I am appalled that this subject needs to be addressed.
The US Food and Drug Administration (FDA) isn’t perfect, but it is still the global gold standard for evaluating medicines for safety and effectiveness. The FDA, though not quite recovered from the self-inflicted damage caused by the Aduhelm® approval mess, is staffed by scientists who have done an admirable job of navigating the question of which drugs should be prescribed in the US. Who wants the judicial system deciding which medicines are safe and effective? No one. That’s right. Not a single thinking person would believe that the science-centric approach for evaluating pharmaceuticals, complex and otherwise, should be the purview of judges at any level of the system.
Texas District Court Judge Matthew Kacsmaryk’s ruling that mifepristone should be withdrawn from the market attempted to thinly mask the real basis for the action: his antiabortion leanings. His line of reasoning in overturning FDA’s decision in approving the drug 23 years ago on the basis of safety and effectiveness is absurd, possibly laughable.
As further evidence of the judiciary’s inability to (1) review this on a scientific basis and (2) comprehend the potentially vast implications of such an action, a federal appeals court preliminarily ruled that, without fully evaluating the safety evidence, the FDA “cannot deny that serious complications from mifepristone.” It pointed to the agreement that patients must sign before receiving it that use of the drug has risks. The New York Times reported that “the court also said that the FDA was incorrect in saying that mifepristone was comparable in safety to ibuprofen. ‘FDA’s own documents show that mifepristone bears no resemblance to ibuprofen,’ the court said.” What? Any healthcare professional will tell you that ibuprofen, when taken chronically and under certain conditions, can cause gastrointestinal bleeding, leading to serious health consequences. Does that mean it should be taken off the market, as well? The court is willing to conflate the experience of mifepristone, which is most often taken in combination with misoprostol, with that of ibuprofen, an analgesic.
Pending a full review by the Appeals Court (two judges appointed by the Trump administration and one by the Bush administration), this issue will likely be escalated to the Supreme Court. If the Appeals Court decides to uphold the Texas judge’s action, it will deal the FDA, the drug industry, and separation of powers a crippling blow.
If the Appeals Court decides to not trample the FDA’s authority, despite the Supreme Court’s recent Dobbs ruling, it should decline to entertain the appeal. The Supreme Court is already facing a crisis of credibility and confidence, and undermining the FDA, whose authority was formally established by an Act of Congress in 1962. Essentially, Congress has passed legislation saying that the FDA is the only entity qualified to make such decisions.
The Court would not question the overall constitutionality of the FD&C Act. Chief Justice John Roberts has long favored narrow rulings to avoid upsetting major legislation. There can be no narrow ruling if the decision to order the withdrawal of a drug is based on something other than scientific rigor. We all have preconceptions of how some of the justices would vote given the opportunity. Are they considering the wider implications? They had better.
The drug industry has reacted with apprehension, justifiably. What other FDA decision could be challenged in court if mifepristone is taken off the market? The only ones who benefit in that case are the lawyers.
Throughout its development, the US healthcare system has been attracted to new and shiny technologies like bees to honey. This is a significant reason why the cost of healthcare rises over time. It is also one reason why value-based care initiatives show smaller savings than hoped—the downward pressure they exert on the cost curve is overcome by the upward pressure maintained by a steady stream of new and more expensive technologies.
Prescription Digital Therapeutics, the Next Frontier
Digital health applications have had a rockier road to acceptance than traditional pharmaceuticals, and that is mainly for two reasons: (1) lack of data on their effectiveness and (2) lack of reimbursement. The reason for the former is simple—evidence for their efficacy is not generally required for FDA authorization (if they are authorized at all). The reason for the latter is also straightforward: Are they covered under the medical benefit, pharmacy benefit, something else, or not at all? Responses to the question are rather vague, ambiguous, and disparate.
When manufacturer activity picks up in specific area of medicine, so does funding for awareness campaigns, drug advertising, and funding for additional research. Examples of this well-worn paradigm include the migraine arena with the approval of the triptans in the 1990s, rheumatoid arthritis and the approval of anti-TNF inhibitors in the 2000s, and Crohn’s disease and interleukin inhibitors in the 2010s. General and specific digital health applications can be expected to follow this trajectory, especially noting the involvement of Google, Apple, Amazon, and other extremely deep pockets.
