Connecting Drug Pricing to Value: The Industry's Greatest Challenge

Transcription

1 Connecting Drug Pricing to Value: The Industry's Greatest Challenge Ed Saltzman Defined Health BIO-Europe Spring Stockholm, Sweden April, 2016

2 The information in this report has been obtained from what are believed to be reliable sources and has been verified whenever possible. Nevertheless, we cannot guarantee the information contained herein as to accuracy or completeness. All expressions of opinion are the responsibility of Defined Health, and though current as of the date of this report, are subject to change. The opinions and information set forth herein are expressed solely for the benefit of the addressee and only for the purpose(s) for which the report was produced. Without the prior written consent of Defined Health, this report may not be relied on in whole or in part for any other purpose or by any other person or entity, provided that this report may be disclosed where disclosure is required by law. This presentation may contain information provided by third parties such as Thomson Reuters, Wolters Kluwer, EvaluatePharma and others with a proprietary interest in the data provided herein. Please note that you are not permitted to redistribute any such third party information without consent from the originator company. Page 2

3 Scientific Transformation is Upon Us Various news headlines Page 3

4 Pharma R&D Productivity Up Substantially New Analysis Underscores Improving Pharma R&D Productivity Aug 4, 2015 Drug industry productivity is continuing to improve, with a bumper haul of new products being launched and companies proving more successful in the final stages of clinical testing, according to a new analysis. Drug As well industry as launching productivity a lot more is continuing new medicines, to improve, the industry with a bumper has also haul of been new enjoying products higher being success launched rates and in companies the costly final proving stage more of clinical successful in development, the final stages with of the clinical number testing, of projects according failing to a in new Phase analysis. III falling Data from Thomson Reuters published on Tuesday showed the number of innovative medicines, or new molecular entities, launched globally in 2014 hit a 17-year high of 46, up from 29 in Last year's entrants included two cancer drugs that help the body's own immune cells fight tumors as oncology remained the top area for drug Data markedly research, from attracting over Thomson nearly the one last Reuters third six of years. all published R&D spending. Phase III on Merck's terminations Tuesday Keytruda showed and Bristol-Myers totaled the 56 Squibb's number in the Opdivo of are the first in a coming wave of expensive immunotherapies. As well as launching a lot more new medicines, the industry has also been enjoying innovative last higher three success years, medicines, rates in down the costly or from final new stage 68 molecular of in clinical , development, entities, according with launched the number to the of globally projects Thomson failing in in Phase III falling markedly 2014 Reuters over hit the 2015 last a 17-year six years. CMR Phase high Pharmaceutical III of terminations 46, up totaled from R&D in Factbook. in the last three years, down from 68 in , according to the Thomson Reuters 2015 CMR Pharmaceutical R&D Factbook. "Overall, based on the metrics, the industry is looking in really good shape," said Philip Miller, senior director for clinical and regulatory affairs at Thomson Reuters. He noted that drug companies were benefiting from a shift to specialized drugs, many for rare diseases, which tend to progress through clinical development faster than mass-market treatments. The CMR Factbook data shows that experimental medicines overall are winning marketing approval from regulators more rapidly than a decade ago. The biggest turnaround has come in Japan, where the average approval time for a new drug dropped to 306 days in 2014, down from more than 800 days in Japan's Pharmaceutical and Medicines Device Agency was faster in approving new drugs last year than either the U.S. Food and Drug Administration or the European Medicines Agency, which took an average of 343 and 418 days respectively. Page 4

5 But Advances in Genetics and Disease Biology Do Not Fit Comfortably Within Traditional Industry Business Model HURDLES CHRONOLOGY Page 5

6 Combination of Scientific Progress and Commercial Hurdles Have Driven Industry Away From Longstanding Breadbasket Large heterogeneous population Chronic, PCP-managed diseases Page 6

