As drugs continue to come onto the U.S. market with ever-increasing prices, payers are seeking to determine the value of those therapies as they make coverage decisions. To help do this, many health plans are putting more and more credence into the assessments from the Institute for Clinical and Economic Review (ICER). But the organization, and particularly its use of the quality-adjusted life year (QALY), has just as many detractors as it does supporters. And although ICER has staunchly defended its approach, the organization recently released a report acknowledging that there may be exceptions to the way it approaches assessments.

The report, published Nov. 12, focuses on high-impact single and short-term therapies (SSTs), which it defines as “therapies that are delivered through a single intervention or a short-term course (less than one year) of treatment that offer a significant potential for substantial and sustained health benefits extending throughout patients’ lifetimes.” These include potential cures for conditions and products that can halt illnesses’ progression or “produce sustained major health gains.” The new approach will be applied for therapies to treat conditions “that are near-term life threatening or severely debilitating, or those that would cause a life-long significant disability if left untreated.”

The report notes that “important challenges” are inherent within these drugs’ assessments, “including distinctive types of uncertainty at the time of launch that raise the risk of high unrecoverable costs; questions regarding additional dimensions of value for patients or the health system; time divergence between costs and benefits; and concerns about affordability and fair sharing of any savings created by preventing the downstream costs of expensive chronic treatment. For all stakeholders, it is critical that the methods that guide assessment and recommendations for fair value-based pricing of SSTs are ready for these challenges and are well adapted to guide and support the innovation of new therapies that are affordable to individual patients and to the health system.”

ICER clarifies that “this focus on single or short-term treatments also implies that we do not believe that treatments taken on a chronic basis, even if they may be true cures that eradicate disease, warrant consideration of special assessment methods. We believe that current assessment methods are adequate for these kinds of treatment and that it is the combination of short-term treatment with the potential for substantial long-term gain that generates the key challenges meriting consideration of alternative assessment approaches.”

A handful of innovative one-time therapies have launched over the last couple of years. And while they have shown promise, the products also have turned heads with their high costs.

In May, the FDA approved gene therapy Zolgensma (onasemnogene abeparvovec-xioi) from AveXis, Inc., a Novartis AG unit, to treat spinal muscular atrophy (SMA), an often-fatal condition (SMA 7/1/19, p. 6). The cost for the treatment is $2.125 million. While it’s the only single-dosed drug priced in the millions, others certainly are not cheap. Spark Therapeutics Inc.’s Luxturna (voretigene neparvovec-rzyl), approved in December 2017 for a rare form of blindness, costs $425,000 per eye; Novartis Pharmaceuticals Corp.’s chimeric antigen receptor T-cell therapy Kymriah (tisagenlecleucel), first approved in August 2017, costs $475,000 or $373,000 depending on the type of cancer it’s used for; and Gilead Sciences, Inc. unit Kite Pharma, Inc.’s Yescarta (axicabtagene ciloleucel), also a CAR-T treatment, approved in October 2017 to treat large B-cell lymphoma, costs $373,000.

And these innovative therapies are not anomalies. In January of this year, then-FDA Commissioner Scott Gottlieb, M.D., said the agency expects to be receiving more than 200 investigational new drug (IND) applications for cell-based or directly administered gene therapy by 2020. The agency had more than 800 INDs on file at the time of Gottlieb’s statement. In addition, he said, the agency expects it will be approving 10 to 20 cell and gene products per year by 2025.

Research from the IQVIA Institute for Human Data Science shows that nearly 100 next-generation biotherapeutics that leverage 18 different approaches were in at least Phase II clinical trials in 2018. That total is almost a doubling of therapies since 2014.

Indeed, ICER President Steven Pearson, M.D., mentioned the pipeline for these therapies when unveiling the new report. “We need to think hard about whether the methods of technology assessment and cost-effectiveness analysis are ready to capture the potential for broader benefits of these treatments,” he said in a statement. “We also need to consider whether new methods can better describe for decision-makers the important uncertainties about long-term benefits of short-term treatments. Lastly, some potential cures will offer the promise of preventing massive health care costs over a patient’s lifetime; we need to ask whether the traditional methods of summing up all those cost-offsets and making it a part of a calculation of a ‘fair’ price makes sense for these specialized treatments.”

