Who Will Pay for New Drugs?

July 1, 2012
Jill Wechsler, Pharm Exec's Washington Correspondent

Jill Wechsler is Pharm Exec's Washington Corespondent

Pharmaceutical Executive, Pharmaceutical Executive-07-01-2012, Volume 0, Issue 0

Comparative research documenting value and affordability is key to obtaining coverage for high-cost therapies. Jill Wechsler reports.

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.

Jill Wechsler

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.

Comparing data

A perennial issue is whether FDA and other regulators can assist in bringing new drugs to market by encouraging the inclusion of outcomes assessments in pre-approval trials. The opening session at ISPOR addressed whether the current regulatory paradigm should be modified so that it's easier for sponsors to study patients with co-morbidities, to compare alternative therapies, and to assess outcomes relevant to patients in Phase III studies. Sean Tunis acknowledged that trials with active comparators are more expensive and take longer, and that many quality measures are not well validated. Former FDA commissioner Mark McClellan, now at the Brooking Institution, noted that rising costs and new healthcare delivery systems support CER, but that the legal standard for new drug approval remains safety and effectiveness, not comparative effectiveness. Trials can be modified to provide additional information, said FDA senior advisor Vicki Seyfert-Margolis, but FDA requires adequate and well-controlled studies to approve new drugs.

Part D and Competition

A goal for William Crown, president of UnitedHealthcare's OPTUMInsight Life Sciences and ISPOR president-elect, is to further refine CER methods so that the conclusions from observational studies are more reliable. "We need to raise the sophistication of the discourse surrounding randomization and observation," he says.

Variations in results from randomized trials and observational studies were further explored at the annual CER symposium sponsored by the Agency for Healthcare Research and Quality. Analysts described the differences between efficacy and effectiveness studies for evaluating healthcare delivery systems, understanding responses of diverse populations and variable care settings, and comparing different treatment modalities and interventions.

Assistance in improving the quality of CER may come from the new Methods Report from the Patient Center for Outcomes Research Institute. A preliminary draft, which is scheduled to be finalized in November, outlines 60 standards to guide researchers in assessing heterogeneity, handling missing data, accessing data networks, utilizing adaptive strategies, establishing data registries, and assessing diagnostic tests.

Part D success

Mark McClellan proposed at ISPOR that changes in healthcare delivery systems through ACOs and other models can help measure quality and costs to achieve savings and improve outcomes, as experienced with the Medicare Part D drug benefit. A recent report from the Kaiser Family Foundation (KFF) documents how government outlays for Part D have been about 30 percent lower than originally projected by the Congressional Budget Office, during a period when overall Medicare spending has skyrocketed. The savings arise from a number of factors, said analyst Jack Hoadley of Georgetown University at a KFF briefing: lower enrollment in Part D than expected, a general slowdown in total spending on prescription drugs, fewer new drugs coming to market, and, most notably, a huge rise in generic drug prescribing.

Karen Ignagni, president of America's Health Insurance Plans, credited the savings to the ability of Part D plans to apply a range of medication management tools to drug utilization, including tiered formularies that encourage patients and prescribers to switch to generics. Even economist Marilyn Moon, a well-known advocate for consumer protection in healthcare, acknowledged that private plans have been able to use financial incentives to push beneficiaries into generics—something that would be hard for the federal government to do.

But Moon noted that Part D plans have "a very good deal" because the doughnut hole structure relieves insurers from covering very high-cost patients. The program's reinsurance system, plus subsidies for seniors also on Medicaid, reduces the pressure on plans to manage spending on high-cost medicines. That may change, though, if the emergence of more pricey critical therapies raises overall costs for Part D and other public and private drug benefits.

Jill Wechsler is Pharmaceutical Executive's Washington correspondent. She can be reached at jwechsler@advanstar.com

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