ADVISORY REPORT AM PL E PA G ES S A S G ES A FirstWord Dossier Advisory report
Published Copyright 2016 Doctor s Guide Publishing Limited Part of the FirstWord Dossier family of reports exploring important trends and challenging issues affecting pharma, FirstWord Dossier Advisory Reports and Highlights provide actionable insights derived from deep-dive primary research with thought leaders from across the stakeholder spectrum through an in-depth report and a management summary of key findings ensuring clients are up to speed and can bring others up to speed quickly. All rights reserved. No part of this publication may be reproduced or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping or storage in information retrieval systems without the express permission of the publisher. This report contains information from numerous sources that Doctor s Guide Publishing Limited believes to be reliable but for which accuracy cannot be guaranteed. Doctor s Guide Publishing Limited does not accept responsibility for any loss incurred by any person who acts or who fails to act as a result of information published in this document. Any views and opinions expressed by third parties and reproduced in this document are not necessarily the views and opinions of Doctor s Guide Publishing Limited. Any views and opinions expressed by individuals and reproduced in this document are not necessarily the views and opinions of their employers. Cover image: Xuejun li AdobeStock
Contents Executive Summary 1 Research Objective and Methodology 2 A challenge for payers 4 Key insights 4 US specialty drug spend doubles in five years 5 US payers concerned about budget sustainability 6 Europe tightening up specialty drug management 7 European payers also worried about specialty drugs 9 Defining specialty medicines 12 Key insights 12 US specialty definitions are more precise 14 Specialty is more of a concept than a category in EU5 16 The cost of specialty medicines 20 Key insights 20 European payers under pressure 23 Oncology costs and more 26 Specialty medicines at special prices 31 Specialty drugs are costly to manage too 32 Can patients afford specialty medicines? 35 Better Value in the long term? 38 Many more specialty products to come 41 All Contents Copyright 2016 Doctor s Guide Publishing Limited. All Rights Reserved www.fwreports.com i
How payers are managing specialty drug costs 45 Key insights 45 US cost controls on specialty drugs 48 European cost controls on specialty drugs 60 Managing specialty drug costs in Germany 60 Managing specialty drug costs in Italy 65 Managing specialty drug costs in the UK 67 Managing specialty drug costs in Spain 71 Managing specialty drug costs in France 76 Emerging strategies for specialty medicines 80 Key Insights 80 Horizon-scanning for specialty medicines 81 Biomarkers and patient segmentation 82 Help from biosimilars 85 Conclusion: the promise of specialty drug outcomes 89 Payer biographies 92 All Contents Copyright 2016 Doctor s Guide Publishing Limited. All Rights Reserved www.fwreports.com ii
Research Objective and Methodology This report looks at how governments, insurers and other payers in the US and the EU5 markets are managing the fast-rising costs of a new wave of specialty medicines. It assesses the financial impact of specialty drugs and what that means for payers, healthcare systems and patients. The report then analyses strategies currently employed in each of these markets to accommodate specialty drug costs, whether they are successful, and how these strategies are likely to evolve in the future. The research methodology included a wide-ranging review of available literature on, and media coverage of, pricing and reimbursement developments worldwide, followed by in-depth interviews with payers responsible for drug budgets in the US and EU5. Information was obtained from publicly available sources of information and from previously published FirstWord reports and analysis. Experts interviewed for this report include: 1. Pharmacy director at US managed care organisation 2. Pharmacy director at US managed care organisation 3. Pharmacy director at US managed care organisation 4. Pharmacy director at NHS Trust in England 5. Pharmacy director at academic hospital in France 6. Head of drug review and medication for German health insurers 7. National and regional drug-budget manager in Italy 8. Drug reviewer for national formulary access in Spain Key questions answered in the report Key questions that were asked during the course of the research included: Is there a clear definition of specialty drugs in your market for budgeting and reimbursement purposes? Which types of drugs fall into this category and which are the most challenging in terms of present and future cost burden? Do payers feel that the price and cost of some specialty drugs are justified or merely opportunistic? All Contents Copyright 2016 Doctor s Guide Publishing Limited. All Rights Reserved www.fwreports.com 2
Are these extra costs being offset by savings in other parts of the healthcare system or broader societal gains? Do specialty drugs impose additional burdens on payers due to the complexity of administration/titration/monitoring, etc., and would an associated shift from primary to secondary/tertiary-care patient management offset this? Does the care setting also entail more complexity in billing for specialty medicines and tracking costs (e.g., US costs buried in medical benefit claims) What efforts are payers making to instill more transparency in specialty drug prices and costs, and are manufacturers supporting these efforts? How are publicly-funded reimbursement systems adjusting to cost inflation from specialty drugs (e.g., HTA interventions, prescribing restrictions, risk-sharing, prior authorisation, discount arrangements, etc.)? How are private payers and insurers absorbing these costs (e.g., tiered formularies, patient co-payments, discounting, prior authorisation, disease-management programmes, etc.)? Are some of these adjustments leading to prohibitive drug costs for patients? Is this likely to result in more national- or state-level legislation imposing payment caps on specialty drug tiers How much are these initiatives undertaken in collaboration with manufacturers and is there earlier dialogue/horizon-scanning to ensure that high drug costs do not come as a shock to payers? How much does assessment of long-term product value and outcomes enter into these discussions? How will biomarkers and other patient-segmentation strategies help to ensure specialty drugs do not overwhelm payer budgets? Do payers envisage the solutions to these issues coming from more stringent price control or from more creative reimbursement arrangements? How can the high upfront costs of some specialty drugs be reconciled with payers and health systems traditional budget cycles? How much is competition from pipeline products, generics and biosimilars expected to relieve these cost pressures? All Contents Copyright 2016 Doctor s Guide Publishing Limited. All Rights Reserved www.fwreports.com 3