The group also issued a technical brief on the topic in August that functions as the background for the methods presented in the new report. Both reports are based on information that ICER culled from a variety of both national and international sources over the past year, including the UK’s National Institute for Health and Care Excellence (NICE) and the Canadian Agency for Drugs and Technologies in Health. The organization says it will start applying the model in January.

Elan Rubinstein, Pharm.D., principal at EB Rubinstein Associates, says that ICER’s above-quoted statement of intent in the report “is important. That is, by pursuing this for high value SSTs, ICER acknowledges that its existing value assessment framework does not fully capture such products’ value, that ICER does not have clear and evidence-based approaches that fully address this value, that ICER values the perspectives and experiences of entities in the USA and overseas to inform its thinking on possible solutions and that while the approaches spelled out in this report may not be fully defensible, they constitute first steps and placeholders from which to move forward.”

Pointing to the gene therapy pipeline, Jeremy Schafer, Pharm.D., senior vice president, Precision for Value, maintains that “these changes to the ICER framework are both timely and necessary.” He tells AIS Health that “the release of the revisions in general was somewhat surprising. ICER has done reviews on multiple one-time therapies including CAR-T products and Zolgensma. This could have given the impression that ICER was comfortable with its current approach. However, the release of the revisions shows that ICER is listening to the market and willing to adapt for new evolutions in health care.”

“If you think about ICER’s journey here — with their assessment of CAR-T — I believe that they were pretty excited and also were seeking differentiation in cure valuation, as at the time we heard from payers that ‘ICER always just says ‘no,’ so I believe that ICER was looking to demonstrate a positive review for highly innovative treatments, which together with Luxturna catalyzed a lot of this thinking,” says Lisa Kennedy, Ph.D., chief economist and managing principal at Innopiphany LLC. “Then with the assessment of Zolgensma in SMA, it seems that ICER was criticized for their high valuation of this treatment, which Novartis’s CEO used at JP Morgan last January. So the tone of the initiative changed to one of optimistic methodologies that balance the assessment of value, fair pricing and incentivizing breakthrough cures to ‘a solution to the most egregious prices that would otherwise be recommended by traditional cost-effectiveness methods,’” as stated in the technical brief.

“So essentially what ICER is saying is that the traditional cost-effectiveness analysis that they typically use for chronic disease treatments gives too high valuations for cures and needs to be further ratcheted down with other methodologies,” she tells AIS Health. “And the result is that chronic disease treatments are disproportionately rewarded over cures in these analyses. Yet if the goal is to buy more health per dollar spent agnostic to the intervention (a fundamental tenet for health economic evaluation as part of health technology assessment), then shouldn’t you measure cures on an even playing field with other therapies? Shouldn’t cures be measured with the same ‘yardstick’ as other therapies?”

Kennedy also questions why ICER would use the term “single and short-term therapies.” This wording, she says, “overcomplicates the term — when someone says cure, you get it. If someone says it’s an SST, an ordinary person will have no idea what you’re talking about.”

One of the approaches in the new framework is that ICER will include not only a base case scenario but two additional scenarios — an optimistic and a conservative one — on the benefits of a product. “Questions around the durability of gene therapy effect speak to one of the largest unknowns for payers and health care providers, particularly those trying to determine if the treatment is ‘worth it’ or not,” says Schafer. Including such scenarios “may help address this.”

Rubinstein agrees. Having the various scenarios will allow people on pharmacy and therapeutics (P&T) committees “to understand the range of value around the reported base case value, when key assumptions in the underlying scenario are changed.” He points out that the report says that “‘developing these alternative scenarios will still require judgments to be made. These scenarios will be evidence based and not arbitrary.’ In considering the importance and utility of these alternative scenarios, P&T decisionmakers will want to consider whether they agree with ICER’s choice of assumptions to change and the amount of change in these scenarios.”

According to Kennedy, “this doesn’t look particularly different from the scenario analysis that ICER currently does in their assessments. HTA [i.e., health technology assessment] of cures struggles with durability assumptions, and ICER are trying to address this uncertainty.”

