In nominating Scott Gottlieb to become the next commissioner of the US FDA, President Donald Trump might have given a boost to pharmaceutical payment models that seek to link the price of drugs more closely to their economic benefit.
While it could take years and perhaps decades before "value-based pricing" is widely used, the building blocks of such a system are starting to be assembled. Mr. Trump has been vague - albeit vocally - about how he intends to arrest the growth of drug prices, but one way to achieve this could be changing government rules to ease negotiations between payers and pharma over the economic benefit of new agents.
Big pharma has taken baby steps in this direction, most prominently with contracts for Entresto and Repatha that measured the real-world benefit of the new drugs and adjusted payment based on those data. However, drugmakers complain that they are held back by federal rules that either restrict their talks with payers or penalise reimbursement from government health programmes.
The FDA addressed one of these complaints in a guidance document published in January in which it says it "does not intend to object" to discussions with payers on pricing, safety and efficacy data and marketing strategies before a drug or device is approved.
This is draft guidance, so it is not clear whether it will become formal FDA policy in the future.
Payers and the pharma sector see other impediments to participation in value-based contracts, as outlined last year in a blog post co-written by Mr. Gottlieb on the website of the policy journal Health Affairs.
"There has been political pressure to enact policies giving federal and state governments authority to set drug prices or limit price increases," Mr. Gottlieb wrote with co-author Kavita Patel, a senior fellow at think tank the Brookings Institution.
"We believe that certain regulatory reforms can address these concerns and encourage more robust competition within the drug market. These policies would allow prices to more easily adjust to reflect how medicines are prescribed and the outcomes they deliver, and thus would help control rising spending and reduce the burden of drug costs for consumers."
Chief among the regulatory reforms Mr. Gottlieb suggested are changes to rules governing the Medicaid program for low-income people. Altering the decree that sets the drug payment rate based on the lowest price offered to private sector payers could be one reform, as could changing laws that define such deals as illegal kickbacks because they could be seen as inducements to over-prescribe.
For once, the pharma sector is allied with its usual sparring partners, pharmacy-benefit managers, in pursuing these aims. The leading PBM, Express Scripts (NASDAQ:ESRX), for example, similarly cited Medicaid "best price" rules and restrictions on pre-approval communication as barriers to value-based pricing in a white paper published in February 2017.
Science and reimbursement
That Mr. Gottlieb - seen as aligned with pharma because of investments in various companies and a consulting position with Glaxosmithkline - wants these rules eased is a sign that many in the sector are warming to the idea of value-based payments. Mr. Gottlieb has served both as an FDA deputy commissioner and a top adviser at the Centers for Medicare and Medicaid Services, potentially making him well suited to control the traffic at the intersection of science and economics.
As a further sign that biopharma is more receptive, when Amgen (NASDAQ:AMGN) disclosed the final results of its Fourier cardiovascular outcomes trial of Repatha earlier this month it accompanied the announcement with a value-based pitch. That said, the disappointing data from Fourier likely motivated this move (ACC - No Repatha of glory, March 17, 2017).
Scott Wasserman, the group's vice-president of global development, focused not on the outcomes, which were based on the time to first cardiovascular event, but the potential to prevent subsequent events, which did not get counted in Fourier.
"What happens in the real world, and what payers deal with, is patients have multiple events," he told EP Vantage in an interview at the American College of Cardiology meeting in March. When investigators track subsequent events outside the scope of clinical trials, the number is "two or threefold" the trial number, Mr. Wasserman said, offering an opportunity for a cholesterol-lowering drug to showcase its economic value.
This is the case Amgen will make to payers in its post-Fourier campaign to increase use, which will include a money-back guarantee to payers based on their patients who experience myocardial infarctions or strokes.
"The value-based pricing is how we assess the value of adding our medicine to the patient armamentarium," he said. "The money-back guarantee expresses our confidence in our drug and what it can deliver for patients.
"When you talk to a payer they want to know the budget impact and they want some predictability. So we're willing to take some of that risk from them," Mr. Wasserman said.
