Latest Drugwonks' Blog

Suffix is in

  • 03.06.2015
And wither the issue of biosimialr nomenclature? What will Zarxio be called? The door remains ajar -- but the wind is blowing in the right direction.

Instead of calling Zarxio simply filgrastim -- the desire of those who believe differential nomenclature is the devil incarnate, the FDA has dubbed the new product filgrastim-sndz, the suffix standing for Sandoz.

According to Dr. John Jenkins, director of FDA's Office of New Drugs the naming of this particular drug does not necessarily mean this will become the general policy for naming biosimilars.

Stay tuned and attuned.

Welcome Zarxio, the Sandoz version of filgrastim. While nothing is “easy” when it comes to drug development, many view this initial Sandoz experience as forecasting clear skies and fair winds for every biosimilar put in front of the agency for consideration.

If you believe that, there’s a bridge in Brooklyn you might find of interest.

The filgrastim example is an n of 1 and shouldn’t be viewed as predictive of anything other than the FDA approval for one product.

As surely anyone inside the agency or at Sandoz will tell you, the pathway to approval has been anything but easy. But that hasn’t stopped the sale of rose-colored glasses to many. So be it.

More important to consider is how the agency will continue to study global biosimilar experiences – and especially in the EU.

Case in point: Remicaide (infliximab), certainly a product on the radar screens of many as the next big biosimilar marketing opportunity – and regulatory challenge.

The Remicaide road has been a rocky one in the EU. A new poster presentation at the European Crohn’s and Colitis Organisation, titled, “Biosimilar but not the same,” offers some timely and important real-world data on the differences between originator biologics and their biosimilar cousins.

The study, from Mercy University Hospital, University College Cork, Centre for Gastroenterology, Mercy University Hospital, Cork, Ireland, studied the clinical impact of both the innovator product (Remicade) and it’s EMA-approved biosimilar (Inflectra). The findings are important. Specifically, the rates of surgery in Infliximab and Inflectra groups were significantly different.

80% of the Inflectra group required hospital readmission versus 5% of the infliximab (Remicade) group. (p=0.00004). 60% of patients in the Inflectra group needed steroid augmentation of standard steroid tapering protocol with 50% requiring multiple increases in steroid dose versus 8% of patients in the Infliximab (p-value = 0.0007). Over the course of 8 weeks, 93% of patients in the Inflectra group had an increase in CRP with 7% remaining unchanged whereas 100% of patients in the infliximab group had a decrease in CRP (p=<0.001).

The conclusion is not ambiguous, “Our results suggest that biosimilars may not be as efficacious as the reference medicine. The results found reflect the ECCO statement position that the use of most biosimilars in IBD will require testing in this particular patient population and cannot be extrapolated from other disease populations."

And now the British Society of Rheumatology (BSR) is calling for clinicians to register patients with its biologics registers to track the efficacy and long-term safety of new biosimilar products coming on to the UK market.

The BSR – the professional association for health professionals involved in rheumatology and muscular skeletal disease – maintains two biologics patient registers. One is for people being treated for rheumatoid arthritis, the other for patients with ankylosing spondylitis.

The BSR has released a position statement on biosimilars and says that it supports their introduction but wants to make sure that a system is in place to monitor their safety and efficacy in order to reassure health professionals and the public.

“Widening the range of treatments available to our patients at a lower cost to the NHS is clearly a positive step, but there are still a few gaps in the evidence for the safety and efficacy of these products, which will need to be explored further,” says Alex MacGregor, chair of BSR Biologics Registers.

“For example, the clinical trials of these drugs for people of rheumatological or autoimmune diseases were with new users only, and no trials have explored the effects of substitution from a reference drug.”

The release of the BSR’s position statement comes as biosimilar versions of Janssen Biologics’s Remicade — a medicine that contains the monoclonal antibody infliximab and is used for a variety of inflammatory conditions including rheumatoid arthritis — are being launched in the UK.

These First World data points about a product from a respected manufacturer (Hospira) cannot be ignored and must be used to inform the policy debate over nomenclature, interchangeability, label extrapolations, and overall pharmacovigilance practices. Surprising? Not if you understand that the decision tree for biosimilars is quite different from the Hatch-Waxman pathway. And that for the foreseeable future, each biosimilar application is going to be an important learning experience for FDA reviewers and senior division staff.