Also in SST assessments, instead of using a traditional parametric curve for a survival analysis, assessments will use a variety of modeling approaches, including cure proportion modeling, to better account for available data. When a product’s price is known, ICER will offer information on how long the product’s benefits must last to achieve a cost-effectiveness threshold. And the assessments will include two hypothetical shared savings scenarios:

(1) A 50/50 shared savings model in which 50% of the lifetime health system cost offsets from a new treatment are ‘assigned’ to the health system instead of being assigned entirely to the new treatment; and

(2) A cost-offset cap model in which the health system cost offsets generated by a new treatment are capped at $150,000 per year but are otherwise assigned entirely to the new treatment.”

According to Schafer, “having multiple scenarios for price justification and cost-effectiveness may help stakeholders, including payers and pharmaceutical manufacturers, understand what cost may be reasonable, especially considering the potential for a lifetime of cost offset.”

Rubinstein tells AIS Health that these scenarios can be seen “as a placeholder to acknowledge the fact and importance of cost offsets, even while proposing an approach for significant uncertainty in their future benefit so as not to overestimate their dollar contribution in the value analysis — that is, to avoid” a situation such as one cited by ICER in the report: “This is a benefit for both patients and the health system, but this traditional approach, when used to calculate cost-effectiveness findings, can suggest value-based prices at extreme levels — for example, more than $80 million for a cure for one severe form of hemophilia.”

However, Kennedy asserts that “the shared saving scenario is a slightly troubling development.” She points to an analysis by Vital Transformation that shows that international reference pricing — which has support in various bills and the administration itself (SMA 11/18, p. 1) — “could take as much as $71 billion per year in revenue, which will irreversibly change the pharmaceutical development landscape.”

Because of this, she says, “we need to be very careful about how we consider and balance HTA with the need to ensure that there is continuous investment in new drugs.”

ICER also retained the 3% discount rate it applies to both costs and health outcomes. Kennedy says, “I would have liked ICER to have revisited the discounting — we know that because society has used heavy discounting in environmental economics, that it could potentially lead to some irreversible environmental changes. Lower discount rates for societal goods need to be applied to cures, and modeling that we’ve done shows that the benefit valuation essentially goes to zero after about 20 years. Again, this means that drugs for chronic conditions are disproportionately valued more favorably than cures.”

Asked if there was anything excluded from the report that should have been addressed, Schafer says that “one area that I think may need more exploration is assumptions on initial uptake of the product and what the initial cost to payers would be. Part of the reason that new drugs for hepatitis C led to such a crisis was that so many patients rushed in to be treated right away. This begat strict policies and a degree of rationing. ICER would serve the payer community well by outlining different scenarios of uptake of these one-time therapies to show budget implications. Having 20% of people with hemophilia get gene therapy in the first year is a very different short-term impact than if 100% got the gene therapy in the first year. For payers with annual budgets, long-term savings are not important if you cannot afford the initial treatment bill.”

An economic review section on uncertainty and controversies will be included in not only SST assessments but all ICER reports going forward. Also being added to all reports, including SSTs, will be three areas of “potential other benefits or disadvantages”:

(1) A potential advantage for therapies that offer a new treatment choice with a different balance or timing of risks and benefits that may be valued by patients with different risk preferences;

“(2) a potential advantage for therapies that, if successful, offer the potential to increase access to future treatment that may be approved over patients’ lifetime; and

“(3) a potential disadvantage for therapies that, if not successful, could reduce or even preclude the potential effectiveness of future treatments.”

Rubinstein says he is “pleasantly surprised” by the fact that ICER addressed these so-called “additional elements of value,” which “may be important for individual patients and in assessment of future value, while acknowledging controversy and difficulty in assessing those factors. ICER says, ‘We have considered these concerns and have decided to propose no quantitative integration of additional elements of value into the value assessment framework for the assessment of SSTs.’ Inclusion is ICER’s acknowledgment of these elements’ important contributions to value even if the ‘how’ is not yet clear.”

So what are takeaways of the report for manufacturers?

“The more influential that ICER becomes, the more that pharmaceutical manufacturers will work with ICER to develop its methods and evaluate the validity of its findings — and, to directly answer the question, the more that manufacturers will allocate resources to build the evidence that ICER requires to drive these analyses of product value,” says Rubinstein.

“While applying resources in this way will increase manufacturer cost,” he says, “if done well, doing this will yield robust and multifaceted aspects of value for its products including from the patient and health plan perspectives.”