More than FDA
Of course, it will take far more than a single appointment - and one to an agency more concerned with science than reimbursement - to reverse regulatory roadblocks to value-based payments. "It's not like FDA can push a button and make them all go away," says Steven Pearson, president of the Institute for Clinical and Economic Review (ICER), an independent organisation that publishes cost-effectiveness reports.
Thus it must be important to watch the activities of the Centers for Medicare and Medicaid Services (CMS), which controlled $990bn of the $3.2tn spent on healthcare in the US in 2015, not to mention numerous regulations controlling the health sector. Unfortunately, for advocates of value-based reimbursement, that agency is deeply embroiled in the effort to replace the Affordable Care Act.
Moreover, the small government approach taken by the Trump administration and the congressional leadership could put an element of CMS influence over value-based pricing in jeopardy - namely, the reimbursement experimentation office called the Center for Medicare and Medicaid Innovation (CMMI).
"If CMMI gets blown up, that's probably a bad sign," says Robert Dubois, executive-vice president of the National Pharmaceutical Council (NPC). "Some people might throw the baby out with the bathwater because it has too much power." The CMMI is probably the fastest place to try things like value-based pricing, he says.
Even without government intervention, Mr. Pearson notes that the agreements already made for Entresto and Repatha show that value-based reimbursement can be achieved (Vantage point - Turning point in the pharma-payer pricing struggle, April 25, 2016). Indication-based pricing, however, clearly has some way to go thanks to Medicaid best-price rules.
Payers are in favour of Indication-based pricing because drugs prescribed across multiple disease areas - such as autoimmune treatments or cancer therapies - have differing efficacy and effect on downstream medical costs depending on indication, and should be priced as such.
Roche's (OTCQX:RHHBY) recently approved multiple sclerosis drug Ocrevus is an example - indicated for both the relapsing and primary progressive forms of the disease, it has differing benefits for the two populations. ICER estimated that the annual price in relapsing MS should be $58,608 to meet a value-based threshold of $150,000 per quality adjusted life year compared with supportive care, but in progressive MS the price should be $14,367.
Roche set a list price of $65,000 (Roche prices Ocrevus for maximum disruption, March 29, 2017). Under Medicaid rules, if Roche were to charge less for progressive than for relapsing MS, the former price would be the one the programme would demand across all indications.
This is one area Mr. Gottlieb could influence. Mr. Dubois points out that one barrier to indication-based pricing is that a drug used across multiple indications has only one National Drug Code (NDC) number when it gets reported to payers. "This is where the FDA gets in the way," he says, because PBMs do not know what indication the drug was given unless there was prior authorization.
There is, however, the possibility of resistance from the pharma sector, which could plausibly argue that a change in NDC would increase production costs, in an attempt to block indication-based pricing.
As for violations of anti-kickback laws, Mr. Pearson calls these "hypothetical". US prosecutors, before filing complaints on value-based deals between pharmaceutical manufacturers and payers, would need to show that they were intended to inflate healthcare spending. This is in contrast to strict anti-kickback rules governing physician referrals, where intent does not need to be shown.
So far when condemning prescription drug costs Mr. Trump has spoken more of direct Medicare negotiation, reimporting from lower-cost countries and competitive bidding, not the nuanced approach of tying price to downstream benefits. Is a pivot possible? In his FDA pick he certainly chose an advocate of this approach, but it might take more allies sprinkled through the health-related agencies for the key impediments to be removed.
ICER's Mr. Pearson says the simpler, high-profile route of Medicare negotiation or reimporting might be more tempting to the president.
"There are lots of other options. None of them involve the FDA," Mr. Pearson says of Mr. Gottlieb's potential role. "There's no suggestion that [Mr. Trump] is aware of these [value-based] options, or that it would be a priority for CMS and FDA to huddle together and sort these things out."
NPC's Mr. Dubois is more optimistic: "The FDA is already making progress towards being clear about off-label communications," he says. "So they're already moving in the right direction. Now that Scott's there they have a vehicle to move faster. I think we'll move in a proper direction."
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