FDA has Appy Feet

  • 03.05.2015

In case you missed ...

The Food and Drug Administration has finalized its guidance clarifying the agency’s hands-off approach to regulating mobile devices and apps. The agency has issued two documents outlining its position on medical device data systems and mobile medical applications, including those on smart phones. The documents reiterate the agency’s position that it won’t oversee low-risk medical devices, or will regulate them under a lower-risk classification.  “Through smart regulation we can better facilitate innovation and at the same time protect patients,” the agency said.

The agency will, however, regulate mobile apps or devices intended to detect life-threatening conditions.  “FDA’s oversight approach to mobile apps is focused on their functionality, just as we focus on the functionality of conventional devices,” the agency said. “Our oversight is not determined by the platform.”

(The documents are largely unchanged from draft versions.)

From this morning's Morning Consult ...

In The New Health Economy, Collaboration Between FDA, Industry, And Consumers Will Be Key

Communication is the key to any relationship – that’s what all the self-help gurus tell us.  In which case, the relationship between the Food and Drug Administration (FDA) and the pharma and life sciences industry should be in for profound, positive change.

In a recent survey, top industry executives told PwC’s Health Research Institute (HRI) that they believe the FDA has become a more communicative and open partner.  Seventy-eight percent of those execs told HRI that the FDA has improved the quality and frequency of its communications in the past two years.  These execs also overwhelmingly agreed that the agency provides actionable feedback and offers more applicable guidance, rules and regulations. These and other findings are reported in depth in HRI’s new report, “The FDA and industry: A recipe for collaborating in the New Health Economy.

If communications, feedback and guidance are improving, can the relationship be far behind? Both in our survey, and in a series of related interviews, it was clear that most company executives believe that their overall relationships with the FDA have improved over the past two years.

It’s certainly a critical time for industry and the FDA to collaborate more effectively.  Both the FDA and manufacturers face mounting pressures from an evolving health sector that places a premium on speedy access to breakthrough, cost-effective and safe medical products.

This is all part of the emerging New Health Economy – a phenomenon driven in part by increased consumer involvement in healthcare decisions and payment.  The $347 billion-a-year pharma and life sciences industry now answers to a new class of consumers who shoulder more of their treatment costs and who demand a greater role in product development.

Some of that pressure comes directly from consumers and their advocacy organizations. Insurers and pharmacy benefit managers are also pressuring drug and device manufacturers as they face rising costs.  Either way, the end result is that companies working to invent novel therapies and win regulatory approval must increasingly demonstrate the value those products bring rather than solely their medical benefits.

Consistent with the New Health Economy’s pressures and incentives, executives’ attitudes have shifted dramatically when it comes to determinations of value.  Forty-three percent now support the FDA evaluating a drug based on both clinical and economic effectiveness. This represents a major swing in sentiment over the past five years; the support for including economic effectiveness was only 14% in 2010.

Our research also showed the executives understand that balancing innovation and risk requires tradeoffs.  To improve access to new treatments, the industry is willing to consider regulatory reforms such as stricter post-market safety requirements and restrictions on promotional activities.  Seventy-one percent of survey respondents agreed that accelerated approval programs should be balanced by stricter post-market surveillance.  Indeed, additional protections once a drug goes to market might help allay fears that patients could be placed at risk by the acceleration of the drug-review process.

But what about those newly-empowered healthcare consumers?  HRI surveyed them as well, and consumers told us they want the FDA and industry to take their views into greater account.  Only slightly more than one-third of consumers (39%) believe the FDA currently incorporates their views in the agency’s review process, and 38% percent say that drug and device manufacturers adequately consider them.

PwC has been periodically surveying the pharma life sciences sector since 1995, and looking back at all that data, it is clear that the relationship between the industry, its chief regulator   and consumers has been one of continuous growth. But it must evolve even further to meet 21st century demands.

A new framework for this complex relationship is needed to ensure America’s perch as a global leader in medical innovation and to focus investment where it will produce the most value.

A closer, more collaborative bond among all stakeholders may create a more efficient development and regulatory process that leads to the next generation of treatments and cures.  As in any relationship, improving communication is step one.