Responds Kennedy, “ICER has firmly established itself in the dialogue on drug price and value, and manufacturers will need to continue to engage with ICER and work with other stakeholders to ensure that assessments reflect the fair value that curative therapy brings.”

“Manufacturers need to be ready to respond to questions on both the short- and long-term efficacy of these products,” says Schafer. “Conducting longer-term studies and gathering real-world evidence will be key. In addition, manufacturers should be prepared to offer outcomes-based agreements that accommodate different scenarios of patients response.”

Download the report, as well as other ICER materials on the topic, at https://bit.ly/33itEVO. Contact Kennedy at lisa.kennedy@innopiphany.com, Rubinstein at elan.b.rubinstein@gmail.com and Schafer through Tess Rollano at trollano@coynepr.com.

by Angela Maas

 

As Health Care Consolidation Accelerates, New Entities Make Decisions on Therapies

Pharmaceutical manufacturers and biotechnology companies, faced with an unprecedented wave of consolidation across practically every aspect of the health care industry, must learn new ways of making the business case for their products that addresses the concerns of newly integrated combinations of various stakeholders. Consolidation in the industry isn’t causing all of manufacturers’ problems, but it is exacerbating them. And as a result, manufacturers will need to focus more on their specific core areas, potentially eschewing noncore product lines, industry stakeholders say. They’ll also need to present their products in a way that panels of experts — not individual physicians — find compelling.

“Consolidation across health care is a reaction to the fact that the health care business model that’s been in place for the last 30 years is rapidly becoming obsolete,” says Michael Abrams, managing partner of consulting firm Numerof & Associates. “Health care continues facing a multitude of pressures — reimbursement’s not keeping up with increases in underlying costs, and there’s increasing linkage to measures of cost and quality.” In addition, there are growing demands for price transparency, Abrams tells AIS Health.

“All of that is weighing on hospital bottom lines, and their first reaction is to merge with the hospital across town, working on the assumption that size would be protective,” Abrams says. “But it’s not in the long run. Being bigger makes you slower with change.”

Still, larger consolidated entities can consolidate their purchasing, and “with the larger volume of purchasing, it is possible to wring price concessions from all your vendors, including pharmaceutical manufacturers,” Abrams says, noting, those companies “have been feeling that pain.”

Payers and PBMs “are looking in a very sophisticated way at formulary design and utilization management tools,” says Elizabeth Carpenter, head of advisory services at Avalere Health.

“Consolidation makes it more likely providers will be sophisticated when it comes to health information technology decision support and more and more when it comes to pharmaceutical spend,” Carpenter tells AIS Health. “When you’re a biopharmaceutical company and you’re talking to a consolidated company, [the company] is going to have more data assets and a better understanding of its population and a better understanding of what’s driving costs.”

Most pharma manufacturers do understand the landscape is changing and are thinking strategically about how to leverage opportunities, she says.

And Ashraf Shehata, principal and healthcare leader at KPMG LLP in Cincinnati, notes that “the trends [towards consolidation] are now less about an external force — value-based contracting or the Affordable Care Act or even Medicare for all. We’re seeing mergers and acquisitions around the fundamentals. Bigger is better: It gives you scale. In life sciences, it may be life sciences and traditional pharma manufacturers. On the hospital side, you’re now combining health systems, providers and outpatient facilities.”

Bigger is also advantageous when it comes to a company’s core competencies, Shehata tells AIS Health. “This is an important transition — now they’re doing it around the fundamentals of business. The fundamentals are generally strong, so they’re not doing this as a defensive play — they’re doing this to play offense.”

Pressure on pricing also is driving mergers and acquisitions within the pharmaceutical manufacturing space, and that trend will continue, Shehata says. “As the unit price on the life sciences side becomes a more bipartisan issue, I think you’re going to continue to see continued positioning around getting the best available price, whether that’s Medicare and Medicaid or commercial insurance,” Shehata says.

All this activity means pharmaceutical manufacturers and biotech companies are in a potentially difficult position: “Manufacturers are under pressure now, and that’s not going to get any better — and I’m not even talking about possible [drug price] legislation,” says Abrams.

M&A Activity Is Everywhere

Consolidation is taking on many guises in the health care industry.

