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Potential for quality equivalent to economies of scale.
Health insurance coverage based on evidence is a standard principle in managed care pharmacy. As the number of orphan disease treatments grows, tighter than label coverage has become a standard practice. Tighter than label coverage means that a health plan limits coverage to key detail in the pivotal trial rather than covering patients whose condition meets a broader FDA-approved indication.
Impetus comes from the super high cost of orphan disease treatments. Justification comes from a product having a broader indication than evidence in the pivotal trial suggests. While tighter than label policies limit patient volume in already small patient populations, they can create conditions that favor future growth.
Based on past market research I have conducted, any one of these clinical factors appears capable of prompting restricted coverage:
Spinraza and age. Spinraza is indicated for treatment of spinal muscular atrophy in “pediatric and adult” patients, but study subjects were infants less than or equal to 7 months of age at the time of first dose. Given the age discrepancy between trial participants and adults, health plans restricted coverage to the age range in the clinical trial. Then, as one pharmacy director put it, “as more data came out for different age groups, we broadened the coverage.”
Oxbryta and hemoglobin. This drug is indicated for treatment of sickle cell disease in adults and pediatric patients 12 years and older, with no other prerequisites in the indication statement. In the clinical trial, however, as another pharmacy director stated, “they only had study subjects whose hemoglobin was less than 10.5.” He went on to explain that “since the drug is based on improving hemoglobin, the plan put that inclusion requirement in the PA.”
When a business enterprise achieves economies of scale, it makes more products at a progressively lower cost per unit produced. The suggestion here is that there is an analogous dynamic for orphan disease treatments with tighter than label coverage. Given the extreme challenge posed by the patient’s condition, risk for poor outcomes from orphan disease treatments is substantial. Risk for poor outcomes is the parallel to efficiency challenges in economies of scale. Pushing this theme further: The more patient volume is concentrated on a limited number of patients mirroring the pivotal trial, the more likely optimal outcomes will result.
Since orphan disease morbidity is typically acute and deteriorating, the greater the frequency of optimal outcomes, the greater the likelihood payers will recognize that real world experience justifies expanding coverage to additional patients with varying characteristics. “Efficiency” for economies of scale equates to “consistency of benefit” for orphan disease treatment.
For brand teams, a different way to look at tighter than label restrictions is not to focus on the limited coverage but to build future planning based on the optimal results likely to materialize. Rather than contend with the reduced volume from coverage that narrows the patient base, growth is better served by developing science-based strategy to leverage demonstrated outcomes, justifying coverage for more patients than the pivotal trial originally promised. The irony of tighter than label coverage is that while it limits patient volume in the short run, it creates potential for accelerating growth in the long run. Also, since most payers based on my research appear to have a lack of interest in multi-year risk arrangements, for orphan disease treatments, marketing keyed to science-based strategy tied to demonstrated outcomes is likely to be more profitable than pushing the boulder up the hill with long-term value-based contracting.
Ira Studin, PhD, President, Stellar Managed Care Consulting. He can be reached at firstname.lastname@example.org.