7 To This Smaller, more homogenous population Specialty-treated diseases Page 7

8 And Perhaps Even to This Individualized, often autologous therapeutic interventions Page 8

9 It is Feasible That in Coming Years Today s 2 Slice Pie Will Need to Accommodate 3 Biologic Top 10 Selling Products (WW) Percent by Category 2004 vs 2014 vs est Small Molecule Biologic Regenerative Gene Therapy Cell Therapy Personalized - Autologous Small Molecule Biologic Small Molecule Regenerative, etc.???? Small Molecule Biologic 2024?? EvaluatePharma Page 9

10 The Result: Industry Revenues Once Driven Mostly by Large Volumes of Comparatively Inexpensive Drugs Annual Cost of Therapy (US) for Top 10 Selling Drugs in 2010 Product Company 2010 WW Sales ($M) US Cost of Annual Therapy ($) Lipitor Pfizer 10,733 2,050 Seretide/Advair GlaxoSmithKline 7,946 2,960 Plavix Bristol-Myers Squibb 6,666 1,833 Humira Abbott Laboratories 6,548 23,258 Avastin Roche 6, ,996 Rituxan Roche 6,113 48,073 Diovan Novartis 6,053 1,227 Crestor AstraZeneca 5,691 2,736 Herceptin Roche 5,221 63,471 Zyprexa Eli Lilly 5,026 5,470 EvaluatePharma Page 10

11 Today are Driven by Smaller Volumes of Ultra High-Priced Specialty Drugs Annual Cost of Therapy (US) for Top 10 Selling Drugs in 2015 Product Company 2015 WW Sales ($M) US Cost of Annual Therapy ($) Humira AbbVie 14,090 39,949 Harvoni Gilead Sciences 14,049 91,663 Lantus Sanofi 7,462 3,809 Rituxan Roche 7,336 59,952 Avastin Roche 6, ,989 Herceptin Roche 6,739 80,310 Remicade Johnson & Johnson 5,753 34,801 Revlimid Celgene 5, ,744 Seretide/Advair GlaxoSmithKline 5,582 4,094 Enbrel Amgen 4,831 41,035 EvaluatePharma Page 11

12 And it Looks Like There is No End In Sight Top 10 Near-Term Drug Launches Compound Company Class Highest Phase / Indication tenofovir alafenamide WW Sales e2020 ($M) First Launch (WW) Gilead NRTI P3: HIV, Hepatitis B 3, neratinib Puma Biotech Pan-HER (ErbB) inhibitor P3: Breast cancer 2, atezolizumab Roche Anti-PD-L1 Mab elbasvir + grazoprevir Merck obeticholic acid Intercept FXR agonist NS3/4A protease & NS5A polymerase inhibitor P3: NSCLC, bladder cancer, RCC, breast cancer 2, PreReg: Hepatitis C 2, PreReg: Primary biliary cirrhosis, NASH 1, dupilumab Sanofi IL-4 / IL-13 Mab P3: Asthma, Eczema 1, ixazomib Takeda Proteasome inhibitor PreReg: Multiple myeloma 1, mepolizumab GSK IL-5 Mab PreReg: Asthma 1, osimertinib AstraZeneca EGFR tyrosine kinase inhibitor PreReg: NSCLC 1, venetoclax AbbVie Bcl-2 inhibitor P3: CLL 1, EvaluatePharma Page 12