✦ Provider consolidation can take the form of hospital-to-hospital mergers and acquisitions (horizontal consolidation) or hospital acquisitions of physician groups and other ambulatory service providers (vertical acquisition). Both types of consolidation have accelerated in recent years. A study on provider consolidation published in October by the Georgetown University Health Policy Institute Center on Health Insurance Reforms reported that in nine out of 10 metro areas, the provider market is considered “highly concentrated.”

✦ Insurers are merging with or acquiring PBMs or are building their own. UnitedHealth Group has its own in-house PBM, OptumRx. CVS Health, which owns CVS Caremark PBM, purchased insurer Aetna late last year in a $69 billion deal, while insurer Cigna finalized its $54 million purchase of Express Scripts Holding Co. in late December 2018. Finally, Anthem Inc. is launching its own in-house PBM, IngenioRx.

✦ Specialty pharmacies have undergone their own wave of consolidation, acquiring each other and being acquired by large PBMs (which may be affiliated with insurers). For example, CVS Health purchased five specialty pharmacies — Apothecary by Design, Central Drugs, EncompassRx, EntrustRx and SimplicityRx, LLC — in 2018. In May, CVS added Premier, Inc.’s 367 specialty pharmacies, located in 367 hospitals in 66 health systems, to its acquisitions as part of a deal worth $22.5 million. Meanwhile, OptumRx purchased Avella Specialty Pharmacy in mid-2018, adding 435 pharmacy locations. Shehata expects specialty pharmacies to continue to be good targets for acquisition.

✦ Insurers and physician groups are combining in various transactions. UnitedHealth’s Optum unit runs OptumCare, which in June completed its acquisition of DaVita Medical Group for $4.9 billion. Humana Inc. last year bought Family Physicians Group, a large Orlando, Fla.-based physician group that provides care through at-risk payment arrangements. In addition, provider-sponsored health plans are on the rise, with a 2018 report from the journal Health Affairs finding that more than 40 provider systems have formed new health insurance companies or acquired existing health plans. And many insurers, including Blues plans, are allying with primary care groups in an effort to control costs.

All this means pharmaceutical manufacturers and biotech companies — who themselves are facing significant consolidation — must improve their game to compete.

“At the highest level, consolidation within an industry produces more sophisticated customers,” Carpenter says, noting that the pharmaceutical manufacturing industry already is under pressure from a pricing perspective. “If you think about consolidation on the health plan side, it also means the customer has much more sophisticated data assets. One of the prime drivers of the recent consolidation on the health plan side is data.”

Consolidation also exacerbates some existing trends, Carpenter says, noting that insurers are more focused on the total cost of care and are investing in wellness and in ways to lower costs for consumers. “Those are all opportunities for biopharmaceutical manufacturers,” she says. Still, she adds, “As the number of formularies goes down, not being on one becomes a bigger deal.”

How Can Firms Articulate Value?

The pharmaceutical and biotech industry does understand the demand for them to better explain the value of their products, particularly new ones, Carpenter says.

However, different health plans and PBMs value different things, she says. That makes it critical for manufacturers to understand the different pressures payers and PBMs face in different markets and to tailor their negotiations accordingly, she says.

For example, a Medicare Advantage plan that’s focused on high-cost, chronically ill seniors may look at things differently than a plan with healthier enrollees: The plan with many chronically ill members might value a more expansive formulary with lower cost-sharing in an effort to keep members out of the hospital. And a plan that’s based around an accountable care organization would be focused on meeting the triple aim of cost, quality and patient satisfaction.

In addition, Abrams points out that mergers of insurers, providers and PBMs inevitably puts pressure on pricing. The lines are blurring between payer and provider, Carpenter adds: “Providers are starting to look more like payers.”

Manufacturers can leverage these changing market dynamics to their advantage if they understand them, Shehata says. “I think it’s all about bringing in the provider network and bringing in the appropriate payer segment,” he says. “They [manufacturers] run a portfolio. They’ve got to be able to rep that portfolio in its entirety.”

Certain drug launches need to be addressed in collaboration with provider networks, asserts Shehata. In addition, he says, “there’s some consumer-direct opportunities — the idea of rebating so that consumers can establish the value of the drug for themselves.”