That is not necessarily the case with PDTs. Manufacturers of digital health applications that are aimed at treating a disease, like substance-abuse disorder, opioid-abuse disorder, depression, insomnia, post-traumatic stress disorder, and more, are not large pharma companies, but smaller entities with more experience in the coding world than in reimbursement and coverage.
Approximately 20 manufacturers have either brought their PDTs to market or are currently developing them. These manufacturers are smaller concerns with more limited resources than conventional pharma companies. For the next few years, a good portion of their resources will be spent expanding awareness of these new treatment options.
First, PDT manufacturers need to focus their efforts on differentiating themselves from other digital health applications, including unregulated wellness apps. Second, they must emphasize their use of cognitive behavioral therapy, an accepted method for treating behavioral health disorders. Third, they are approved by the FDA as “software as a medical device,” and it will take a bit of explaining to attain recognition by payers and plan sponsors about what this term means for reimbursement and coverage. Finally, they need to spotlight the prescription-only feature for access (and adjunctive nature of their treatment). This is no small task for an industry that saw its first FDA authorization the second half of 2017.
Added Value to Adjunctive Therapy?
There may be a value-based aspect to PDTs. Consider that PDTs are not very expensive (although generally out of the range of uninsured patients or those paying out of pocket—probably up to $1,000 per prescription). They are not meant to be used as exclusive treatment; patients should be under the active care of a health professional and receiving live counseling, pharmaceutical therapy, or both. They are intended to improve the effectiveness of overall care and patient engagement. For example, a PDT for substance-abuse disorder seeks to improve abstinence rates and avoid recidivism. For the employer, that may translate into greater productivity, less disability, and less absenteeism.
The evidence for several of these PDTs is promising. Employers are only now awakening to the potential of PDTs to address important, stigmatizing conditions, with on-demand education and treatment modules.
Technical coverage and reimbursement questions will have to be resolved; for instance, can utilization of a PDT be tracked through pharmacy management, especially without a national drug code? They do carry unique device identification codes, but PDTs are not devices like glucose monitors. Will patients’ PDT data be reviewed and not simply relayed to the healthcare team? Will patients only be able to get a prescription through certain providers (e.g., will a nurse or pharmacist be able to prescribe it)?
This is a burgeoning treatment modality and worth tracking, with the introduction of PDTs for several new indications in the near future.
Scrutiny on pharmacy benefit managers (PBMs) has just been ratcheted up considerably. The Federal Trade Commission (FTC) announced on June 7 the launch of its investigation into PBM practices, targeting the largest players. This investigation comes at an extremely crucial time for the biosimilar industry, as manufacturers prepare to negotiate with these same PBMs for coverage of adalimumab biosimilars.
The PBMs are the chief purchasers of medications for commercial plans and Medicare part D members. They negotiate drug pricing contracts with drug manufacturers for the vast majority of the insured population in the US. They are another unique feature of global health systems: No other advanced country allows private middlemen to serve such a role.
A 90-Day Deadline
The FTC will send “compulsory orders” to CVS Caremark; Express Scripts, Inc.; OptumRx, Inc.; Humana Inc.; Prime Therapeutics LLC; and MedImpact Healthcare Systems, Inc., who purchase medications and make pharmacy coverage decisions for approximately 90% of the commercial and Medicare part D insured population.
According to the FTC, these PBMs will be compelled to “provide information and records regarding their business practices,” which are notoriously opaque. The investigation will focus on how these PBMs affect access and affordability of prescription drugs. The FTC’s deadline for compliance will be 90 days from issuance of the orders.
“Although many people have never heard of pharmacy benefit managers, these powerful middlemen have enormous influence over the U.S. prescription drug system,” stated Federal Trade Commission Chair Lina M. Khan in the FTC’s release. “This study will shine a light on these companies’ practices and their impact on pharmacies, payers, doctors, and patients.”
How Do Net Prices and Rebate Contracts Buy Coverage?
At the center of the FTC investigation of PBMs is the PBMs’ encouragement of rebates to negotiate low net prices, and how this results in barriers to coverage of other drugs. For example, a PBM may allow a drug manufacturer exclusive formulary coverage for their drug if the rebates offered are sufficiently attractive.
