On May 14, 2015, 60 senior physician executives from the Boston area biotech and pharmaceutical industry gathered at Alnylam Pharmaceuticals in Cambridge to hear Julia Gaebler, Ph.D., Vice President, Health Advances and Troyen Brennan, M.D., M.P.H. EVP & CMO, CVS Caremark, discuss Drug Pricing & Reimbursement. The event was moderated by Akshay Vaishnaw, EVP R&D & CMO of Alnylam.
Dr. Gaebler began by emphasizing three key messages for the audience:
1. Global Health Technology Assessment (HTA) is proliferating and payers are gaining influence
2. Payer evidence requirements have created a new ‘4th hurdle’ for manufacturers
3. Biopharma and Global Medical Affairs (GMA) must respond to the new payer landscape
Market access issues are now the leading risk to the biopharma business model and companies should be reassessing their level of investment to influence payer audiences.
Comparative effectiveness in a real world setting is increasingly required. Dr. Gaebler noted that Germany not only assesses cost-effectiveness relative to comparators, but also plays a large role in determining what the comparator(s) will be. She cited an example where the reimbursement price of a new drug was based on the comparative benefit of a non-drug course of physical therapy.
Reimbursement agencies also seek to reduce the potential patient population to a subset of the patients studied in randomized clinical trials. In Europe, after EMA approval, each country has its own process of evaluating and determining the price of a new product; the more direct evidence of clinical benefit (versus the Standard of Care) that a company can put forth, the better the chance of a higher price. The United States is alone in using free market pricing among first world countries. In the U.S., payers control their budget via utilization restrictions, including formulary restrictions, prior authorizations, step therapy and differential co-pays.
Today, failure to match price with value proposition and supporting evidence at launch will irreversibly restrict a product’s commercial and medical opportunity. The changing market access and reimbursement environment requires biopharma companies to make a number of operating changes:
• Companies need to invest “boots on the ground” to reach regional payers in Europe and the numerous third party payers in the U.S.
• Manufacturers need to engage payers earlier in the development process, optimally prior to Phase III.
• Health Economics Outcomes Research (HEOR) teams need to be integrated into the Clinical Development Plan at a much earlier date to ensure that payer-relevant data are collected, e.g., Quality-of-Life measures, impact on health care system resource allocation, cost-effectiveness data and patient-centred outcomes.
Link to Dr. Gaebler’s Slides: Julia Aledort Gaebler, Ph.D. – Drug Pricing & Reimbursement
Dr. Brennan began by describing the impact of specialty drugs on overall spending for pharmaceuticals. Specialty drugs are defined as expensive drugs that often require special handling or distribution. In many cases, these drugs are administered by injection.
While specialty drugs comprise only 1% of prescriptions, they account for 32.5% of total drug spending. Dr. Brennan projects that the cost of these drugs will grow by 17% per year and comprise 50% of drug spending by 2018.
Dr. Brennan believes that some of the rapid growth in price increases for these drugs as well as the launch of new drugs at very high prices, is a result of selected aspects of the Affordable Care Act.
• Insurers are no longer allowed to deny coverage for pre-existing conditions.
• The Affordable Care Act prohibits health plans from putting annual or lifetime dollar limits on most benefits, including prescription drugs.
• The maximum out-of-pocket cost limit for any individual Marketplace plan for 2015 can be no more than $6,600 for an individual plan and $13,200 for a family plan.
As a result, the launch prices of new drugs continue to increase and drug companies have become very aggressive in price increases on specialty drugs and specific brands. CVS Health is using evidence-based approaches to control drug costs. In addition to encouraging the use of generics, CVS uses step therapy, prior authorization and formulary restrictions to reduce utilization of expensive brands and specialty drugs. He and his team primarily rely on the published literature to set utilization policies.
Dr. Brennan described the case history of Sovaldi for Hepatitis C as an example of the increasing cost of new specialty drugs. The cost of 12 weeks of therapy with Sovaldi, including ribavirin and interferon, is ~$130,000. He anticipates a continuing crisis in the cost of Hepatitis C treatment in the U.S. as more patients are diagnosed and treated. Dr. Brennan expressed concern that we have already arrived at two-tier medicine as he contrasted the Sovaldi Medicare reimbursement guidelines with those for Medicaid in the state of Illinois.
Link to Dr. Brennan’s Slides: Troyen Brennan, M.D., M.P.H. – Drug Pricing & Reimbursement
During a lively Q&A Session, Dr. Gaebler and Dr. Brennan provided some additional perspectives:
• Orphan Drug designation is important for manufacturers in terms of exclusivity, but does not have a big influence on how U.S. payers view a new drug. Some European countries, such as Germany, use orphan drug designation as a means of controlling overall spending on a drug.
• New therapies that improve patient compliance are not considered to be more cost-effective than existing therapies unless the manufacturer proves that improved compliance leads to better outcomes.
• While Dr. Gaebler encourages early outreach to payers, Dr. Brennan prefers to rely on published literature that is unbiased and peer-reviewed vs interactions with drug companies.
• Manufacturers are allowed to communicate health care economic information to formulary committees as part of FDAMA Sec. 114. However, this legislation was passed in 1997 and FDA has never issued guidelines interpreting it, particularly regarding the definition of “competent and reliable scientific evidence”
About the Boston CMO Network
The Boston CMO Network includes senior physician executives in the greater Boston area who are active in the biotech and pharmaceutical industry. The Network sponsors events for Boston-area physician executives to meet, interact and learn from each other.
A Steering Committee of physicians plans the group’s events:
Akshay Vaishnaw, M.D., Ph.D. (Chair) EVP & CMO, Alnylam Pharmaceuticals
Julie Krop, M.D. VP, Clinical Development, Vertex
Alfred Sandrock, Jr., M.D., Ph.D. SVP, Development Sciences & CMO, Biogen Idec
Matt Sherman, M.D. CMO, Acceleron Pharma
Nancy Simonian, M.D. CEO, Syros Pharmaceuticals
Gloria Vigliani, M.D. Principal at Vigliani Consulting
Chris Wright, M.D., Ph.D. CMO, Pronutria
Steven Rauscher (Organization) BioPharm Physicians