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Drug Price Reform with Value in Mind: Is It Possible?

December 2021, Vol 12, No 6

Oncologic drug pricing is being transformed with greater value in mind. At the 11th Annual Summit of the Association for Value-Based Cancer Care in 2021, a panel led by moderator William McGivney, PhD, Managing Principal, McGivney Global Advisors, Wayne, PA, discussed innovation in drug pricing, how the current rebate system supports higher drug costs, balancing new interventions with profits, and the implications of drug price negotiations being considered in Congress.

Drug Pricing Innovation

Kent Rogers, MBA, Former Senior Vice President, Industry Relations, OptumRX, spoke from his position as Chief Customer Officer at EQRx, Cambridge, MA, a start-up biotechnology manufacturer that specializes in remaking medicine services with the goal of drug pricing transparency and drug affordability. The company has 2 agents in development, an anti–PD-L1 antibody (sugemalimab; CS 1001) and an EGFR inhibitor (aumolertinib; HS-10296).

“The remit for our organization is to try to completely change the amount of investment that goes into the throughput and research and development cost, and then try to be able to translate that into significantly lower prices in the immunology and oncology space,” said Mr Rogers. “We’re going to work with payers as partners rather than a transactional relationship you typically find.”

While efficacy is the “coup de grace” of innovation within oncology, unique cost management strategies are not yet considered as a part of innovation, Mr Rogers said. For a number of years, obtaining a rebate on a product was the avenue to control drug costs. “In oncology, you’re not seeing a lot of rebated products yet. But that’s also because you haven’t had a flood of competition in the marketplace like you have in primary care settings,” he said. “I worked for a PBM [pharmacy benefit manager] for 6 years. We were under the gun to try to create a rebate guarantee for every single contract we went out to get. Billions of dollars came down to 1 number—a rebate guarantee. We weren’t managing trends and spend. We were managing rebates. So, the higher the drug price, the higher the rebate. That’s what’s wrong with the system.”

But rebates tend to encourage higher drug prices, said Sarah Emond, MPP, Executive Vice President and Chief Operating Officer, Institute for Clinical and Economic Review, Boston, MA, who believes that true innovation will be pricing that considers outcomes.

“The reason we’re having this debate, and unfortunately the reason there’s a lot of fear mongering, is that we’re talking about changing the status quo,” said Ms Emond. “The PBMs benefit from higher prices because they get bigger rebates. We have that problem. We have manufacturers who are picking the price based on what they think the market can bear. The patient is nowhere in that conversation. How the manufacturers have been able to demonstrate that a patient is actually improving is nowhere in that discussion of price.”

When developing new interventions, manufacturers should work with patients and patient advocates to ensure they are addressing outcomes that patients desire, and incorporate those into clinical trials, said Ms Emond. “When you develop an asset that’s showing that knock-it-out-of-the-park benefit for patients, you’re going to be rewarded in a market that’s going to pay for that,” she said.

Patients may care just as much about functional outcomes and quality of life as they do an improvement in progression-free survival, for example. “When you have demonstrated benefit for things that patients care about, you get to charge more,” Ms Emond said.

Negotiating Drug Costs

When asked whether the FDA should consider cost when approving new drugs, the panelists expressed hesitation. “I’ll say no for a number of reasons, but the biggest reason is that the FDA’s statutory authority is safety and efficacy,” said John O’Brien, PharmD, MPH, President and Chief Executive Officer, National Pharmaceutical Council, Washington, DC, and former Senior Advisor to the Secretary of the Department of Health & Human Services. Ms Emond agreed: “It’s not their remit. Every other developed nation has an agency whose remit is to think about cost analysis.”

Dr McGivney asked whether any agent or device approved by the FDA should be automatically covered by the Centers for Medicare & Medicaid Services. Ms Emond responded that “it wouldn’t work in our convoluted and hysterically complicated health system. We don’t have single payer. It’s all aggregated payers.”

Legislation being considered in Congress would, for the first time, allow Medicare to negotiate directly with pharmaceutical manufacturers on prices for their medications. The concern among panelists was the stifling of innovation that might result.

“The only way you can get that kind of pricing to the marketplace is if you have a much-reduced investment to get the drug to market,” said Dr O’Brien. “That’s a risk in itself.”

He added that Medicare Part D already allows for negotiation, but lower prices that are a result of the negotiations rarely reach the patient. “That’s largely because the gross-to-net has started to create an artificial bottom, so you start removing rebates,” said Mr Rogers. “Medicare is the benefit that takes the rebates to buy down the premium, the way the employers should. If those rebates disappear, how are they going to set a premium? There would have to be an adjustment period for it to work. Theoretically, you’ll be spending less but without that vehicle, you’ll have to adjust the way you set the premium.”

In cancer care, the patient populations for the new indications are getting smaller and smaller as a result of biomarkers or targeted therapy, said Dr McGivney, and these small niche areas put a lot of pressure on pricing. Personalized medicine may relieve some of this pressure, believes Ms Emond.

“One of the ways that the payment infrastructure panics is when they’re paying high prices for something, and they don’t know if it’s going to work. That’s full-on waste,” she said. “When we get to a system (and the PD-1’s are a good example) where we can predict with more accuracy who is going to respond, we should see the payment community respond either through outcomes-based contracts…or a value-based pricing approach because you’re able to show exactly the patient population that’s going to benefit, and that commands a higher price and we have savings.”

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