One question I have been asked several times is my opinion on Afrezza refills. It is my opinion that refills are lower than desired, and that the main issue with the refill rate is not a one size fits all answer. I attribute a lower than desired refill rate to the following:
- Afrezza cost to insurers
- Afrezza cost to cosumers
- Afrezza insurance coverage
- Doctor hesitation
- Perceived efficacy/complexity
Let's look at these one at a time
COST TO INSURERS
Let's face it. Insurance companies are in business to make money. That is the harsh reality. In that quest, the "job" of insurers is to find the least expensive treatment option that can treat the disease or condition. Afrezza simply costs more money than other treatments. This means that insurance companies will tend to favor other medications prior to Afrezza based on cost alone. From time to time I hear the "argument" that Afrezza will cause fewer hypoglycemic events, fewer amputations, fewer instances of diabetic ketoacidosis, etc. These "arguments" may or may not be true. For many of these types of arguments, there is no real data to support them. In addition, the A1C reduction that is associated with the clinical trials and label is not impressive enough to warrant paying a premium in the eyes of the insurer.
What insurance companies have done (in general) is to place Afrezza on the lowest tiers of coverage. This often means step therapy, quantity restrictions, and prior authorization. These "hurdles also impact doctor hesitation, which I will cover in more detail below.
Step therapy is essentially a try and fail system of treatment. Basically the insurer will require the patient to try less expensive treatments and fail prior to getting authorization for the next treatment. There could be one step in the process or more than 1 step. Think about what that means. If a person tries a less expensive insulin, and is able to get diabetes under control, there is no need to step up to Afrezza. The try and fail method also means more doctors visits, more learning how to use meds, more time, and more energy expended.
Quantity restrictions may take some patients out of the mix simply based on the amount of Afrezza they are allowed to buy. Pass the quantity and the patient must pay out of pocket.
Prior authorizations is also a process. The doctor or patient must contact the insurer to get authorization for Afrezza. Quite often, the coverage can be approved, but we then get to cost, and this is a big issue with consumers.
COST TO CONSUMERS
The average consumer thinks a lot like the insurance companies. They want to treat the condition in a cost effective manner. If treatment "A" costs the consumer $50 a month and option "B" is $300 per month, the average consumer is going to take option "A".
A consumer may like to concept of Afrezza and even be willing to try it. They may even ask their doctor about it and get a script written. They may even get the doctor to help with prior authorization. What happens when they get to the pharmacy? The pharmacist calls their name and says, "That will be $300". The consumer has sticker shock. They are used to paying $50. They do not fill the script, call their doctor, and complain that he scripted them a more expensive medicine. That means a new appointment, and a new script written for a less expensive solution.
This gets even more complex. Afrezza used to have fewer cartridges. A consumer would fill a script, but that script would not last an entire month. They found themselves having to pay more money for additional Afrezza. MannKind, in an effort to rectify this, changed the packaging so that it had more cartridges, and added titration packs. What if the patient gets sticker shock from the cost of the more expensive titration pack and never realizes that the less expensive packs will be their treatment regimen moving forward? The consumer does not refill, and the company loses a patient. It is quite possible that in its effort to solve the problem of to few cartridges, a new problem (or perceived problem) of to many cartridges needs to be addressed.
Simply stated, even when it comes to health, many people do not take the time or effort to research things out. Consumers (in general) want things to be quick and simple. Jumping through hoops make the consumers brain hurt, and they simply wind up refusing to jump through hoops.
What is a solution? Getting the word to the consumer about the costs to treat with Afrezza so that they can make an informed decision, are not shocked by the numbers, and will therefore not "waste" the time of the doctor. That is not an easy thing to do. Sales reps can not engage a patient. At this time MannKind is somewhat reliant on the doctor taking the time to go through these types of things with a patient. Doctors do not feel it is incumbent upon them to walk people through a specific treatment when other more simple options are available.
This is a tough game. Big companies can afford to rebate the product and help the bottom line of Insurers. Smaller companies can not really afford this. Until such time that MannKind can get Afrezza on better insurance tiers, there will always be issues with refills. All of this essentially boils down to what insurers are willing to pay, and what consumers are willing to pay.
Yes...Doctors have an oath and a responsibility to patients. That does not mean that doctors should script one drug over another simply because the patient wants it, or simply because a pharma company offers them paid junkets.
If a doctor knows that a drug is widely covered by insurance and can treat the condition, that will become her "go-to" solution. The doctor avoids prior authorization hurdles, step therapy hurdles, and angry patients complaining about the cost of the drug.
Is it a doctors responsibility to discuss the cost of a drug with patients? That is an uncomfortable discussion that eats up time. Will a doctor take the time to have a 15 minute discussion about drug "B" when she knows that the person can most likely treat with drug "A", have success, and never balk about price, etc.
Just like consumers, doctors want to take the path of least resistance.
First to efficacy. Afrezza is different and therefore can not be a straight translation on a unit to unit basis. If a consumer thinks they need 4 units because that is what they learned, they may find themselves needing more Afrezza than they thought they would need. Each cartridge costs money. They suddenly get the feeling that Afrezza may not work in the manner they felt it should. Once that seed of doubt is planted, the odds of retaining that patient diminish.
Think of this as a bit of "old school" vs. "new school". I will use math as an example. When I grew up, math was math. However, my kids use something called "new math". The answer is the same, but the process differs. In my mind "new math" is a painful process. In the minds of my kids it is simple. I see added steps in the process, they see efficiencies. Even though the answer is the same, the process is never likely to be accepted by an older generation.
Afrezza is a new system. The dosing is not "compliant" with current dosing that every diabetic has learned and is ingrained into their brain. Can switching be simple? Yes. Do people en mass like to change? No.
Some people like to say Afrezza is a paradigm shift. The more accurate statement is that it is attempting to create a paradigm shift. Whether that happens or not is yet to be seen. In the U.S., the effort to switch to the metric system failed (for the most part). We by a liter of soda or water, but gallons of milk and gas. Here in the U.S. the metric system is a niche system even though it is actually far more simple than how we measure now.
Fixing refills needs a multi-prong approach that is not simple. Some of the issues have lengthy and complex solutions, while others are more simple. What investors need to grasp is that this is not an issue that will vanish over night.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.