This is potentially a huge obstacle for makers of adalimumab biosimilars. AbbVie passes millions of dollars in rebates to PBMs at present in exchange for Humira® coverage. Biosimilar manufacturers who seek PBM coverage must contend with the PBM’s lost or reduced Humira rebates if their biosimilar is to be covered exclusively or at parity with the reference product. Further, how are these rebates passed along to payers and ultimately to patients?
The Influence of PBMs
“In these roles,” says the FTC, “[PBMs] often have enormous influence on which drugs are prescribed to patients, which pharmacies patients can use, and how much patients ultimately pay at the pharmacy counter. Many of these functions depend on highly complicated, opaque contractual relationships that are difficult or impossible to understand for patients and independent businesses across the prescription drug system.”
In addition to the impact of rebates, the FTC will also review practices that involve the PBM’s relationship with the pharmacy network, including reimbursement; their use of prior authorization and other administrative tools to manage access, and the PBM’s specialty drug policies.
This inquiry is the next step in the FTC’s request for information about PBMs issued in February (and elicited 24,000 public comments). It is not known when the FTC’s investigation will conclude or whether it will immediately impact the negotiations for the multitude of adalimumab biosimilars to be launched in 2023. However, this inquiry may begin to pry open the lockbox on PBM practices. There will certainly be more to report on these developments.
It is difficult to speculate on what FDA’s motivation might be to overrule the recommendation of its Advisory Committee and approve Biogen’s aducanumab for the treatment of mild Alzheimer’s disease. Relatively few providers are convinced of the value of this agent based on the clinical trial results reviewed, and many are outspoken in their opposition to it. Based on the providers’ perspective, what are payers supposed to think?
Research in the Alzheimer disease category has resulted in depressingly few bright spots. Biogen’s agent does not seem to break any new ground here—a drug that helps clear amyloid plaque from the brain seems to achieve that goal, but without showing meaningful differences in cognitive improvement (or delayed progression). The clinical trials proved this. FDA seems to be holding out hope that this mechanism of action will be proven beneficial at some point in the future. Certainly, they do not have this evidence to date. The fact that the approval will require a phase 4 clinical trial to support this hope is frankly uninspiring. Newly diagnosed patients will clamor for the drug, despite its poor record of efficacy and its significant risks, placing providers and payers in a difficult bind.
Alzheimer’s disease is a disorder heavily weighted toward the elderly population, and Medicare will be expected to bear the brunt of the bill for aducanumab. Early estimates have gone as high as $10 billion annually based on the prevalence and incidence of Alzheimer’s disease. This points to the immediate need for a national coverage determination (NCD) to help guide Medicare coverage. Health policy experts are calling for this to begin now. However, commercial payers will also need to make coverage policies pertaining to the agent.
In other words, payers will have their hands full trying to measure value against the projected $56,000 yearly cost of treatment. In an earlier analysis, ICER revealed that aducanumab may not be cost effective at one-tenth this price. Reacting to the approval, ICER sent out its own commentary, taking the FDA to task.
Payers, including Medicare Advantage plans, can utilize prior authorization criteria and step edits to manage appropriate access to this treatment. In this case, “appropriate access” may be very difficult to define, outside of an investigational clinical trial. Ordinarily, when products are approved by the Food and Drug Administration, there is an expectation of careful evaluation and decision making based on the efficacy and safety of the medication. In an accelerated approval scenario such as this, this expectation is not met. Judging from the cacophony of confusion coming from neurologists on this decision, I don’t believe that we have a clear understanding of whom this agent may benefit. Maybe it is just wishful thinking from the FDA that clearing amyloid plaque will somehow equate to better cognitive function (perhaps in a smaller subset of patients). Until we have real evidence that this is the case, a very conservative approach seems warranted. Let Biogen conduct the new study and prove the concept works. Until then, the number needed to treat, and the cost of that treatment, to gain benefit in one patient could indeed be enormous.