13 Except When One Looks From Other Vantage Points Clinton's Promise on Treatment Prices Hits Pharma Shares 22 September 2015 Shares in European pharmaceutical companies have dropped following Hillary Clinton s promise to bring down the price of prescription drugs. The frontrunner for the Democratic party s presidential nomination put the drugs industry on notice on Monday after it was revealed that a US company had increased the cost of a drug used by HIV patients from $13.50 a pill to $750 ( 485). Martin Shkreli, a former hedge fund manager who now runs Turing Pharmaceuticals, said that although patients typically took the drug, Daraprim, for several weeks, it was still a bargain. This drug saves your life for $50,000, he told Bloomberg TV. At this price, it s a no-brainer. Shkreli said producing the 62-year-old drug at the old price was not financially viable but his comments could prove the final straw for the drugs industry, which has been accused of overcharging for treatments for cancer and other diseases. Clinton tweeted on Monday: Price gouging like this in the specialty drug market is outrageous. Tomorrow I ll lay out a plan to take it on. Clinton s comment, made shortly before the UK stock market closed, sent shares of US biotechnology companies falling on Monday. It was later reported that she is proposing a $250 monthly cap on prescription drugs for patients with chronic or serious medical conditions. The impact of her comments spread to European drugmakers on Tuesday. In the UK, shares of GlaxoSmithKline and AstraZeneca fell by more than 3% and Shire, the Irish biotech company, dropped more than 4%. Roche, the Swiss drugmaker, and Germany s Merck each fell more than 2%. Page 13

14 Battle Just Starting Medicare Program; Part B Drug Payment Model A Proposed Rule by the Centers for Medicare & Medicaid Services on 03/11/2016 Summary: This proposed rule discusses the implementation of a new Medicare payment model under section 1115A of the Social Security Act (the Act). We propose the Part B Drug Payment Model as a two-phase model that would test whether alternative drug payment designs will lead to a reduction in Medicare expenditures, while preserving or enhancing the quality of care provided to Medicare beneficiaries. The first phase would involve changing the 6% add-on to Average Sales (ASP) that we use to make drug payments under First Part phase: B to 2.5% changing plus a flat fee the (in a budget 6% add-on neutral manner). to Average The second Sales phase Price would implement (ASP) under value-based purchasing tools Part similar B to to 2.5% those employed plus a by flat commercial fee. health plans, pharmacy benefit managers, hospitals, and other entities that manage health benefits and drug utilization. We believe this model will further our goals of smarter, that is, more efficient spending on Second quality care phase: for Medicare implement beneficiaries. value-based purchasing tools similar to those Purpose: Part employed B includes a limited by commercial drug benefit that health encompasses plans, drugs pharmacy and biologicals benefit described managers, in section 1861(t) of the Act. For the purposes of this proposed rule, term drugs refers to drugs and biologicals paid under the Part B program, as well as hospitals, and other entities that manage health benefits and drug biosimilars. Currently covered Part B drugs fall into three general categories: drugs furnished incident to a physician's services, drugs administered utilization. via a covered item of durable medical equipment (DME), and other drugs specified by statute. Based on our claims data, we estimate total Part B payments for separately paid drugs in 2015 were $22 billion (this includes cost sharing). In 2007, the total payments We were believe $11B; the this average model annual will increase further since 2007 our has goals been 8.6%. of smarter, This significant that growth is, has more largely been driven by spending on efficient separately paid spending drugs the on hospital quality outpatient care setting, for Medicare which more than beneficiaries. doubled between 2007 and 2015, from $3B to $8B respectively. Section 1115A of the Act authorizes the Innovation Center to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care furnished to Medicare, Medicaid, and Children's Health Insurance Program beneficiaries. We propose to exercise this authority to test whether the alternative drug payment designs discussed in this proposed rule will lead to spending our dollars more wisely for drugs paid under Part B, that is, a reduction in Medicare expenditures, while preserving or enhancing the quality of care provided to Medicare beneficiaries. Page 14