Mike Swanick is Global Pharmaceuticals and Life Sciences Leader at PwC

Bobby Clark is Senior Manager at PwC’s Health Research Institute


  • 02.27.2015

The FDA has decided to postpone the March 17th meeting of the Arthritis Advisory Committee. The adcomm was supposed to discuss Celltrion’s infliximab biosimilar application. The Pink Sheet proclaimed this a “Biosimilar Bummer.”

What does the cancellation mean? Lots of potential tea leaves to read and no shortage of regulatory mediums. Bottom line – not a good thing for Celltrion. As to why, one thing to consider is the recent revelation that Hospira’s EMA-approved infliximab biosimilar (Inflectra) has shown some significant clinical differences from innovator and reference product Remicade.

For more on this issue see, “Interchangeability: When Irish Eyes Aren’t Smiling.”

A bummer for Celltrion to be sure, but the lesson to be learned is that the filgrastim adcomm, viewed by many as a FDA love-fest should not be viewed as a broader predictive regulatory response to every biosimilar application. Many saw it as such because they wanted it to be true.

(Infliximib is considerably more difficult to characterize than filgrastim – and characterization data was very important at the filgrastim adcomm.)

Bummer? Not if you understand that the decision tree for biosimilars is quite different from the Hatch-Waxman pathway. And that for the foreseeable future, each biosimilar application is going to be an important learning experience for FDA reviewers and senior division staff.

Repeat after me – there are no such things as generic biologics.

But it’s human nature to believe what you want to be true. No doubt those who are disappointed out will “blame the FDA.” A “bummer” is in the eyes of the beholder.

As Oscar Wilde said, “The truth is rarely pure and never simple.”

On a related note, yesterday I was honored to share my thoughts on the issue of biosimilar naming at the World Congress on Biosimilars Market Access. An important part of the discussion focused on the fact that biosimilar approvals are based on similarity – but in the real world success will be measured by patient outcomes. Real world data capture will be crucial to understanding the true clinical impact of biosimilars and for 21st century pharmacovigilance – which is why differential nomenclature is so important

Focusing on issues such as price and market share are important. But minus a concentrated strategy to measure patient outcomes and address pharmacovigilance issues as they arise -- it’s putting profits before patients.

And that’s not the spirit of the Biologics Price Competition and Innovation Act.

California State Assemblyman David Chiu (D-San Francisco) has introduced a bill in that would require the manufacturer of any drug priced higher than $10,000 per year to report operational costs and profits associated with the product. 

The bill would require drugmakers to report profits attributed to drugs as well as expenses for R&D, clinical trials, acquisition, manufacturing, marketing, advertising and patient prescription assistance programs.

Companies would also have to report grants associated with high-priced drugs.
The Office of Statewide Health Planning and Development (OSHPD) would collect the information into an annual report, submit the report to the state legislature and post it online

Chiu said the bill is meant to provide transparency as drug prices rise.

Really? What about the cost of failure – which represents the lion’s share of pharmaceutical spending? Perhaps Mr. Chiu hasn’t been properly informed of the basic tenets of drug discovery. And maybe it’s time that was corrected.

Or maybe he’s just looking for an easy headline.

Hagap Kantarjian wants lower drug prices and he's willing to let people die to get them. 

In a conversation with Ed Silverman who runs Pharmalot, Kantarjian noted he is launching a online crusade to get 1 million people to support  his plan to lower cancer drug prices.  

Here's the 5 point plan he shared with Ed:

"First, allow Medicare to negotiate drug prices. Two, allow the Patient-Centered Outcomes Research Institute [which was created as part of the Affordable Care Act to assess treatments] to put the prices of drugs in their evaluations of benefits. Three, allow importation of drugs across borders. Prices in Canada are half of what they are in the U.S., so insurance companies would save money, patients would save on out-of-pocket costs and drug companies would make money because the patient who can’t afford the drug here would then make a purchase. Fourth, we should prevent drug companies from making deals to protect patents, like pay for delay, and prevent patent evergreening [which allegedly involves tweaking a patent to extend its life]. And fifth, we should encourage organizations that represent patients with cancer to develop treatment pathways that incorporate drug prices – what they call drug value or treatment value.

If we put these in place, it will allow market forces to work in a more favorable way."

In fact, under Obamacare, health plans are already doing much of what Kantarjian desires.  Recently HHS issued a final rule on drug coverage to address "benefit designs that we believe would discourage enrollment by individuals based on age or based on health conditions, in effect making those plan designs discriminatory, thus violating this prohibition. " The final rule goes on to cite “placing most or all drugs that
treat a specific condition on the highest cost tiers” as an example of discrimination." 