Research in the Alzheimer disease category has resulted in depressingly few bright spots. Biogen’s agent does not seem to break any new ground here—a drug that helps clear amyloid plaque from the brain seems to achieve that goal, but without showing meaningful differences in cognitive improvement (or delayed progression). The clinical trials proved this. FDA seems to be holding out hope that this mechanism of action will be proven beneficial at some point in the future. Certainly, they do not have this evidence to date. The fact that the approval will require a phase 4 clinical trial to support this hope is frankly uninspiring. Newly diagnosed patients will clamor for the drug, despite its poor record of efficacy and its significant risks, placing providers and payers in a difficult bind.
Alzheimer’s disease is a disorder heavily weighted toward the elderly population, and Medicare will be expected to bear the brunt of the bill for aducanumab. Early estimates have gone as high as $10 billion annually based on the prevalence and incidence of Alzheimer’s disease. This points to the immediate need for a national coverage determination (NCD) to help guide Medicare coverage. Health policy experts are calling for this to begin now. However, commercial payers will also need to make coverage policies pertaining to the agent.
In other words, payers will have their hands full trying to measure value against the projected $56,000 yearly cost of treatment. In an earlier analysis, ICER revealed that aducanumab may not be cost effective at one-tenth this price. Reacting to the approval, ICER sent out its own commentary, taking the FDA to task.
Payers, including Medicare Advantage plans, can utilize prior authorization criteria and step edits to manage appropriate access to this treatment. In this case, “appropriate access” may be very difficult to define, outside of an investigational clinical trial. Ordinarily, when products are approved by the Food and Drug Administration, there is an expectation of careful evaluation and decision making based on the efficacy and safety of the medication. In an accelerated approval scenario such as this, this expectation is not met. Judging from the cacophony of confusion coming from neurologists on this decision, I don’t believe that we have a clear understanding of whom this agent may benefit. Maybe it is just wishful thinking from the FDA that clearing amyloid plaque will somehow equate to better cognitive function (perhaps in a smaller subset of patients). Until we have real evidence that this is the case, a very conservative approach seems warranted. Let Biogen conduct the new study and prove the concept works. Until then, the number needed to treat, and the cost of that treatment, to gain benefit in one patient could indeed be enormous.
The pharmaceutical
industry sometimes forgets how payers calculate the value of their products.
Payers do not view value solely through the lenses of clinical efficacy,
safety, and utility. The case for the value of a COVID-19 vaccine to prevent disease
or an antiviral to prevent COVID-related serious complications and
hospitalization can readily be made. What about the following, less-obvious scenario?
A pharmaceutical offers some (but not high) level of clinical benefits in a common
disease state for which no other pharmacologic therapy has been proven to work?
It is surprising how
many disorders do not currently have effective, approved treatments. This is
particularly true in the orphan disease areas (especially ultra-orphan
diseases), in which fewer than 200,000 people have been afflicted by an illness.
Often, genetic mutation or deletion is the principal cause. In other cases,
like pancreatic cancer, outcomes with known therapies are considered minimally
effective. When speaking about a high-prevalence disorder, the same can be said
for nonalcoholic steatohepatitis (NASH). At least two therapies are in
late-stage trials, but many questions regarding their clinical and
quality-of-life outcomes are yet to be answered.
When developing a new
pharmaceutical for orphan diseases or more prevalent disorders that do not yet
have effective treatments, the calculation of value is not so well defined. In
our market research with payers, we find that the first treatment found to have
any clinical effectiveness for a disorder is likely to gain some level of coverage.
This does not mean it will be favored as a preferred product. One can assume
that prior authorization requirements will be the principal way in which access
is controlled, particularly when the drug is priced as a specialty
pharmaceutical.
This is why payers are
increasingly looking to organizations like the Institute
for Clinical and Economic Review (ICER) to help them set pricing standards
in the sometimes ambiguous world of pharmaceutical value. The analysts at ICER
take a direct approach to the consideration of pharmacoeconomics. They evaluate
whether the price proposed by the drug maker is cost effective based on its predicted
clinical improvement and potential medical cost offsets, and, perhaps more importantly,
at what price would the drug be cost effective?
The standard pharma
company method includes gaining payer feedback in several prelaunch phases.
