While drugs are increasingly hitting the market that address unmet needs and even offer cures for some rare diseases, private insurers are highly concerned about such therapies’ eye-popping price tags, a recent survey indicated. But one prominent payer executive who spoke during AHIP’s Medicare, Medicaid, Duals & Commercial Markets Forum suggested that insurers are better off working collaboratively with drugmakers to ensure prices are tied to value — rather than engaging in an inter-industry war of words.
“More and more we’re seeing drugs come through with limited evidence through accelerated approval processes, which generally is a marker for an unmet need, which is a good thing. But the evidence can be thin,” said Michael Sherman, M.D., executive vice president and chief medical officer of Point32Health. During a March 14 panel at the AHIP forum, Sherman pointed to the example of Makena (hydroxyprogesterone caproate), a drug that aims to reduce preterm births but failed to prove clinical effectiveness in trials conducted after it received accelerated approval. With the FDA poised to make a final decision on the drug’s status, Clovis Pharma Group recently announced it would voluntarily pull Makena off the market.
While patients should be able to access novel therapeutics, it’s important to understand that “if we’re paying for drugs that don’t have a benefit, we’re increasing premiums and costs,” Sherman said. “So more and more, we’re looking to collaborate. I think if we’re out there having a debate in the press, saying ‘The drug is too expensive,’ [and] the pharma company is saying ‘No, it’s priced right,’ we all end up looking bad. We’re putting the member in the middle, and that’s not why we exist; that’s not a winning strategy.”
New England Insurer Led Way on Outcomes-Based Deals
Point32Health — formed when Harvard Pilgrim Health Care and Tufts Health Plan combined — is largely seen as a trailblazer when it comes to outcomes-based payment arrangements with drugmakers, which tie the price of drugs to their ability to prove clinical effectiveness. One of its more recent outcomes-based pacts was with Takeda Pharmaceuticals America, Inc.: The companies said in October 2021 that they inked a risk-sharing agreement for Alunbrig (brigatinib), a treatment for non-small cell lung cancer.
“We’ve done a lot…with value-based agreements, but I’m really heartened by the amount of collaboration that’s occurring behind the scenes,” Sherman said during the AHIP panel. He remarked that he recently had meetings with representatives of “two gene therapy companies” who understand the need for a collaborative working relationship with payers. “If they’re going to price them in the millions, then they acknowledge they’re worth less if they’re not effective,” Sherman added.
Sherman also highlighted a recent call he had with Barry Greene, the CEO of Sage Therapeutics, Inc., noting that in this case, “I want to be specific…because I want to really call this out as an example of a discussion we should be having.” Sage and Biogen Inc. are close to going to market with the postpartum depression treatment zuranolone. “It’s likely to be expensive, on a per-pill basis,” Sherman said, adding that he wasn’t yet sure that the investigational therapy has proved effective enough to convince payers.
“The call was very high level — we didn’t agree on anything other than the fact that they’re interested in working with us as a leader on agreements that can be applied for the entire industry that demonstrate value and align incentives and have some component of value.…But we need more of that, and not this playing out in the press” of payer-pharma spats, Sherman said.
Payer Execs See High-Cost Drugs as ‘Organizational Risk’
Sherman’s desire to tackle the cost of novel therapeutics puts him in good company with other payer executives, a recent survey from KLAS Research found. To collect payer perspectives on the issue, researchers conducted 30-minute phone interviews with eight executives and other senior-level contacts from payer organizations and provider-sponsored health plans from July 2022 through January 2023.
Of those eight executives, seven categorized their level of concern about the “rising cost of novel therapeutics” as “high,” while one indicated a concern level of “medium.” The report defined “novel therapeutics” as those that provide “first-of-their-kind treatments not previously approved or marketed in the US for rare diseases and conditions,” including the high-cost category of cell and gene therapies.
“We are seeing current and proposed million-dollar therapies come up more and more routinely because they are touted as being more curative,” one anonymous executive told researchers for the KLAS report. “As the cost of these therapies grows, just one patient case could significantly impact a self-funded client or our ability to make health care affordable. Typically, when the cost of care escalates, the rising cost ends up being passed to members and patients through increased premiums, making health care unaffordable as a whole. So the cost of novel therapeutics is one of our top priorities, and we look at it as an organizational risk.”
Another executive is quoted in the report as saying: “We are constantly on the cutting edge of wanting to move to solutions that will provide high value to our customers and health in general. We also want to be able to do so at scale and have processes and contract arrangements that will provide the best financial methodology.…Everybody in the mix of new therapeutics could do a better job of helping to keep the costs down, especially pharmaceutical companies. I don’t know whether they will, but we have some leverage with them, so we have the responsibility to get involved.”
Head of FDA Wants Payers to Apply Pressure
One top government official, meanwhile, thinks pharmaceutical firms and regulators aren’t the only stakeholders that need to take responsibility for ensuring that drugs that go to market via the FDA’s accelerated approval pathway conduct the required confirmatory trials.
“To ensure the studies get done I would argue that you guys have a very significant role to play,” FDA Commissioner Robert Califf, M.D., said during a March 16 discussion with AHIP President and CEO Matt Eyles, according to a Pink Sheet article.
It is not “just a matter of FDA making sure the studies get done,” Califf emphasized. “This is a community issue where we all have a role to play. And as we pick up our game…you’ll be hearing a lot from me about, OK, what are the other members of the ecosystem doing? What is the strategy of the insurance plans to get the studies done?”
Based on Sherman’s comments during his AHIP forum panel two days earlier, some payers already are communicating directly with pharma companies about their trial data.
Sherman noted that “there are…pharma companies that come to me basically showing their work” to argue for a drug’s effectiveness. “It’s about having a mechanism for justifying price” rather than pulling a figure out of thin air, he added.
He also touched on the subject of the Inflation Reduction Act, which includes sweeping drug pricing reforms that represented a major lobbying defeat for the powerful pharma industry.
“If the pharma company is pricing at a point that seems unconscionable, and the same thing applies to payers on prior auth[orization]…there’s going to be legislation that comes that sometimes has unintended consequences,” Sherman said. “I’m a fan of the private system — I think when we can, we’re better off working together. When I meet with organizations, you can get through a lot of the noise by putting [patients] in the center and working around it.”
This article was reprinted from AIS Health’s biweekly publication RADAR on Drug Benefits.