A review of these plans found that many patients have no affordable or low cost options. “Even if they are willing to switch drugs, many of the drugs have a high coinsurance cost…”

It should be noted that this redlining of sick people is based on the evaluation of drug prices and the pathways Kantarjian endorses.  PBMs say they are cutting drug prices but in fact they are just extorting rebates from innovator companies and pocketing the cash.  But I guess that's ok too as long as the drug companies are screwed to Kantarjian's satisfaction.  

Not suprsingly,  AHIP is claiming it wouldn't have to ration drugs if the prices weren't so damn high.  That's what Kantarjian claims too.   

That's just a lie, which since it is repeated often enough, passes as fact in Beltway discourse.  

In fact,  innovative cancer medicines represent 0.6% of total healthcare spend.  If every new medicine prevented or controlled disease, theeby eliminating hospitalization and physician visits and increasing healthy life span, spending three times what we currently spend on drugs would be a great bargain.   More immediately, a Milliman study has shown it would cost health plans less than $1 a month per health plan member to cover the cost of new oral cancer drugs.   

So what if we acheived Kantarjian's dream, not allowing any new cancer drug to the market until it the price was cut in half and stayed there.  America would save a grand total of $15 billion a year out of the $2.8 trillion spent on health care.  That's about 50 cents a day per cancer survivor.  That's something close to what the United Kingdom and Canada do with regard to prices.  

The UK, despite spending about the same amount on cancer drugs as the US, has the worst 5 year survival rates and mortality rates for many cancers.   The same with Canada.  Mortality from cancer is declining and has been declining more quickly here.  The reason?  Faster access to new medicines.   Just the time it takes to review new medicines is deadly.  A Frasier Institute report concludes that delaying access to just five new cancer drugs to get the price down cost the total federal and estimated would cost 1696 life years with estimated value of extended survival of between between $339.2 and $559.6 million.   There are many other studies confirming the connection between the Kantarjian cure for drug prices, increased health care spending and more people dying sooner. 

Kantarjian's silence on this disparity exposes him as nothing more than a second rate publicity hound.    (Similarly,  Kantarjian has said nothing about the fact that MD Anderson, where he works, increased what it charged for cancer surgery by 400 percent or marks up the price of cancer drugs discounted for the poor by 700 percent.   )

He and other critics of drug prices fail to support policies that reduce the time and cost of bringing new medicines to market and refuse to discuss ways to change how new therapies are paid for.  Amortizing the cost of a medicine over a period of years and providing patients and providers 'upgrades' as new technologies emerge would help frame the value of innovation.  

But these are serious proposals.  Kantarjian is not serious.  He is a demagogue who distorts the facts, ducks debates and hides the truth.  

When it comes to the patient voice (or any voice), the plural of anecdote isn't data. But the plural of data is science.

One of the hallmark pieces of FDASIA enshrines the concept of patient-focused drug development. Per the FDA’s own website:

Patients who live with a disease have a direct stake in the outcomes of the drug review process and are in a unique position to contribute to the entire medical product development enterprise.  Under FDASIA, the FDA will increase patient participation in medical product regulation.

  • Patient Participation in Medical Product Discussions under FDASIA. Sec. 1137 of the new law will assist the agency in developing and implementing strategies to solicit the views of patients during the medical product development process and consider their perspectives during regulatory discussions.  This will include:
    - Fostering participation of FDA Patient Representatives as Special Government Employees in appropriate agency meetings with medical product sponsors and investigators; and,
    - Exploring means to provide for identification of potential FDA Patient Representatives who do not have any, or have minimal, financial interest in the medical products industry.
  • Patient-Focused Drug Development under PDUFA V. The PDUFA V agreement provides for a new process enhancement under a commitment that will provide a more systematic and expansive approach to obtaining the patient perspective on disease severity or the unmet medical need in a therapeutic area to benefit the drug review process.  In other words, the patient perspective will provide context in which regulatory decision-making is made, specifically the analysis of the severity of the condition treatment and the current state of the treatment armamentarium for a given disease.

But patient input needs to be more than anecdotal – it needs to be data-driven so that divisional decisions can be more scientifically-driven by the patient community. And nowhere is that more urgently needed than in discussions over risk/benefit calculations.