This consists of presenting a condensed profile of “Product X,” which
highlights the new drug’s benefits (real or aspirational), risks of treatment,
and the intended patient population. After digesting this information, payers
(usually a mix of medical directors, pharmacy directors, and clinical pharmacists)
are offered a wide choice of potential prices, in an effort to better obtain a
narrower range of acceptable prices. Subsequent rounds of feedback are obtained
regarding rebates necessary to obtain preferred formulary placement and what prior
authorization criteria will be utilized to manage patient access.
Rarely, do pharma
companies directly ask the payers what price would make financial sense based
on the product’s apparent value. It seems an obvious question, and it does sometimes
get asked, but not often enough. This leaves payers (and most other
stakeholders) with the impression that the price is an actuarial business
decision: let’s pick a price point that maximizes revenue. This doesn’t mean
the price is indefensible, but it does imply there is little transparency or logic
to the pricing.
There are ample examples
where initial pricing was drastically changed once the agent was introduced and
caused an outcry that affected managed care plan coverage. Despite promising
the first medical cure for patients with hepatitis C, the initial price tag for
Gilead’s Solvaldi caused
an uproar. Cost increases to cancer products like Revlimid, which may be
associated with only incremental benefits, have been debated by oncology
centers like Memorial Sloan Kettering Cancer Center as well as by Congress. Manufacturers
like Amgen cut the price of their PCSK9 cholesterol-lowering agents by
60%, because of payers’ perception that the initial price was not rooted in
value (and their subsequent refusal to provide broad formulary access).
Too many specialty drugs
today and in the pipeline tomorrow carry price tags that do not align with
their claimed value. Biopharmaceutical companies should expend considerably
more time and effort incorporating payers’ assumptions and opinions on the
value of new medications before setting price, or at least really gauge their
reaction to proposed pricing well before launch. This will result in at least
some degree of price acceptance at launch or at least the impression that the
company cares about the payer perspective.
In a value-based health
system, this will matter a great deal.
SM Health Communications provides writing, consulting, and innovative market research services for the payer markets. Its proprietary P&T Insight™ virtual P&T Committee program is the leading mock P&T Committee product in the field. We’ve participated in many market research projects involving biosimilar development and launch, from the point of view of the biosimilar and the innovator drug manufacturer. For more information, please visit www.smhealthcom.com or contact Stanton R. Mehr, President, at stan.mehr@smhealthcom.com.
In our previous post, we documented the difficulties and challenges in considering a “Medicare-for-all” scenario to extend coverage to virtually everyone. We also discussed the potential for implementation of a “public option,” which was first proposed with the initial version of the Affordable Care Act. One of the least considered alternatives to extend universal coverage is Universal Catastrophic Care (UCC).
Any attempt at extending coverage to the fullest, appropriate American population should accomplish three objectives: (1) it should lower the risk of medical bankruptcy (or even eliminate the possibility), (2) vastly simplify the health system from the consumer’s point of view, and (3) lower overall costs (administrative and healthcare costs) from the society’s view. The chart below is a simplified view of how well the three mechanisms discussed in this series of posts attack these objectives.
Objective
Medicare for All
Public Option
Universal Catastrophic Care
Lower Risk of Medical Bankruptcy
+++
+
+++
Simplify Healthcare for the Patient
++
—
+++
Lower Overall Costs From Societal View
+
+
++
Health Insurance as Insurance Once Again
Insurance of nearly any type is supposed to protect people from unlikely, negative events. For auto or homeowners insurance, this means the unlikely prospect of a serious vehicular accident or fire in the home. A routine visit to a doctor is a regular occurrence for the majority of the population. Chronic prescription medicines are taken by a substantial portion of Americans. This does not fit the concept of insurance, wherein low costs are paid by the many so that they few have protection in times of need. With healthcare, most people have a regular need.
The problem for underwriters is that general health care delivery is not truly something that can be insured. Unlike auto insurance, it is a service that the majority of people utilize at some point of time, and the costs associated with that care are not limited. As it is, most people pay large sums each year on auto insurance and do not file claims in a given year. Health care, however, is a service that many people utilize at some point during the year, and some repeatedly. First-dollar coverage for many services, including preventive care, raises rates. A wide array of services covered raises rates. Increasing provider charges raises rates.