Transparency within the rebate process “has been coming for a while now,” he says, adding, “not even price transparency — rebate transparency.” At the same time, the new provider-payer alliances are looking for pricing incentives that are aligned with the outcomes of a drug. Some of these deals “are groundbreaking,” Shehata says. “Those are working very closely with health plans to deliver the value proposition directly to the provider.” In “this new world around breakthrough drugs,” payers are looking to pay “the right amount” for a product, he says, adding, “you can only do that through scale.”

Uptake Is Far From Certain Now

Consolidation may “buy some time” for the various stakeholders in the industry to keep the status quo, but the health care system inevitably is shifting to one that’s value-based, Abrams says. Pharmaceutical and biotech companies must shift their strategies accordingly, he says.

“There was a time that when you launched a new product, uptake was a near certainty,” Abrams says. “FDA approval is now a checkbox, but it does not guarantee uptake. It used to be all about reach and frequency — your relationships with physicians and office staff were enough to win acceptance. That’s changing, increasingly being driven by consolidation across the health care industry.” When physician practices are gobbled up by hospital systems, it dramatically alters how manufacturers interact with providers, he says.

“With regards to how decisions get made [pertaining] to the purchase of new products, increasingly it is a task force, which has different points of view and different priorities in terms of what they think is best for the hospital,” Abrams says. “They scrutinize every new product that’s on offer: How is this different from the current standard of care? What’s the return on investment? If the product costs more, where do we see the payback downstream? That’s been a wrenching change for some manufacturers — they never needed to do that before. We’re seeing a redefinition of what matters.”

Value-based care is in part driving consolidation, and pharma manufacturers and biotech companies need to understand the move to value-based care by providers, with an eye towards how individual health systems are adopting arrangements governed by the total cost of care, Abrams says: “It’s not as though a manufacturer can use a one-size-fits-all approach.” Instead, he says, companies need varying approaches tailored to how far along a hospital system has gotten on the value-based continuum: “What is the exposure of their revenue to delivering on the cost of care and clinical quality?”

Markets in different states — and often in different cities in the same state — have quite divergent dynamics on this issue, Abrams says. Pharmaceutical manufacturers and biotech companies also are in different phases of acceptance — or denial — on how health care is changing, he says, adding, “I’d estimate 35% to 40% are at various stages of coming to grips with the fact that the old approach they’ve taken to business development is less and less effective.”

Economic and clinical benefits are key to these new, larger purchasers, Abrams says. That means pharmaceutical and biotech companies must tailor their pitches accordingly, he adds. “Manufacturers have to learn how to tell different economic and clinical stories, depending upon the audience for which it’s intended.”

This isn’t a natural fit, to say the least, he explains. “Organizations don’t change unless they have to. It’s a wrenching change for them to look at ‘feet on the street’ [pharmaceutical representatives marketing to individual providers] as something that’s no longer relevant.” And “it’s not just changing their behavior — it’s what they have to present: What are the benefits on the front end, and what are the implications on the front end and downstream?”

Presenting this type of information to a multiperson task force requires different types of capabilities, and some manufacturers aren’t necessarily well-versed in these capabilities, Abrams says: “It calls for a different mind-set with regards to the account. Now it’s about key account management and all of the skills that go along with that.”

How Can Firms Counter Consolidation?

Value-based contracts between payers and biopharma companies have gotten lots of press, and uptake is growing. But they won’t solve all of manufacturers’ problems, including those that are driven or exacerbated by consolidation.

A study from Avalere published in October found that 59% of payers have executed an outcomes-based contract with drug and device manufacturers tying product reimbursement to clinical, quality, utilization or financial outcomes. When Avalere first conducted the survey in 2017, only 24% of health plans had an outcomes-based contract in place.

Some 31% of health plans reported having more than five outcomes-based contracts, compared with 12% in 2017, while 21% had two to five outcomes-based contracts in place, up from 4% in 2017. Nearly 60% of health plans that have executed outcomes-based contracts cited cost savings and clinical improvement as the contracts’ top advantages. The capture of real-world information and improved payer-manufacturer relationships also were “notable areas of growth,” according to the survey.