Steve Usdin’s cover story in BioCentury, “Calming the Pendulum,” makes the case in the first sentence, Regulators and drug developers have converged on the idea that enhancing and broadening patient engagement is a key to improving drug development and adjudicating controversies over benefit-risk decisions and the value of medicines.

Absolutely right. But that’s not patient-focused drug development (after all, isn’t all drug development patient-focused), it’s patient-driven drug development. PD3. It’s time to change the name to properly fit the task. PD3 places the patient voice squarely in the middle of the drug development ecosystem.

Usdin quotes Dr. John Bridges (senior fellow at the Center for Medicine in the Public Interest and Associate Professor at the Johns Hopkins Bloomberg School of Public Health) who says that the FDA’s use of decision-based preference data “changed the world.” If only it were that easy.

Usdin writes, “Patient engagement provisions in the 21st Century Cures discussion draft were written based on input from patient groups, industry and FDA. They are intended to create regulatory certainty around the use of patient perspectives, including formal pathways for patient groups and companies to submit information about patient preferences, as well as defining how FDA will incorporate these submissions into approval and other decisions.

In Bridges’ new paper, Identifying the Benefits and Risks of Emerging Treatments for Idiopathic Pulmonary Fibrosis: A Qualitative Study (The Patient, DOI 10.1007/s-40271-014-0081-0) he provides important qualitative evidence on stakeholders’ views as to important issues associated with emerging therapies for idiopathic pulmonary fibrosis.

Bridges, et al., identifies multiple issues were identified spanning the impact of emerging therapies, including the need to document the patient experience with treatment, and factors associated with disease progression.

The paper discusses the value of qualitative research both in understanding the benefits and risks of emerging therapies and in promoting patient-centered drug development.

Patient passion is important to share. When combined with data and a more dispassionate understanding of regulatory paradigms, a patient-driven pathway can is, and must evolve into a tool used to impact regulatory decision-making.

A new BIO survey finds that more drug sponsors are not seeking special protocol assessment for drug development because they do not believe it improves their chances of getting a product approved. (The survey represents 165 companies and 240 individual clinical development programs.)

According to BIO’s Executive VP for Emerging Companies Section, Cartier Esham, “The reason cited is that they don’t see any objective evidence that utilization is improving chances of success.”

Question: Does that speak to a problem with the pathway or in the design of any given clinical program? One cannot be blamed for the other. SPAs were never meant to promise speed-to-market. Could it be a case of inappropriate sponsor expectations? Just asking.

BIO’s survey also found that the majority of respondents have not utilized FDA’s enhanced communications program, and that the reason people give for not using the program is that they are not aware of its existence or what purpose it serves.

Really? Or is the reason that what the program offers isn’t what sponsors want – or want most – direct communications with their agency review team.

You can't always get what you want
But if you try sometime you just might find
You get what you need.

And, according to the BIO survey, smaller companies often don’t take advantage of FDA meeting opportunities. That’s truly unfortunate since the FDA said its own analysis shows that companies that have milestone meetings with the agency across all phases of development experience shorter clinical development (by a year or more) than those that did not engage at all milestones.

Blame the FDA? What about blaming shortsighted corporate regulatory strategies?


High Noon At The Pharma Pricing Corral
A wrangle over costly hepatitis C drugs portends a transformation in health care reimbursement
By Rick Mullin


Reorganize R&D in pharmaceuticals? Not a problem. It hurt, but faced with petering pipelines and patent expirations on top-selling drugs, major drug companies moved quickly over the past three years to consolidate operations. They closed labs, slashed research staff, and sold off noncore ventures. They replaced those operations by forming partnerships with academic labs and licensing or acquiring promising drug candidates from small biotech firms, hardly skipping a beat on innovation.

Reorganize getting paid in the drug industry? That’s a problem. In fact these days, the business appears to be at crisis point, as the first entries in a new generation of high-priced, highly effective drugs raise alarm and generate pushback from patients, insurance providers, and Congress.
Much of the attention is on two expensive new drugs for hepatitis C—Gilead Sciences’ Sovaldi and AbbVie’s Viekira Pak. Also of concern is a related deal between AbbVie and Express Scripts, a pharmacy benefits management firm, or PBM. Rebelling against Sovaldi’s $84,000-per-treatment price tag, Express Scripts said it would offer Viekira Pak at a significant, but undisclosed, discount and exclude Sovaldi from its formulary. In response, Gilead cut a similar deal with the drugstore chain CVS.