Can patients afford specialty medicines? As is evident from the GAO findings, patients not covered by the tax-funded single-payer healthcare systems found in Europe may find health insurers or pharmacy benefit managers imposing prohibitive co-insurance rates for specialty medicines. According to a recent study by the AARP Public Policy Institute, which looked at the average retail cost (not factoring in discounts or rebates) of 622 prescription drugs, including for 115 specialty medicines, the average annual cost of therapy for a specialty product was $53,384 in 2013, which is higher than the US median household income. 41 By comparison, the average annual retail cost, pre-discounts, for a brand-name prescription drug was 18 times lower at $2,960 and generics were 189 times cheaper at $283 for the same year. In the study recently presented at the ASCO annual meeting, 42 researchers estimated the affordability of 15 generic and eight branded cancer drugs by calculating their median monthly cost as a percentage of gross domestic product per capita based on purchasing power parity (GDPcapPPP), without taking into account discounts or rebates to list prices. Cancer therapies were found to be most affordable in Australia and the UK, where the average monthly price of patented drugs was 71 percent and 78 percent of respective GDPcapPPP values. In the US, branded and generic cancer drugs cost 192 percent and 14 percent, respectively, of GDPcapPPP. That compared with 288 percent and 313 percent of GDPcapPPP, respectively, for branded drugs in China and India, where the average monthly price of generic cancer drugs was 48 percent and 33 percent of GDPcapPPP, respectively. If you re giving some of these drugs, they are not only more than the median income, a lot of them are more than upper middle-class incomes. We re talking $100,000. Who s got that kind of money? Basically their prices are arbitrary. US PAYER There s co-insurance, but there are usually caps on the products. So for the preferred specialty tier, it s 10 percent co-insurance on average, with a cap of about $150 per month per prescription. For non-preferred, it s 20 percent co-insurance capped at $300. Since we authorise medical necessity and clinical criteria, and drive utilisation to preferred options, we don t want to make this egregious out of pocket cost for the patient. Now, some of the employer groups have the ability to increase the caps. Some could have a 30 percent co-insurance with a $500 out-of-pocket cap. That s really up to the benefit design, which potentially helps lower the premium, because it s pushing more of the cost onto the patient. US PAYER 41 Specialty drugs now cost more than the median household income. Carolyn Johnson. The Washington Post (November 2015). Retrieved from https://www.washingtonpost.com/news/wonk/wp/2015/11/20/specialty-drugs-now-cost-more-than-most-household-incomes. 42 Study suggests cancer drug prices highest in US, but least affordable in India, China. Anna Bratulic. FirstWord Pharma (June 2016). Retrieved from http://www.firstwordpharma.com/node/1389070#axzz4aslvhxqz. All Contents Copyright 2016 Doctor s Guide Publishing Limited. All Rights Reserved www.fwreports.com 35
Managing specialty drug costs in France As noted earlier (see Europe tightening up specialty drug management, page 7), specialty medicines used in secondary care in France are effectively exempt from budgetary controls if they are listed separately from the T2A tariff system used for reimbursement of hospital-only medicines in addition to standard inpatient fees, and on the basis of diagnosis-related groups (DRGs). To qualify for that exemption, and a guarantee of 100 percent reimbursement through Hors T2A listing, specialty drugs need to obtain an added medical benefit or ASMR (amélioration du service médical rendu) rating of at least III at the approval stage from the government s Transparency Committee (Commission de la Transparence) (see Specialty is more of a concept than a category in EU5, page 16). The cost of the drug is included in the daily cost of the hospitalisation. At the national level they say, we do want to pay for innovation, but just show me that the innovation is at least an ASMR of III in comparison with a cheap drug. FRENCH PAYER For the manufacturers it could change a lot of things between [ASMR] IV and III. Recently we had paclitaxel (Abraxane; Celgene). It only reached an ASMR of IV, because the clinical trial was done in comparison with gemcitabine, and because in the practice use, many physicians are using Folfirinox [leucovorin plus fluorouracil), The improvement from Abraxane/gemcitabine in comparison with Folfirinox was not so high, so they decided to give an ASMR of only IV [minor improvement]. That s terrible for the product and the manufacturer. Because of the ASMR, the drug is not on the Hors T2A list. It means that if we want to use this drug in the hospital, then we have to find the money on our budget using the DRG. FRENCH PAYER There are also clearly specified indications for Hors-T2A medicines, to avoid wastage or off label prescribing of specialty medicines. Ten years ago, with the arrival of monoclonal antibodies, we realised that the cost of some expensive drugs was higher than the daily cost of hospitalisation. That s why we set up a system to make those drugs available to any patients in France, but also to try to reduce wastage and off label use. This is what we call good contract use. For example, in oncology, if we want to use a monoclonal antibody, then at the beginning of the prescription, the physician will have to specify which indication among the validated indications is the one for his patient. Everything is done at the national level to make the restrictions. They will say, you can use this drug in this indication and you will be reimbursed. If it s another indication, it will be more difficult. You will have to justify it and provide some clinical data. FRENCH PAYER Given the cost pressures on the Hors-T2A list and on other areas of drug reimbursement or healthcare in France, it is likely that conditions for access to the specialty-medicines list for hospital inpatient use will eventually become more exacting. All Contents Copyright 2016 Doctor s Guide Publishing Limited. All Rights Reserved www.fwreports.com 76
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