Abrams notes that there’s pressure on pharmaceutical manufacturers and biotech companies to consolidate around therapeutic areas. “It forces businesses to really consider whether to hold onto smaller chunks of their portfolios,” he says. Both Johnson & Johnson and Pfizer Inc., among others, have closed these types of deals, he notes.

For example, the Janssen Pharmaceutical Companies subsidiary of Johnson & Johnson focuses on six core areas: cardiovascular and metabolism, immunology, infectious diseases and vaccines, neuroscience, oncology and pulmonary hypertension. To bolster its immunology focus, Janssen Biotech, Inc. agreed in May 2018 to pay $1 billion to acquire BeneVir Biopharm, Inc., a biopharmaceutical startup that’s developing oncolytic immunotherapies based on its proprietary T-Stealth oncolytic virus platform.

Pfizer, meanwhile, agreed to acquire Array BioPharma Inc. earlier this year for $10.64 billion in cash to augment its oncology portfolio. Array’s portfolio includes the approved combined use of Braftovi (encorafenib) and Mektovi (binimetinib) for the treatment of BRAF or BRAF-mutant unresectable or metastatic melanoma. The combination therapy also is being investigated in more than 30 clinical trials across several solid tumor indications, including the Phase 3 BEACON trial in BRAF-mutant metastatic colorectal cancer. Pfizer already owns 17 approved oncology medicines, with an additional 19 assets in clinical development.

Focusing on specific clinical areas can result in marketing savings, with a more targeted sales force, Abrams says. “Pretty much up and down the whole product line there are opportunities to cut costs,” he says. Still, he warns pharmaceutical manufacturers and biopharma companies “not to chase products that don’t offer economic and clinical value. You can’t count on uptake unless the value is there.”

Carpenter also suggests focusing on the consumer: “When you look at areas of alignment between the biopharma industry, health plans, PBMs and providers, you’re looking for new ways to engage the consumer to drive health and wellness.”

On the drug distribution side, consolidation occurred a few years earlier, Shehata points out, leaving the top three companies — AmerisourceBergen Corp., Cardinal Health, Inc., and McKesson Corp. — firmly in charge. “Consolidation yielded very large national contracts,” he says. Still, innovations around pill packaging and distribution likely are coming and could result in a “technology sea change” around distribution that pharma manufacturers potentially could utilize.

“The next wave [of consolidation among drug distributors] is going to be much more about how capabilities affect the touch to the consumer,” Shehata says. “We’re moving away from episodic distribution to a more seamless distribution channel” that potentially could distribute the right drugs to patients regardless of whether they’re in the hospital, at home or in a retail location.

“One of the biggest frustrations is ensuring drugs are available at the point of service when they need to be,” Shehata says. “The idea is that the drug should be available at any one of those channels. Being about to adapt to that distribution chain using nontraditional methods may help [drug product] uptake.” There’s room in this new paradigm for partnerships among the various players, he adds.

Ultimately, he says, “I think the health care industry needs to start looking at the individual, not what group they belong to.”

Contact Abrams via spokesperson Matthew Dick at matthew.dick@pinkston.co, Carpenter at ecarpenter@avalere.com and Shehata via spokesperson William Borden at wborden@kpmg.com.

by Jane Anderson

 

Study: NSCLC EGFR-i May Be Fit for Value-Based Contracts

A recently unveiled study shows that one first-line therapy for non-small cell lung cancer (NSCLC) with an epidermal growth factor receptor (EGFR) mutation is substantially more costly than four other competitor therapies. Payers may wish to consider implementing management strategies to help rein in costs, according to the study from Prime Therapeutics LLC.

Researchers presented the study at the Academy of Managed Care Pharmacy Nexus meeting held in National Harbor, Md., Oct. 29 through Nov. 1.

Lung cancer is the second most common cancer for both men and women, as well as the main cause of cancer death in the United States, according to the American Cancer Society. NSCLC is the most common form, affecting 84% of people with lung cancer. Among those, 10% to 50% have an EGFR mutation, according to the American Cancer Society and the National Comprehensive Cancer Network (NCCN).

When the FDA first approved AstraZeneca’s Tagrisso (osimertinib) in 2015, it was as a second-line NSCLC therapy in people with an EGFR mutation, and it launched with an annual wholesale acquisition cost (WAC) of $177,152 — approximately $70,000 more than the first-line EGFR-inhibitors (EGFR-is) that were available at that time.