The U.S. Senate, also startled by Gilead’s asking price, convened a committee last year to investigate the drug’s cost. Meanwhile, patient advocates have come forward with concerns over the steep price of highly effective new drugs not only for hepatitis C but also for cancer and a variety of rare diseases. Moreover, they view the likelihood of formulary exclusion via deals between drug companies and PBMs as threatening access to treatment.
It can be argued that nothing out of the ordinary is happening. Products that differentiate themselves from others in any market command high prices—consider the furor over a new smartphone—and two such products will often battle head-to-head for market share. Vying for exclusive deals with payers is a time-honored means of doing battle in many industries.

Indeed, Gilead’s disclosures about such deals in its recent earnings statement led stock analysts at Morgan Stanley to estimate the firm’s average price for Sovaldi and Harvoni, another hepatitis drug, at $51,000 to $52,000 when discounts are taken into consideration.

The monthly costs of cancer drugs at the time of FDA approval has soared. SOURCE: Peter Bach of Memorial Sloan Kettering Cancer Center
But drugs are not smartphones. Their critical role in people’s lives, the means by which their value is calculated, the method established for payment, and drugmakers’ outsized expectations for return on investment define a unique economy of access and reimbursement—one that industry watchers claim is no longer sustainable and is in need of change.

The cost of developing and commercializing a new drug has risen to $2.6 billion, a 145% increase, corrected for inflation, over the past 10 years, according to a recent report from the Tufts Center for the Study of Drug Development. And drug companies want to recoup that investment.
But the price of new therapies is increasingly determined by estimates of savings to the health care system over an extended period of time, a calculation that often yields a significantly higher figure than the mere investment cost. In short, if an effective new drug cures a patient of a chronic disease, the cost benefit of not having that person as a patient is factored into the treatment cost. As drugs impacting underserved therapeutic areas emerge, some fear that price and volume will combine to overwhelm the annual budgets of insurance companies and other payers.

“I think of this as pressure building up,” says Glen Giovannetti, global life sciences leader at the consulting firm Ernst & Young, of the attention garnered by the hepatitis C drugs in recent weeks. Although Giovannetti sees nothing fundamentally new in dealings between the drug companies and insurers, he says there is cause for concern over the rise of formulary exclusion as more breakthrough drugs enter the market. According to Giovannetti, Express Scripts is “clearly sending a message” that it is also looking to form exclusive pacts with drugmakers over future cancer treatments.

But the battle over drug pricing may also be a distraction from a more important issue, according to Robert M. Goldberg at the Center for Medicine in the Public Interest, a health care policy research organization. “Discussions about what is best for patients always circle back to outrage over high prices,” Goldberg says. “But this is nothing new. We have been fighting about drug prices since the snake oil salesmen pulled their wagons to town. We rarely have a discussion about value.”

Some of today’s new drugs, he says, are delivering more value to patients and their families than the drugs of 10 years ago did, which means big changes across the health care landscape. “There is less and less economic return going to the traditional institutions, like the insurance companies and the hospitals,” Goldberg says. “These medicines are doing to this business model what digital information did to the recording industry. They are decimating it.”
Goldberg is optimistic that genomics, big data, systems biology, and information technology—what he calls the digitization of the industry—will lead to transformative change in health care, but pricing and reimbursement need to accommodate them and ultimately facilitate patient access to new drugs. “We may need to change the way things are paid for,” he says.

Patient Distress
Whatever the causes, the cost of new treatments is a source of increasing alarm for patient advocacy groups. The Fair Pricing Coalition, a network of patient advocacy groups focused on HIV and hepatitis C, characterizes the high prices of new hepatitis C drugs and the deals between drug companies and PBMs as indicative of heightened obstacles to patient access ahead.

“Hep C is the canary in the coal mine,” says David Evans, director of research advocacy at Project Inform, a member of the coalition. Sovaldi and Viekira Pak are perceived by patient groups as the first in a wave of high-tech, high-cost drugs, he says. They are concerned about the prices of such drugs and how squabbles among corporate giants impact availability.

