemic, the focus has shifted away from the day-to-day running of HTA processes. Inbeeo’s HTA map documents the extent of expected market access delays in Europe. Based on a review of the agencies’ reported activities and postponed reimbursement decisions, Inbeeo expects market access delays for nine out of 13 European agencies for which information is available. For example, Belgium’s INAMI has suspended all ongoing reimbursement assessment procedures, while England’s NICE is focusing its appraisal work on areas deemed therapeutically critical (e.g. cancer treatments not covered by the Cancer Drug Fund) and on the diagnosis and treatment of COVID-19. Revised timelines for all other appraisals are being prepared.

Payers interviewed by L.E.K. suggest that delays of up to nine months might be expected for pricing and reimbursement processes, with longer delays in countries which have regional/local P&R decision points in addition to national ones. In England, some commissioning bodies and pharma companies are trying to mitigate delays by agreeing on pre-HTA drug access subject to risk-sharing between the parties:

“We are open to pre-HTA agreements for drugs that have strong clinical data and might save us some money, e.g. because of less frequent dosing compared to the standard of care. There is of course a risk that the NICE HTA will be negative. In this case we expect the pharma company to pick up the bill for patients who received early access and to fund them for the remainder of their treatment.” (Commissioning pharmacist, NHS England).

Changes to HTA approaches

The pandemic might trigger more fundamental disruptions to HTAs in addition to short-term delays by causing payers to reassess their value drivers and willingness to pay. As Paula Lorgelly and Amanda Adler, two leading UK health economists, point out:

“HTA agencies in response to financial uncertainty may become more risk averse, which could be further magnified given the evidence base they will evaluate may be more uncertain because of the current disruption to clinical trials.”

HTA-specific changes may include limiting the use of new drugs to sub-populations with the highest unmet need and the highest potential benefit (rather than all populations as indicated in the label) and revised payer thresholds (e.g. budget impact threshold which triggers a health economic analysis in France, cost-effectiveness threshold in England). 

At the same time, debates are ongoing about the utility of the cost per quality-adjusted life year (QALY) approach used by some HTA agencies. An ISPOR2 task force has investigated whether HTAs should take a broader view of the definition of value beyond cost savings and productivity, and has argued in favour of considering novel elements such as reduction in uncertainty, fear of contagion and value of hope. This is especially pertinent in light of the COVID-19 pandemic, where the true societal value of a vaccine or treatment is unlikely to be captured adequately by the QALY approach.


The budgetary pressures and financial uncertainty caused by COVID-19 are putting a renewed focus on cost containment methods, which are already widely established across Europe. These include pressure on list prices for newly launched drugs, higher discounting in tenders and contracts, and a more extensive use of managed entry agreements, particularly outcomes-based models. 

Payers interviewed by L.E.K. highlight significant country differences in the use of specific cost containment instruments. For example, ‘pay for performance’-based approaches are expected to become more widespread in the UK:

“We are seeing an increase in the use of risk-sharing agreements. We would like to fund the drugs that provide the greatest patient benefits, and to reward performance, while paying less if the treatment does not deliver.” (Commissioning pharmacist, NHS England)

In this context, interest in indication-based pricing may also increase in the UK, as the approach enables payers to differentiate pricing depending on a drug’s performance by indication. 

In Germany, on the other hand, the appetite for performance-based pay appears significantly lower, and simpler instruments are preferred, in particular those which target list or net price reductions directly:

“Pay for performance is like warm beer ― nobody wants that in Germany. These schemes are really difficult to administer. We just want lower prices, and this is easiest to achieve via list price reductions or a mandatory discount.” (Budget holder, SHI, Germany)

Tougher price negotiations as part of the AMNOG3 assessment for new drug launches, the introduction of international reference pricing, regular list price renegotiations and an increase in the mandatory rebate4 are some of the options which may be considered to control drug pricing. Price pressure in Germany also has a political dimension:

“We still have among the highest drug prices in Europe. If the government changes after the general election next autumn and we get a Green Party minister of health, I bet you that German drug prices will be scrutinised even more.” (Budget holder, SHI, Germany)

Utilisation controls and supply

As for pricing instruments, payer interest in utilisation controls is likely to vary by country. Incentivising biosimilar use is a case in point: variations in therapeutic interchangeability regulations, pricing, tendering, and physician and patient awareness contribute to differences in biosimilar uptake and leave room for further growth in some European countries.