15 And it May Be A Long One Stop the CMS Proposed Part B Drug Demonstration Project! Background On March 8, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule outlining a demonstration project that would modify drug reimbursement based on Primary Care Service Areas (PCSAs), which are based on zip codes that include primary care providers and the Medicare beneficiaries they serve. ASCO believes ASCO that believes it is inappropriate that for it CMS is inappropriate to manipulate choice for of treatment CMS to for manipulate cancer patients using choice heavy-handed of reimbursement treatment techniques. for cancer patients using heavy-handed reimbursement ASCO has techniques. long advocated for and has shared with CMS its comprehensive payment reform proposal to achieve high-quality, high-value care for every patient with cancer. Physicians We did not are create deeply the problem concerned of drug pricing this and risky, its solution unproven should not experiment be on their backs. to Medicare Current Status Part B drug payments will jeopardize the health of millions of Medicare ASCO is currently patients conducting with detailed cancer. analysis to determine the full impact this proposal will have on access to care for Medicare beneficiaries facing a cancer diagnosis. ASCO will send detailed comments to CMS during this comment period. Alert Congress Today: Protect the health and safety of Medicare However, preliminary analysis shows this proposal which focuses only on drugs and not overall reform to support patientcentered patients, care will have especially a devastating vulnerable impact on community seniors, practices. who rely on Medicare Part B We need drugs! to make Congress aware of our concerns and urge Congress to prevent CMS from finalizing this precarious initiative. We are deeply concerned this risky, unproven experiment to Medicare Part B drug payments will jeopardize the health of millions of Medicare patients with cancer. Alert Congress Today Protect the health and safety of Medicare patients, especially vulnerable seniors, who rely on Medicare Part B drugs! Page 15

16 With Strong Forces on Both Sides AARP Supports CMS Medicare Part B Demonstration Project March 23, 2016 WASHINGTON, DC AARP supports The Centers for Medicare & Medicaid Services (CMS) demonstration project that modifies how Medicare pays for certain prescription drugs administered by physicians and other clinicians. The goal of the five-year project is to determine whether alternative payment approaches will lead to better value and higher quality care for patients. year Medicare Part B spent $22 billion on prescription drugs, double the amount spent in 2007, said Nancy Last year Medicare Part B spent $22 billion on prescription drugs, double LeaMond, Chief Advocacy & Engagement Officer at AARP. This spending escalation is simply unsustainable. We cannot continue to the ask taxpayers amount and spent Medicare in beneficiaries 2007, said to pay Nancy for exorbitantly LeaMond, priced Chief prescription Advocacy drugs without & any consideration of whether their money is being well-spent. Engagement Officer at AARP. This spending escalation is simply unsustainable. We cannot continue to ask taxpayers and Medicare Currently, Medicare Part B pays providers based on a drug s average sales price plus an additional 6%. The proposal will change this add-on payment to 2.5% plus a flat fee of $ CMS also plans to implement value-based purchasing or paying for drugs based beneficiaries on how well they to work for pay for a limited exorbitantly number of prescription priced prescription drugs. CMS hopes drugs that these without changes any will improve how Medicare consideration Part B pays for prescription of whether drugs, their as well money as support is physicians being and well-spent. other clinicians in delivering higher quality care. This project is a thoughtful, measured approach to modernizing the way that Medicare pays for what are often incredibly expensive drugs, said LeaMond. Many of the changes that CMS is considering in this demonstration project are already being used in the private sector. CMS s proposal includes multiple opportunities for public input, adds a new exceptions process that will allow providers and Medicare beneficiaries to obtain medically-necessary drugs, and will keep beneficiary cost-sharing responsibilities the same with the option of reducing or waiving them entirely. The demonstration will last for five years and does not reflect a permanent change to the Medicare program. Also, the proposed model will not prevent doctors from prescribing the drugs that they believe their patients need. Page 16