Universal catastrophic care enables healthcare insurance to act more like insurance once again. It resets the definition of health insurance to that of reinsurance. A design such as UCC prevents medical bankruptcy for most consumers who require expensive care–like in today’s traditional Medicare, government funding is used to pay for their expensive episode(s) of care. Instead of being funded through premiums, UCC will be financed through payroll and employer taxes, like the Medicare-for-all plans being raised today.
Under UCC, individuals would be responsible for paying for (or obtaining private health insurance to pay for) medical care up to a specific threshold expenditure. Everyone can buy this insurance through their own resources or through government subsidies (based on a sliding income scale). In simple terms, people with incomes qualifying for today’s Medicaid will pay nothing out of pocket; a person earning $300,000 a year must pay for all care up to the level defined as catastrophic care. Medical savings accounts like those seen today to pay for today’s care under a deductible can still be used to pay for medical care below the catastrophic care threshold. Beyond that level, the government pays all costs. Above this level, the government negotiates all bills and sets fees with physicians and hospitals, and other health providers.
For example, Mr. Jones chooses his doctor, any doctor he believes will serve him best (no referrals). His doctor says Mr. Jones needs surgical intervention. Prior authorization or precertification is not required (or is completed electronically, instantaneously for highly complex cases only). He chooses any hospital he wants to perform the surgery, because the hospital network is universal. He is treated by numerous professionals, none of whom are “out-of-network,” because every credentialed provider is part of the UCC network. All hospitals and providers must meet accreditation and quality standards to operate.
What Happens Before
Reaching the Catastrophic Care Threshold?
Before reaching the UCC threshold, Mr. Jones pays up to the preset threshold amount for all his medical care (it is also possible that dental/ vision can be added to this benefit, depending on financing). This threshold will be calculated based on the initial target national health expenditure. Let’s say that this number is set at $8,000 for 2022. Mr. Jones, who earns a moderate income, would be asked to pay for all of his care up to this amount or purchase health insurance that covered this care up to $8,000 (family care limits may be something similar to today’s high-deductible limits). If Mr. Jones earned very little (i.e., qualified for Medicaid in today’s system), the government would subsidize 100% of his payments. Patients with preexisting conditions may be compensated with a credit towards their initial cost of care. Remember, relatively few patients would require care that costs more than $2,000 in any given year. Overall, the vast majority of people would pay far less in premiums and incur lower costs than they do under today’s system.
A person who wished to purchase coverage for an individual or their family from traditional health insurers up to the threshold amount should be subject to very low premiums. This is because health benefits costs are capped at a relatively low amount. And insurers may not find it necessary to require any tiered networks or other marginal mechanisms to hold down excessive costs. Furthermore, health insurance companies will need to market themselves differently than they do today to capture consumer marketshare—with this structure, Medicaid and Medicare can be folded into this system (or not), while providing the same or improved benefits to consumers.
Marketing to People, not to Health Plans
This also means that hospitals and other centers must be more consumer centric in their approach, as the patient is more directly involved with choosing a provider, without unnecessary gatekeeping referrals, or other forms of authorization.
Optimally, the hospital would be paid a single global fee for its inpatient services, medication use, and follow-up care. Optimally, drug companies would be paid a standard fee for outpatient medications (they are also paid a standard negotiated fee for inpatient medications; payment does not vary by hospital).
For routine office visits and elected procedures, the patient chooses their providers, with as much information on quality that can be made available. The hospital and/or physicians must compete for that patient, especially for those initial, below-the-threshold dollars.
Today, we pay $3.7 trillion on US health care expenditures, or more than $11,200 per person, which is far more than any other nation pays for their advanced health care systems. In comparison, UCC has the potential to lower this amount, while providing care access for every US citizen.
Simplicity. Competing for patient dollars. Quality. No preexisting exclusions. The health care system can be refreshingly simple, wherein patient choice carries much greater weight (which would enable the market to work better), where physician practices would reap savings in administration, and where patients and consumers might actually see considerably lower costs.
Several complex issues would need to be addressed, such as setting fees, labor practices, medical malpractice, the role of pharmacy benefits managers, encouraging routine vaccinations, and others, but this may be the simplest, most refined and rational way to deconstruct the decades-old patchwork machinery that has promoted rampant costs, decreased physician satisfaction, increased underinsurance, limited a patient’s ability to navigate the system, and ceded a world-leading position in health care effectiveness and innovation.
