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Exploring Fixed and Variable Coverage Principles

Pharmaceutical ExecutivePharmaceutical Executive-10-01-2022
Volume 42
Issue 10

Different paths to formulary decision-making.

Last month, within two days of each other, FDA approved two very different products that promise to advance standard of care for conditions they target. The drugs were Zynteglo, for beta thalassemia, and Auvelity, for major depressive disorder (MDD).

For this discussion, what stands out is their similarity in representing an advance, plus their extreme scientific and pricing differences. The suggestion here is that this similarity-difference regime can be instructive for how the inner workings of medical policy govern coverage.

Similarity-difference regime

On the one hand, Auvelity has been described as “the first orally administered novel mechanism to enter the MDD market in more than 60 years.” But it consists of two decades-old agents—dextromethorphan plus bupropion—and while the price has not been set as of this writing, it’s not unreasonable to assume something in the range of branded atypical antipsychotics.

On the other hand, Zynteglo is a gene therapy developed to cure beta thalassemia. It consists of the patient’s genetically modified bone marrow stem cells, creating functional beta-globin. The price is a one-time $2.8 million, with a rebate of up to 80% back to payers if over two years transfusion independence is not maintained.

One question these profoundly different products raise is, are there different principles in medical policy that determine coverage for each, or are the principles the same regardless of the differences?

Fixed principles in medical policy

Based on my experience conducting payer market research, principles in medical policy governing coverage for an Auvelity or Zynteglo are almost certain to be the same. Each product must meet the requisites of efficacy, safety, and tolerability compared to existing treatment options.

But these fixed principles are inherently broad and, while there will be exceptions, few products fail to pass through the initial coverage gate. The critical factors governing coverage for Auvelity and Zynteglo—or any product—are the variable principles derived from where business and clinical considerations overlap. Two such principles are described here.

Variable principles and coverage decisions

Principle 1: appropriate patient. In the case of MDD, there is no biomarker, so the decision on the appropriate patient will be determined by a history of antidepressant use.

In the case of beta thalassemia, the patient’s genetic defect is the biomarker, however, the specificity requirements go further. As one pharmacy director told me, someone with one transfusion every few months may not be a candidate, but three or four times a month would be. Here, the combination of a genetic defect and severity establishes the appropriate patient.

For brand planning, a key point about principle No. 1 is that the size of the market is not prevalence of the condition, but the percent of people who qualify for coverage.

Principle 2: treatment options. Independent of the appropriate patient, when payers make coverage decisions they focus on the treatment landscape. Are there other viable treatment options, particularly lower-cost options?

For Auvelity, payers can be expected to use prior authorization to require probably two generic antidepressants before coverage. While a barrier on its face, the upside is that previous antidepressant use can be determined electronically from the claims system, with coverage approval to follow. This short-term noise should not work against future pricing.

For Zynteglo there are no treatment options. The manufacturer can charge whatever it wants. Payers will narrow their criteria for defining the appropriate patient, but coverage restrictions are limited by the patient characteristics trial data supports.

Closing points

Variable principles in medical policy drive the different ways products are absorbed in the payer market. Using the two products considered here as an example: payer focus on Auvelity will center on a brand replacing low-cost generics; payer focus on Zynteglo will zero in on an extraordinary new cost where there was none before.

In the first instance, coverage appearing to be restrictive, is ultimately not. In the second, coverage is heavily restrictive. Ironically, though, the super high-cost treatment should produce a substantial medical cost offset, while the much lower-cost treatment will not—potentially impacting any gray area around coverage policy.

Ira Studin, PhD, president, Stellar Managed Care Consulting. He can be reached at istudin@stellarmc.com.

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