17 One Certainty Amidst Uncertainty: Rx Prices and Value Will Be More Closely Connected CVS, Express Scripts plan value-based drug pricing April 03, 2016 Recently CVS and Express Scripts announced they are rolling out plans to determine the price and access to cancer drugs based on the value per indication. The approaches reflect a growing number of initiatives meant to tie drug prices to value, such as an analytic tool deployed by a Memorial Sloan Kettering doctor in Peter Bach, MD, director of Memorial Sloan Kettering s Center for Health Policy and Outcomes, released the tool called the DrugAbacus, which allows users to modify a number of parameters and compare a given drug s actual price versus the calculated value-based price derived from the parameters. Recently CVS and Express Scripts announced they are rolling out plans to Health plans are using the abacus to determine what drugs to pay for when setting up one size fits all pathways. There are a broad spectrum of options for implementing determine value-based contracting, the says price Christine and Cramer, access spokesperson to cancer for CVS Health. drugs These include based contracting on the with value drug manufacturers per as well as with providers ways to ensure both cost effectiveness and improved outcomes. At CVS Health, we are in the process of exploring various options and developing new indication. capabilities this The area. For approaches example, says Cramer, reflect CVS is currently a growing developing number value-based contracting of initiatives approaches within its exclusion formularies, which align discounts to specific indications rather than at the level of broad therapeutic categories. For many drugs, particularly oncology agents and drugs meant for autoimmune to tie diseases, drug one prices drug may have to several value, different such indications as an and analytic the number of tool competitive deployed drugs or the clinical by a utility may vary by indication, she explains. By negotiating formulary positions based on the specific indications we are able to create greater competition, lower costs Memorial Sloan Kettering doctor in Peter Bach, MD, director of and improve value for our clients. Keep in mind that overall, these types of contracts are very complex and are often influenced by government regulations and are dependent on process and infrastructure, Cramer says. MSC s Center for Health Policy and Outcomes, released the tool called the DrugAbacus, which allows users to modify a number of parameters According to DrugWonks.com, at a recent National Business Coalition on Health panel discussion, CVS vice president and head of specialty client solutions Surya Singh, MD, said: I think we want to pay more for drugs that work better... to push [manufacturers] to think about pricing things that have a better impact on survival at a higher price point and pricing things that don't have as much impact on survival at a lower price point. Singh went on to say: and compare a given drug s actual price versus the calculated valuebased cancer is price minimal, but derived [the indication] from is on the label. Should parameters. we pay the same for the drug on a unit cost basis when it's used for something Herceptin has gotten a lot of attention for being very good in breast cancer. It's very well studied and has great benefits....it s also used in gastric cancer. The benefit in gastric where it doesn't work as well? I don't think so. Robert Goldberg, PhD, vice president and cofounder, Center for Medicine in the Public Interest, said in a recent DrugWonks blog post: Except that prior to Herceptin, people with advanced gastric cancer had no other treatment options. It was originally given to the 15% of gastric cancer patients that had ERBB2 overexpression and/or amplification. Overall survival was modest [2.7 months] but significant because of dearth of other therapies to keep people alive. Now there are large initiatives to identify subsets of gastroesophageal cancer based on patterns of immune response. That's how innovation evolves. Cutting the price of taking on the most challenging tumor types cheapens the lives of those seeking to survive. Page 17

18 Which Means At Least Some Impact From EU Value Assessment Imports Page 18

19 These May Not Be Like Other Imports We Have Come to Love! Page 19

20 But Rather Fear and Dread! Page 20

21 Problem: Connecting Value to Price More Challenging in Pharma Than in Some Other Businesses! Page 21

22 And Value Measures are Highly Stakeholder Dependent Elements of Drug Value How Quantified Beneficiaries Timing of Benefit Timing of Payment (to manufacturer)? Outcome at episode of care QALYs, HTAs at Time 0 Patients receiving drug Today Today Perpetuity value QALYs, HTAs over time indefinitely Patients receiving drug Post patent expiration? Option value Various methods to assess novelty and "upside" (e.g. risk adjust NPV, real options pricing) Society and patients receiving drug (for future indications) When there is evidence of efficacy? Intangible value/hope Willingness to pay (WTP) analyses that measure value via trade offs Society especially those at risk for certain disorders or with family members with said disorders Today and forever? Innovation Willingness to pay (WTP) analyses Society if productive innovation Today and forever? 22 Page 22

23 So What Can We Learn From Each Other? Page 23