THE BIOPHARMA DILEMMA:

Transcription

1 THE BIOPHARMA DILEMMA: Balancing Innovation and Affordability Amitabh Chandra HARVARD UNIVERSITY

2 Disclosures Panel of Health Advisors, CBO Speaking fees from Biogen, Novo Nordisk, Pfizer, PCMA, Roche Consultant to Microsoft and Precision Health Economics Advisor to Maxwell Health and HealthEngine 2

3 Oncology is the Largest Area of Focus in R&D Number of active products in the pipeline to date = 6,234 Source: IMS Institute for Healthcare Informatics. Innovation in Cancer Care and Implications for Health Systems: Global Oncology Trend Report. May

4 Over the Next 5+ Years, Combinations of Targeted and Immuno-Oncology Agents will Account for Many NME Launches and Line Extensions Expected Combination Regimen Launches in Oncology Source: IMS Institute for Healthcare Informatics. Developments in Cancer Treatments, Market Dynamics, Patient Access and Value. Global Oncology Trend Report May

5 Annual Cost Of Recently Approved Oncologic Drugs Source: Hirsch BR, Balu S, Schulman KS, et al. The Impact of Specialty Pharmaceuticals as Drivers of Health Care Costs. Health Affairs. 2014;33:

6 Comparison of Incremental Survival Improvement and Cost of Treatment for Several Cancer Drugs Across Different Approved Indications Plus a Hypothetical Scenario in Which Price Is Set per Indication to Yield the Same Total Treatment Cost per Median Benefit (Indication-Specific Pricing a ) Source: Bach P. Indication Specific Pricing for Cancer Drugs. JAMA. October 2014;312(16)

7 Potential Combination Therapies Launching by 2021 Source: IMS Institute for Healthcare Informatics. Global Oncology Trend Report May

8 Attrition Profiles Across Therapeutic Areas Source: Calcoen D, Elias L, Yu X. What Does it Take To Produce a Breakthrough Drug? Nature Reviews Drug Discovery. 2015:(14)

9 Predictions about the Future ACA will increase innovation expanded market-size reforms increase value of insurance 21st century cures act will increase innovation Personalized medicine will increase prices Multi-Manufacturer Combination therapies will increase prices Move into riskier areas of Monthly and Median Costs of Cancer Drugs at the Time of FDA Approval Monthly Cost of Treatment (2014 Dollars, log scale) $ $10000 $1000 $100 $ Year of FDA Approval discovery will increase 9 $1 Individual Drugs Median Monthly Price (per 5 year period) Source: Peter B. Bach, MD, Memorial Sloan-Kettering Cancer Center

10 WHAT CAN WE DO?...WHAT SHOULD WE NOT DO?

11 HDHPs save 12-15%...but Patients cut back on prevention, Rx, Tx haphazardly 1/2 of all savings came from the sickest patients No evidence of price-shopping Source: Brot-Goldberg, Z Chandra A, Handel BR, Kolstad JT. NBER Working Paper No Issued in October 2015

12 Source: Chandra A, Shafrin J and Dhavan R. Utility of Cancer Value Frameworks for Patients, Payers, and Physicians. JAMA May 17, 2016, Vo 315, No 19 12

13 Specialty Medicines and Generics Outpace Growth of Traditional, Small Molecules and Brands 2013 medicines spending, and growth segmentation comparison Source: IMS Institute for Healthcare Informatics. Medicine Use and Shifting Costs of Healthcare: A Review of the Use of Medicines in the United States in April

14 Generic Competition and Drug Prices Source: Morton FS, Kyle M. Markets for Pharmaceutical Products. Handbook of Health Economics Vol. 2. Print. 14

15 Evolution of Global Sales for a Selection of Top Branded Biologic Drugs from Source: Calo-Fernandez B, Martınez-Hurtado JL. Biosimilars: Company Strategies to Capture Value from the Biologics Market. Pharmaceuticals. 2012;(5)

16 Complexity of Small Molecule Drugs Versus Biologics GCSF: Granulocyte Colony-Stimulating Factor HGH: Human Growth Hormone EPO: Erythropoiesis-stimulating agent mabs: monoclonal Antibodies 16

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18 Biosimilar Pipeline for Biologics with the Greatest Number of Candidates Source: IMS Institute for Healthcare Informatics. Medicine Use and Shifting Costs of Healthcare: A Review of 2015 and Outlook to April

