Who Will Pay for New Drugs?

Jul 01, 2012

Jill Wechsler
While scientists and biomedical researchers at the recent meeting of the Association of Clinical Oncologists applauded encouraging data on dozens of break-through cancer therapies, analysts pondered strategies for convincing payers to cover the new life-saving medicines. More than 900 cancer drugs are under development, according to Pharmaceutical Research and Manufacturers of America, and the Food and Drug Administration anticipates some 20 submissions for new cancer medicines this year. Not all the reviewed products will make it to market, but those that do will have to demonstrate their value over comparable treatments to achieve market acceptance. Private health plans and payers are demanding more evidence from pharma marketers to support reimbursement for new and old therapies, while striving to reduce their pharmacy expenditures by driving generic prescribing and imposing high co-pays on patients.

Documenting outcomes

How and when pharma companies should develop comparative effectiveness information on new drugs was the focus of the annual meeting of the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) in Washington last month. With $50,000 to $100,000 price tags on targeted therapies for cancer, rheumatoid arthritis, multiple sclerosis, and other critical diseases, payers are looking to limit prescribing to those patients most likely to benefit based on biomarkers and diagnostic tests. In addition to implementing step therapy, prior authorization, and tiered formularies to control drug outlays, payers seek outcomes studies, comparative effectiveness research (CER), and targeted clinical trial designs to document product value.

Not surprisingly, there were dozens of posters at ISPOR analyzing the costs of alternative treatments for cancer patients, relevant healthcare expenditures, and the value of new oncology medicines in the United States and overseas. Health technology assessment (HTA) agencies emphasized risk-sharing and patient access schemes, and some experts acknowledged explicit end-of-life treatment criteria. There was great interest in how accountable care organizations (ACOs) specializing in oncology and other innovative delivery programs can offer treatment pathways and bundled payment methods to manage care and drug expenditures.

So far, payers and insurers in the United States have been willing to cover costly new cancer therapies because the number is relatively small and many target small patient populations, explained Thomas Bramley, vice president of Xcenda, the consulting arm of AmerisourceBergen. But now plans are looking for more convincing cost-effectiveness data and budget impact models, along with companion diagnostics able to direct treatment to those patients most likely to respond. Drug "affordability" has gained currency, as payers realize that there are limits on patient acceptance of high co-pays.

Marketers are more open to consultation and collaborating with payers and health plans to avoid launching new products that will be rejected in the market. Sean Tunis, president of the Center for Medical Technology Policy, described the Green Park Collaborative, which hopes to develop guidance on effective research designs to meet the needs of payers and HTA agencies, starting with an Alzheimer's disease pilot. Newell McElwee, head of outcomes research at Merck, agreed that industry is talking more to payers about what evidence they require for a positive reimbursement decision, adding that collaboration is preferable to obtaining 10 different research recommendations from 10 different payers.

Yet, some analysts questioned whether all the budget impact analysis from pharma companies is useful in deciding reimbursement. There's skepticism about such calculations on both sides, and payers seem to prefer models for how patients do long-term on a treatment, noted Kathy Hughes, vice president of Avalere Health. Marketers feel that a budget analysis is necessary to gain market access, but recognize that its usefulness may be limited to certain types of drugs and therapeutic areas.

Payers can offer helpful advice on designing clinical trials to produce useful CER—and sometimes to support a company's decision to kill a development program not likely to yield a marketable product. However, it's not clear whether marketers can discuss research methods and outcomes claims with payers prior to approval without violating off-label marketing restrictions. Pharma companies also are unsure of the rules for presenting outcomes information that touches on off-label uses to payers and formulary committees and have petitioned FDA for clarification.

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