“Biosimilar penetration is at c.80% in my SHI region ― and generics hold more than 92% share in their respective molecule markets ― so driving up biosimilar and generics use further is not our top priority for controlling cost. But the situation might be different elsewhere”. (Budget holder, SHI, Germany) 

Other utilisation-focused measures, such as maximum prescribing volumes, are seeing some resistance. As a French health economics expert commented:

“We have been largely unsuccessful in implementing utilisation controls. What matters is that clinicians treat patients according to the guidelines. Putting measures in place to restrict the amount of prescriptions for a specific drug would mean restricting the number of patients a physician can see, and eventually patients would just be shifted to another physician. From a system point of view this is not effective.” (Pharmacist and health economics expert, France)

With payers increasingly concerned about medicine shortages, minimum supply volumes and supply chain management commitments are expected to attract more attention, a point highlighted in a recent COVID-19 payer survey:

“[In the] longer term, the question of availability of treatments and management of shortage will become a real concern. Only a few price agreements enforce a minimum volume of supply … We have massive concern [about] supply chain management and investment in factories for bio-pharmaceuticals in France/EU including generics, biosimilars and essential drugs and chemical ingredients.”

It is possible that new price/volume agreements will specify a minimum amount of locally produced stock to avoid future shortages. Other options might include financial incentives to produce locally, guaranteed minimal stock levels with wholesalers and pharmacies, increasing the weight of capacity as a decision-making criterion in tenders, or penalty payments in case of shortages. 

Which actions should innovative pharma company innovators take now?

Pharma companies can consider a number of ways to prepare for the new environment. Some are new in the context of COVID-19 and its aftermath, while others build on healthcare cost containment-related initiatives that are likely to exist already:

COVID-19-specific responses

  • Review launch timing and launch sequencing in response to HTA delays. Timeline changes might in turn impact international reference pricing, so launch sequencing needs to be carefully considered in order to avoid unnecessary knock-on effects on pricing potential in reference countries. In this context, it will be important to have robust price modelling tools in place which simulate the impact of international reference pricing vs. the effect of changes in launch sequencing in order to develop the optimal entry strategy.
  • Be prepared for some increases in payer interest in pharmaceutical supply chains. A marginally increased focus on supply security is possible. This could translate into a greater focus on diversifying sources (in tenders) and / or policies to incentivise some local production, although exact mechanics have yet to be determined. Any responses by pharma need to be weighed against financial impacts (due to a potential increase in manufacturing cost) as well as regulatory implications and the need to qualify new manufacturing sites.
  • Be flexible and thoughtful when interacting with payers, considering COVID-19 workloads: expect delays, given COVID-19-related activities will take precedence, and listen to payer needs and be proactive in addressing them. A thoughtful approach to payer interactions will ultimately allow pharma companies to strengthen their relationships with payers.

Longer-standing initiatives

  • One size does not fit all: adapt your pricing approach to country-specific requirements. While managed access agreements, which link reimbursement to real-world data and patient outcomes, are well perceived in some countries, e.g. the UK, direct pricing levers such as discounts might be preferred in other markets, such as Germany. A nuanced, country-specific approach can be facilitated by enabling local affiliates to play a prominent role in pricing negotiations, as a German payer points out:

“I have seen it happen often ― many pharma companies lack a real understanding at the corporate level of national market access conditions in Europe, particularly if the headquarters are based outside of Europe. They need to empower their affiliates in negotiations with payers to get the best outcome.”

  • Review payer value propositions to ensure that payers receive compelling evidence. In order to strengthen the value proposition, reduce overall budget impact and therefore maximise pricing potential at launch, it may be beneficial to consider alternative access strategies, such as targeting only those patient sub-populations where the drug offers the greatest added benefit. Early dialogue with payers on evidence requirements and trial design will become even more important as access conditions become stricter.

Some of these responses are familiar from years of healthcare cost containment in the aftermath of the 2008 financial crisis, but the nature of the challenges now is different: beyond the economic repercussions of the pandemic, healthcare systems are facing a sharp increase in demand for particular areas of care. This triggers a short-term shift in priorities as well as potential capacity constraints. At the same time, COVID-19 is putting a renewed emphasis on the security of drug supply. As a consequence, pharma companies need to review their go-to-market approaches more broadly. 

Despite the challenges, COVID-19 illustrates the need for continued innovation:

“The pandemic won’t mean the end of expensive therapies. We need to ensure that we secure fundamental, basic treatments (e.g. antibiotics) at a manageable cost. Alongside we will need to encourage innovation and find a way to pay for it.” (Pharmacist and health economics expert, France) 

L.E.K. is closely monitoring developments related to COVID-19 and can share a detailed perspective on the expected impact of COVID-19 on pricing and market access, and other pharma functions.

1; Similar to Gilead, Moderna is facing criticism for its vaccine starting price of $32 to $37, above the price being considered by other drug makers, despite having received nearly $1bn in government funding for the development of the vaccine:
2International Society for Pharmacoeconomics and Outcomes Research
3AMNOG: Arzneimittel-Neuordnungsgesetz ― German law relating to the marketing of pharmaceutical products in Germany; requires drug manufacturers to submit evidence to the Federal Joint Committee to demonstrate the clinical efficacy of their drugs relative to comparators
4There is a 7% mandatory rebate in Germany for patented drugs which are not part of a reference price group and a 6% mandatory rebate for generics

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