19 DESCRIPTION Allow patient cost-sharing to depend on outcomes or drug performance BENEFITS Boosts initial demand by reducing risk to patient MONEY-BACK GUARANTEES OR DRUG WARRANTIES Provides payers with improvements in perceived and actual value Facilitates earlier adoption of drugs with preliminary evidence bases CHALLENGES Exposes manufacturers to risk of patient outcomes that depend on non-drug factors e.g., poor adherence or poor patient behavior Legal implications for ASP and Medicaid best-price rules uncertain Higher prices for patients who benefit; lower total spending 19

20 Example of a Money-back Guarantee in Medicine Integra-Med Fertility Shared Risk Refund Program IVF typically requires multiple attempts Each attempt is approximately $7,000 Integra-Med offers three attempts for price of two If no baby results, patient refunded 70% 100% Approximately 75% of patients enrolled in this multiple-attempt program have a baby Source: Albany IVF. IntegraMed Shared Risk Refund Program. Available at: Accessed May 9,

21 Examples of Possible Targets in Cancer DRUG DISEASE SALES ($ MILLIONS) Avastin Metastatic Colorectal Cancer 1,182 c Dacogen Myelodysplastic Syndrome 250 d Herceptin Breast Cancer 764 c Rituxan Non-Hodgkin s Lymphoma Rheumatoid Arthritis 1,489 b Vesanoid Promyelocytic Leukemia 55 d Notes: Sales figures are from (a) 2002, (b) 2003, (c) 2005, and (d) unknown. Source: Goldman N. Novel Approaches to Cost-Sharing. June 10, Available at: Accessed May 9,

22 PHYSICIAN EXPERT SYSTEMS Put Physicians, not Hospitals in Charge Physician Led Bundles will be more successful than ACOs

23 Provider Decision Making: Implications of Oncology Drugs Five oncology groups participated from , all patients with breast, colon and lung cancer 1,024 patients in all Identified 19 different episodes based on tumor site, stage, HER2 status, whether chemo is used, etc. Each group selected a single chemo regimen for each adjuvant therapy episode on the basis of their interpretation of the medical literature Practice receives an episode payment at initial visit to cover 4-12 months of treatment, depending on episode Episode payments covered chemo drugs (based on the practice-selected regimen) at acquisition cost Eliminated incentive for providers to choose more expensive therapies simply because they are more profitable Source: Newcomer LN, Gould B, Page RD, et al. Changing Physician Incentives for Affordable, Quality Cancer Care: Results of an Episode Payment Model. Journal of Oncology Practice. July 8,

24 Results of United Experiment: Compared to FFS TOTAL MEDICAL COSTS Decreased by 34% ($33M vs. $98M) CHEMOTHERAPY DRUG COSTS Increased by 179% ($8M vs. $21M) Study not powered to determine which costs drove the decline in total medical costs, but evidence suggests declines in hospitalizations and therapeutic radiology use Sample size insufficient to evaluate survival or most other quality impacts Source: Newcomer LN, Gould B, Page RD, et al. Changing Physician Incentives For Affordable, Quality Cancer Care: Results Of An Episode Payment Model. Journal of Oncology Practice. July 8,

25 Loyal Patients Rich Data on Longitudinal Outcomes Scientific Credibility Knowledge of Costs Bundled Payments Humility + Courage 25

26 Takeaways BioPharma Innovation and Prices will increase Worldwide increase in market-size Price increases from more risky ventures Growth in income-inequality Precision Medicine -> Orphan Rx Multi-manufacturer combination therapies Opportunities Biosimilars and plan design Innovative Pricing Bundles before ACOs Physicians showing the way 26

27 Top 20 Pharmaceutical Companies' R&D Forecast Through 2020 Source: EvaluatePharma. World Preview 2014, Outlook to June Note: Forecast pharmaceutical R&D spend based on a consensus of leading equity analysts estimates for company-level R&D spend. 27

28 Worldwide Total Pharmaceutical R&D Spend in Source: EvaluatePharma. World Preview 2014, Outlook to June

29 Biomedical Research Funding by Source, Source: Dorsey ER, de Roulet J, Thompson JP, et al. Funding of US Biomedical Research, JAMA. 2010;303(2):

30 Large Difference Between List Prices and Net Price Source: IMS Institute for Healthcare Informatics. Medicine Use and Spending in the U.S.: A Review of 2015 and Outlook to April

31 Oncology Spending Source: IMS Institute for Healthcare Informatics. Medicine Use and Shifting Costs of Healthcare: A Review of 2015 and Outlook to April

32 The Nation s Health Dollar ($3.0 Trillion), Calendar Year 2014, Where it Went Source: CMS. National Health Expenditure Data Available at: Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/PieChartSourcesExpenditures2014.pdf. Accessed May 12,