The other EGFR-is were:

✦ Gilotrif (afatinib) from Boehringer Ingelheim Pharmaceuticals, Inc.;

✦ Iressa (gefitinib) from AstraZeneca;

✦ Tarceva (erlotinib) from OSI Pharmaceuticals, an affiliate of Astellas Pharma U.S., Inc., and Genentech, Inc., a member of the Roche Group; and

✦ Vizimpro (dacomitinib) from Pfizer Inc.

In September 2017, NCCN added Tagrisso to its guidelines for first-line use, and in April 2018, the FDA expanded the drug’s label to include this indication. But the company retained the second-line pricing for the therapy. This, says Jeremy Whalen, Pharm.D., Prime’s specialty clinical program director and lead author on the poster, “mak[es] it important for payers and stakeholders to understand its first-line utilization trend and impact on total cost of care, as well as value-based contracting and management opportunities.”

Prime analyzed integrated medical and pharmacy claims from January 2017 to June 2019 for 15 million commercially insured members to determine Tagrisso’s use among members new to therapy, the total cost of care (TCC) pre- and post-initiation among all the EGFR-is and the discontinuation rates among the EGFR-is. Among those 15 million members, researchers identified 1,020 members with a claim for an EGFR-i.

Among the study findings were:

✦ Tagrisso use among new starts for all EGFR-is rose from 6.9% in first-quarter 2017 to 71.1% in the second quarter of 2019.

✦ The TCC for the six months after treatment initiation for Tagrisso was $37,934 higher than the competitor EGFR-is — which equates to more than $4 million in additional costs for 129 Tagrisso-treated members.

✦ 18.6% of 129 Tagrisso new starts discontinued treatment within six months after initiating it, compared with 33.9% of 171 members who discontinued among the competitor EGFR-is. Various reasons can cause people to discontinue oral oncolytics; Whalen says some of the reasons researchers considered within this specific category were “cost of therapy, toxicities, disease progression or decisions to halt therapy altogether.”

Whalen tells AIS Health that some of that TCC among Tagrisso-treated members “could be attributed to the 15-percentage point higher persistence compared to members utilizing competitor EGFR-is. However, when only persistent osimertinib and competitor EGFR-i utilizers were compared, the TCC six-month difference was $45,054 higher among osimertinib utilizers.”

Value-Based Deals May Be Option

According to Whalen, “osimertinib’s $177,152 annual wholesale acquisition cost coupled with the finding that one in six discontinue therapy during the first six months warrants the need for value-based contacting to recoup the drug cost waste associated with therapy failure.”

Asked how Tagrisso compares with the other EGFR-is in terms of clinical effectiveness and side effects, Whalen says that Tagrisso’s FDA trial showed that it “demonstrated superior efficacy as compared to traditional first-line agents in its class. Tagrisso appears to be well-tolerated, like other EGFR-is. Some questions still persist around the benefit to sequencing therapies, especially around time to initiation of non-EGFR inhibitor therapy and cost of care.”

Sequencing Therapies Could Help

As to whether payers might consider preferencing among the EGFR-is, Whalen says it may be something to consider, but Tagrisso’s first-line indication “makes it challenging. That said, there are still clinical options to consider such as sequencing therapy, which could put Tagrisso back into second-line use. Management strategies will evolve as we better understand the genomic profile of individual tumors.”

Payers interested in value-based contracting for Tagrisso may have a variety of markers on which to base those arrangements, he says. Those include “discontinuation/persistence/adherence, time to disease progression, initiating of a subsequent therapy and impacts on total cost of care.”

Whalen emphasizes the fact that Prime has the ability to analyze integrated medical and pharmacy benefit claims.

“Prime leverages this integrated data to see real- world use and cost of emerging high-cost therapies to prepare our clients for their impact,” he says. “In this case, our ability to see across the pharmacy and medical benefits allows us to provide them with a comprehensive evaluation of total cost of care within specific oncology populations.”

Contact Whalen through Jenine Anderson at jenine.anderson@primetherapeutics.com.

by Angela Maas

This story was reprinted from AIS Health’s monthly publication RADAR on Specialty Pharmacy. Visit https://aishealth.com/product/specialty-pharmacy.