economists conference london - challenges of the evolving health care environment

The Pharma LetterKeywords: challenges, evolving, health, care, payer, environment, drug

Challenges of the evolving health care payer environment for drug firmsArticle | 19 March 2007Governments as drug payers are finding that health care is the biggest single item of public expenditure, with drugs the fastest growing item on the bill. As growth rates consistently rise faster than the gross domestic product, drug prices are perceived to threaten the long-term viability of health care systems. Unlike other major items of health care spending, such as physician and nursing staff wages, cuts in drug prices do not carry public disapproval, as they do not appear to harm people's livelihoods. Pamela Santoni, a senior principal at IMS Health said: "predictably, payers are applying management tools to curtail the growth in budget impact, thereby putting pharma profits at risk."

Ms Santoni was speaking at The Economist's 13th Annual Pharmaceutical Conference in London, UK, which was on the theme of "Growing pains: how to adapt in a changing market." She listed the market management tools employed by various countries as: the UK's National Institute of Health and Clinical Excellence's (NICE) guidelines (Marketletters passim); Germany's Institute for Quality and Efficiency in Health Care (IQWiG) guidance and reference pricing (known as "jumbo reference pricing;" Marketletters passim); France's clinical merit rating (ASMR) and price/volume agreements; The Italian Medicines Agency (AIFA) negotiations, Spain's visados (special approvals by a state inspector for patients before they can have a drug dispensed by a pharmacist) and innovation type assessments. In the USA, meanwhile, tier level and access restrictions, for example by a formulary, are the payer's budget control options.

Drug industry wants premium prices

The challenge for the drug industry, according to Ms Santoni, is to defend a premium price without sacrificing access or volume. The essential problem is that the drug industry's favored strategy is to develop superior products which command a premium price, such as Herceptin (trastuzumab), Gleevec/Glivec (imatinib mesylate) and enzyme replacement therapies. Products most at risk for potential access restrictions, Ms Santoni said, are those that are perceived not to offer superiority, of which she listed: thiazolidinediones (TZDs), atypicals, beta interferons, branded selective serotonin reuptake inhibitors (SSRIs), dopamine agonists, Avastin (bevacizumab), Erbitux (cetuximab), Sutent (sunitinib malate) and Nexavar (sorafenib).

Taking the example of TZDs, payers in the European Union consider the problem of poor diabetes control as one of compliance and not efficacy of the drugs. To EU payers, the issues are patient and physician education, patient compliance, controlling obesity through diet and exercise programs and better diagnostic rates. The attitudes of European payers were summed up in a statement from a UK

of 4Challenges of the evolving health care payer environment for drug firms - Pharmaceutical...

5/10/2013http://www.thepharmaletter.com/file/30183/challenges-of-the-evolving-health-care-payer-...

source who told IMS Health: "if a patient is non-compliant on a cheap drug, [he or she] will be equally non-compliant on an expensive one."

Clinical improvements in diabetes control are therefore looked for in terms of overall HbA1C, patient response rates, treatment success, eliminating the need for a second oral antidiabetic drug and a reduction in cardiovascular events. Safety concerns were used to restrict access to TZDs in the EU's five major markets (Germany, UK, France, Italy and Spain). In Germany, for instance, the Federal Joint-Committee (G-BA) of the medical profession's self-governing body recommended TZDs for patients who are not good candidates for metformin and other generic antidiabetic drugs. In the UK, the NICE guidance relegated TZDs to second or third line use for type 2 diabetes. In the decade beginning 1995, restrictions on TZDs were lifted, leading to an over 300% increase in sales in the "big five" EU markets, with France leading the way.

Payers expect head-to-head trials against gold standard treatments

In the USA, even in a highly sensitive therapy class with no generics available, an equally efficacious diabetes product will be at a disadvantage unless it offers a price concession in the 10%-15% below parity range. Ms Santoni noted that payers are expecting head-to-head trials against gold standard treatments that demonstrate superiority on key endpoints. "Statistically significant is no longer adequate, payers want real outcomes data," she said.

Payers want to see outcomes data linked to cost-effectiveness and savings. For example, comparative responder rates and sub-segment analysis can support efficacy claims and sustain financial costing arguments.

Evidence of improved treatment compliance will resonate with payers, but, Ms Santoni explained, such data are difficult to demonstrate in clinical trials, so analysis of trial discontinuation may be helpful.

Payers are skeptical about some clinical trial conclusions

Another problem is that payers are skeptical about the conclusions that are presented to them from clinical trial data. In the case of the PROspective pioglitAzone Clinical Trial In macroVascular Events (PROActive), in late 2005, a study of cardiovascular outcomes for patients using Japan-based Takeda's Actos (pioglitazone) reported that the drug significantly reduces the risk of CV events including heart attacks, strokes and death in high-risk patients.