“As an organization whose first goal is to ensure access to quality and affordable medication for people living with chronic diseases, we have a tremendous fear that the giants involved in this battle are going to try to crush each other to the harm of people with those diseases,” Evans says. “What we see is King Kong versus Godzilla. The pharmaceutical industry is very powerful, as is the insurance industry. And they are playing hardball over price.”

Cancer patient advocates are similarly concerned. “On the very positive side, especially in blood cancer, there has been a tremendous amount of innovation. The options available have increased dramatically,” says Brian Rosen, chief policy and advocacy officer for the Leukemia & Lymphoma Society (LLS). “On the other hand, the price of innovation is very high.” And the current reimbursement model requires patients and payers to pay up front for drugs priced according to estimates of long-term value to the health care system.

Drug companies and payers, Rosen contends, are both reluctant to engage in discussions of altering the pricing and reimbursement model in health care. “But if there come barriers that prevent a product from reaching a patient, then the model becomes unsustainable,” he says. “Currently, it’s our belief that barriers to patient access are increasing.”

LLS hosted a forum a year ago to which it invited drug producers, payers, economists, and data experts. “We came away with the perspective that in order to inform the value equation, we need the patient’s perspective,” Rosen says. “And it is lacking.”

Producers’ Perspective

Cara Miller, vice president of public affairs at Gilead, argues that the savings to the health care system justify the cost of Sovaldi and Harvoni. “Unlike long-term or indefinite treatments for other chronic diseases, Harvoni and Sovaldi offer a cure at a price that will significantly reduce hepatitis C treatment costs now and deliver significant health care savings to the health care system over the long term,” she tells C&EN.

AbbVie makes a similar argument for its hepatitis C drug. “In determining the price of Viekira Pak, we took a number of factors into account including the overall market dynamics, the benefits of the therapy to patients, the cost-effectiveness of treatment, and the value that the product brings to offsetting short-term and long-term costs,” says Stefanie Prodouz, the firm’s senior manager of public affairs. She adds that the deal with Express Scripts is indicative of the company’s efforts to ensure that patients other than just the sickest are able to get Viekira Pak.

Douglas Paul, a partner at Medical Marketing Economics, an Oxford, Miss.-based consultancy to the pharmaceutical industry, agrees that pricing needs to take a drug’s efficacy into account. “Historically with hepatitis C, we paid $30,000 for a 30% cure, $60,000 for a 60% cure, and now we are paying $90,000 for a 90% cure,” he says.

Moreover, Paul contends, the flash point between Gilead and payers over Sovaldi occurred not because of the high price of the drug but because of the high volume of patients seeking access.

“What made this one different is that it was a very accessible drug,” he says. “You had all these people who were warehoused, waiting for this highly efficacious, low-side-effect drug. The price per cure didn’t get the payers; it was the number of people seeking a cure.”

Paul views the recent developments in hepatitis C as normal market activity—two highly differentiated products came on the market at the same time, and price competition led to deals with insurers. He does not view such deals as restricting patient access because the drugs are of equal efficacy. Nor does every hepatitis C patient need the new drugs right away, he adds.

Paul also expresses frustration over payers’ failure to prepare for Sovaldi, which the Food & Drug Administration approved in December 2013, in their budgets for 2014. He and others point to Gilead’s $11 billion acquisition of Pharmasset—which discovered Sovaldi and had taken it through Phase III clinical trials—and the drug’s strong clinical results as sufficient indication that something big was due in hepatitis C.

A PBM Responds
David Whitrap, corporate communications director at Express Scripts, begs to differ. “Nobody anticipated that the $11 billion purchase price of Pharmasset would lead to an $84,000 price of Sovaldi,” he says. “When Gilead did ultimately price Sovaldi at that level, they were able to recoup the entire Pharmasset investment in only one year—far sooner than acquisitions of that level generally pay off.” He adds that budgets for payers are generally set long before the December immediately preceding the benefit year.

Express Scripts also challenges the contention that drug companies and insurers are vying for position at the expense of patients. “We put clinical profile and clinical efficacy first,” says Steve Miller, the firm’s chief medical officer. “Access is an enormous factor,” he says. “And access is proportional to price. It doesn’t matter if you bring great drugs to market if no one can afford them.”

He points out that some patient advocacy groups, including the AIDS Healthcare Foundation, applauded Express Scripts’ deal with AbbVie. Indeed, the group issued a strongly worded statement condemning Gilead for its pricing of Sovaldi.

