Pharmaceutical Companies and Reimbursement Issues for New Drugs
New York—When GlycoMimetics, Inc., developed its program for a promising new drug, the biotechnology company considered not only the medication’s safety and efficacy but also its economic value. Other pharmaceutical manufacturers are implementing a similar strategy as payers are becoming more selective in their formularies. Even after receiving FDA approvals, drugs are no longer guaranteed to become commercial successes. Companies must differentiate the medications and demonstrate their value over the current standard of care.
GlycoMimetics, Inc., is partnering with Pfizer on GMI-1070, a drug intended to treat vaso-occlusive crisis (VOC) of sickle cell disease. At the American Society of Hematology annual meeting in December 2013, the companies presented results of a randomized, double-blind study evaluating the drug’s use in hospitalized patients. Compared with a placebo group, patients who received GMI-1070 had faster VOC resolution and shorter length of hospital stay, although the results were not statistically significant. By evaluating if the drug can reduce hospitalizations, the companies are attempting to demonstrate if it can decrease costs to payers.
“It is a nice combination in the case of that drug where I think clinical end points and the benefit we would show if successful would naturally tell a good pharmacoeconomic story,” GlycoMimetics, Inc., chief executive officer Rachel King said during a panel discussion at the Biotechnology Industry Organization (BIO) CEO & Investor conference. “I think that is increasingly the kind of perspective that we need to have as we look at drugs in general because we are going to have to make value cases ourselves.”
Most of the cost concerns for payers are with specialty medications, particularly in multiple sclerosis, rheumatoid arthritis, and oncology. Roger Longman, chief executive officer, Real Endpoints, noted that Express Scripts data shows the growth in costs for specialty drugs is 4 times larger than for traditional drugs or for overall healthcare costs.
Mr. Longman said he recently met with senior executives and asked them about the challenges they face with regard to their pharmacy programs. They would like to cut the growth in their specialty drug spending by decreasing the costs of the medications as well dealing with the medical benefit and changing how they compensate physicians. They are also interested in providing a differentiated pharmacy benefit to employers, pension funds, and other customers and noting how they can offer better benefits, decrease costs, and improve productivity. In addition, by restricting their networks, payers are worried that providers may protest the choices of drugs on their formularies and file more appeals, which would increase costs.
“My bet is that payers are going to increasingly compare drugs, one against the other, and the question is, ‘How are you going to get them to compare those drugs not using the lowest common denominator, which is price?’” Mr. Longman said. “Payers are going to do this. The question is, how do you turn the conversation away from saying, ‘Value equals price to value equals some combination of efficacy, safety, practicalities of using it, and the full economics of those drugs.’”
In the past 5 years, Mr. Longman said several drugs have had “challenging commercial operations” in part because of restrictions from payers. Melinda Thiel, vice president of pharmacy, HealthFirst, said her nonprofit managed care organization delegates its formulary management to CVS Caremark. HealthFirst mostly serves patients enrolled in Medicaid and Medicare and is slow to add new drugs to its formulary. However, with specialty drug costs so high, HealthFirst has asked CVS Caremark to limit its formulary, restrict as many medications as possible, and implement prior authorizations whenever appropriate. Payers also evaluate clinical outcomes, but Ms. Thiel and others in similar positions do not have access to all of the safety or efficacy data.
“What is interesting from a payer perspective is that the value is really a little misaligned,” Ms. Thiel said. “I have an accountability for how much is being spent on pharmacy, and I would not necessarily see the clinical value in terms of medical cost offset. While we appreciate it, we still have a financial partner on the pharmacy side. We are putting more pressure [on pharmaceutical companies]. We have no choice.”
Physicians are also sometimes getting involved in protesting expensive new drugs. Peter Bach, MD, discussed a famous example in which he and 2 other doctors at Memorial Sloan-Kettering Cancer Center wrote an op-ed article in the October 14, 2012, edition of the New York Times detailing the hospital’s decision to not include ziv-aflibercept on its formulary. The FDA had approved ziv-aflibercept in August 2012 to treat patients with advanced colorectal cancer, but Memorial Sloan-Kettering’s pharmacy and therapeutics committee chose not to cover the drug because it cost twice as much as an alternative (bevacizumab), which was more toxic yet inconvenient.
“We decided it was an opportunity to assert the role that prescribing physicians have and should have in this discussion about value,” Dr. Bach said. “The future is hard to predict until it has happened, but I think the expectation is that this will start a little bit more assertion at the doc level.”
Although the Patient Protection and Affordable Care (ACA) created concern for some in the industry, Dr. Bach agreed with healthcare business strategist J.D. Kleinke, who said the ACA is “a radical endorsement of the status quo.” Pharmaceutical manufacturers were also worried during the managed care boom of the 1990s, according to Mr. Kleinke, but their businesses flourished because more people gained insurance. Mr. Kleinke believes a similar situation will occur in the next few years as most people in the United States will be forced to have coverage or pay a tax.
To Dr. Bach, a more pressing issue is the industry’s lack of transparency even when dealing with initiatives intended to promote the quality of care. In the next few years, he believes there will be an increase in the use of pathways, which are negotiated, proprietary contracts between doctors and payers to use specific drugs in a certain order for particular conditions. However, he said the contracts need to be more transparent so that patients and others know what drugs they will receive and whether they are the best options. Dr. Bach was also adamant that pharmaceutical companies factor the savings they generate into the prices they charge for drugs.
“The one notion I reject is that these prices are written in stone and come down from the top of a mountain,” Dr. Bach said. “They are a product of the market in quotation marks that we have created. There is no reason for them except that it is possible… I sort of reject the argument, sort of a standard industry talking point, that the cost of drugs should somehow bake in the risk of the enterprise rather than the value of the products that is produced.”
Ms. King mentioned a group that is interested in comparing drugs for oncology based on their clinical benefit, toxicity, and costs. Results will be published and will help doctors and patients make more informed decisions.
“I think we tend to be afraid of that sort of thing in the industry, [but] I think it is actually something that we would probably be better off embracing,” Ms. King said. “I think drugs are actually going to turn out to be a good value in general. I think often we do improve quality of life, we do keep people out of the hospital [and] improve length of life. To some degree, we really need to welcome the kind of scrutiny that we are going to be seeing as a result of these cost pressures. I think in general our products are going to do well. We need to make the case for those drugs perhaps in ways that have not been the case before.”
Dr. Bach asked Ms. King how much GMI-1070 would cost if it is approved, but she declined to comment and mentioned Pfizer will make the final pricing decisions. She said breakthrough therapies that offer substantial benefit over existing options will continue to get reimbursed, although drugs that only offer slight improvements may have a harder time getting on formularies.
“History shows that over time, incremental improvements can add up to substantial benefits,” Ms. King said. “We need somehow, from a systems perspective, to incentivize the innovation of incremental improvements, but I think the reality is if the incremental improvement really is small and the price difference really is great, then someone might make the value judgment that they are not going to pay for that. It is going to be product-specific and disease-specific issues. We do not have infinite pricing flexibility. We never really did. Every time we are going to need to make that value case.”