Payers "looked for excuses" to discount PROActive results

Payers looked for, and found, reasons or excuses for discounting the PROActive results. The trial's design was "ambiguous" about whether edemas were included as "CV events." Improved outcomes shown from adding TZDs were not sufficient to justify their use as front-line therapies. Payers also argued that a relative risk reduction of 16% in high-risk patients was insufficient and would not justify prescribing TZDs for the entire diabetic population.



In addition to discounting the findings, payers claimed to be waiting for the results of head-to-head trials involving TZDs versus metformin as a monotherapy as well as in combination with sulfonylureas.

German reference pricing system undermines future market for some classes of drug

Ms Santoni also examined the German reference pricing system, which, she argued, threatens to undermine the future market for many classes of drugs. The system adopted in Germany allows free pricing, but with reimbursement limits. The assumption is that drugmakers will lower their prices to the reimbursement level, for fear of losing market share to other drugs in the same class.

However, the "jumbo" reference pricing method utilized in Germany does not simply group drugs with identical active ingredients (level 1), but also drugs with pharmacologically equivalent substances (level 2) and drugs with an equivalent therapeutic effect (level 3). If only one of the drugs in a "jumbo" reference group reaches the end of its patent protection, all products in the class are likely to face arbitrary price cuts.

Pfizer says "No!"

Pfizer has challenged the cozy political assumptions about the reference pricing method in Germany by simply refusing to lower its price for the blockbuster statin Lipitor (avorstatin). By refusing to lower the unit price, the US drug giant accepted a lower volume of sales in order to maintain its unit revenues. From 2003 to 2005, when the reference price hit Lipitor, sales fell over 75% in volume, yet statins as a whole fell back 25% at a time when sales by volume "rose dramatically," Ms Santoni said.

In order to avoid clustering in a "jumbo" class, drugmakers may attempt to demonstrate a different mode of action, efficacy or safety via clinical end-point studies. Taking in account some of the potential difficulties raised by excessive bundling together of drugs, whilst aiming to make savings overall, the German government passed the Economic Efficiency in Drug Supply Act (AVWG) in May last year. The new law went into effect in July, triggering price cuts in 3,000 drugs (Marketletter October 2, 2006). "This relaxes the rules on reference pricing and enables products with a new mode of action to escape clustering even without therapeutic improvements," Ms Santoni explained.

As a result, drug firms are adding the threat of "me too" drugs to their marketing decisions. If a drug is not going to be first or second in class, there is a strong case for not developing the drug at all, if reference pricing is going to hit the drug's patent-protected revenue potential, unless they can clearly demonstrate superior efficacy.

Unintended consequence of price control: less choice, reducing future competition

This is likely to hit R&D at a time when there are already problems in developing next-generation blockbusters (Marketletters passim). As an unintended consequence, some classes of drugs may even find that there are fewer drugs to choose from, which in turn will tend to mean higher prices.

In France, new indications receive a new ASMR rating. Although an indication launch sequence will determine the achievable price, this does not preclude subsequent price volume negotiations.



Meanwhile, in the UK, primary care trusts will follow the NICE's guidelines, but until there has been a review by the authority, PCTs have a tendency to refuse to provide a drug via the National Health Service.

Oncology is major growth area

As a consequence of the pressure by payers against accepting premium prices for drugs that are perceived to offer only "incremental improvements," R&D is shifting into newer areas. IMS Health forecasts that by 2009, the oncology drug market will reach $55.0 billion, from $24.0 billion in 2004, overtaking the currently leading therapy class, statins, which are expected to grow from $27.0 billion in 2004 to $38.0 billion in 2009. The other most notable growth areas are angiotension II inhibitors, platelet aggregation inhibitors and osteoporosis drugs, all of which are predicted to almost double their markets in the 2004-2009 period.

However, if the number of oncology treatments grows, the willingness and ability of US insurers to manage these products will also increase. Reforms to the Medicare system, combined with a trend away from employer-provided health insurance, mean that the burden of oncology is new to US insurance plans. The influx of directly competing products, Ms Santoni notes, gives stakeholders the means to compare. In breast cancer for instance, UK-based drug giant GlaxoSmithKline's lapatanib is likely to be benchmarked against Swiss drug major Roche's Herceptin. In the EU, the accent is on cost-effectiveness. One German payer told Ms Santoni: "in the future, I don't think that claims such as one month survival improvement will get much approval."

Related CompaniesPfizerGlaxoSmithKlineGSKRocheGo to company listing

Related DrugstrastuzumabHerceptinSutentSunitinib MalateSorafenibGo to drug listing

© 2013 thepharmaletter.com

HOME RSS ABOUT US SUBSCRIBE TERMS AND CONDITIONS ARTICLE ARCHIVE

Site powered by WORKSsitebuilder CMS



economists conference london - challenges of the evolving health care environment

Documents