Miller notes that the issues of drug pricing and reimbursement have garnered interest on both sides of the aisle on Capitol Hill in the wake of the Senate investigation of Gilead and Express Scripts’ deal with AbbVie. Democrats, who have long pushed for price controls, are glad to see the pressure on Gilead, he says. Republicans like that free-market forces are being applied.

Express Scripts also favors free-market mechanisms over price controls and pays for much more expensive drugs than Sovaldi, Miller points out. “We have drugs on our formulary that are $300,000-plus for kids with cystic fibrosis,” he says. “You haven’t heard us complain about this because this is truly adding great value.”
Despite new products such as Sovaldi, Miller faults big pharma on innovation. “Let’s be honest,” he says. “When it comes to the hepatitis drug, Pharmasset was the innovative company. What Gilead did was financial innovation. Pharmasset indicated in public filings that they would have sold the drug at $36,000-per-treatment cost.”

The Push For Change
The American Enterprise Institute, a conservative policy and economics think tank, is among the voices suggesting alternatives to the current payment system. Scott Gottlieb, a fellow at AEI and former FDA deputy commissioner for medical and scientific affairs, coauthored a report last year suggesting various means of spreading payments over time, including reinsurance and amortization.

According to Gottlieb, such a change would be the second shoe dropping on a reengineered drug industry. “They have changed their whole R&D model, but they haven’t changed their payment model,” he says.

But he considers the entire system primed for changes that will impact payers, care providers, and patients alike. “You haven’t seen a lot of financial services sophistication in the market for these transactions,” he says of the recent agreements between drug companies and payers. “I think we are going to have to think about how to bring real financial services constructs into these transactions. And one of these is amortization.”

Although it is unclear why the health care industry has lagged others in adopting such standard financing instruments, Gottlieb points to unique aspects of the industry that set it on its own course. “There is a lot of churn,” he says. “How do you amortize the cost when by the 10th year, you still have the cost but you no longer have the patient?”

Advocates of reform are garnering government backing. Last month, the U.S. Department of Health & Human Services stated a goal that by 2016, 30% of all Medicare provider payments will be transacted through alternative models tied to patient outcomes rather than how much care is provided. The target rises to 50% by 2018. Pharmaceutical Research & Manufacturers of America, a drug industry association, responded that it supports payment plans emphasizing patient outcomes and encouraged the agency to “incorporate clear mechanisms for recognizing the value of new treatment advances.”
Gottlieb doesn’t see any of the stakeholders stonewalling on exploring new modes of finance. Not even the drug companies. “They are not resistant to the idea of amortizing these costs and smoothing out their earnings,” he says.

Most PBMs are also receptive to changes that enhance their growing role as financial service intermediaries. That sector is ripe for change, in Gottlieb’s view. “Simply extracting discounts from drugmakers and passing on some of the discounts to payers is not a sustainable model where the ‘middleman’ sees his margins shrinking.”

At the moment, however, payers and patients are pointing their fingers at the drug companies in what Gottlieb characterizes as a cycle of recrimination that currently puts big pharma in the crosshairs.

“It’s all great theater, but is it good for patients? The answer is no,” Goldberg of the Center for Medicine in the Public Interest says, “because increasingly, patients will be forced to jump through hoops to get the medicine that is right for them and still pay thousands of dollars out of pocket for medicine that might not work in order to get a medicine that will work. There really isn’t a focus on what works best for the patient.”

He says disease advocacy groups such as LLS and the Multiple Myeloma Research Foundation are gathering data on patients that may provide a corrective force. Discrimination lawsuits brought by patient groups against PBMs may have an effect as well, he says.
The current concern over the cost of treating patients with the best drugs needs to be matched with a regard for the cost of not doing so, according to Goldberg. “The healthier the people in your risk pool, the lower your premiums are,” he says. “So why would you not want to use the best technology first to keep people healthy?”

The key, Goldberg argues, is to determine the value of drugs by focusing on their long-range benefit to the health care system and to patients—but to facilitate access up front.

“The faster you get medicines to patients, the lower the cost will be,” he says. “In the short term, patients are going to be whipsawed, but there will be changes made by drug companies and health plans well before legislation kicks in. Things are moving in a very good direction. The next generation of medicines will be priced differently, and cheaper.”  

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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