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The Pulse of the Pharmaceutical Industry

Payer Access Special Feature: Straining the system

Written by: | | Dated: Wednesday, June 6th, 2018


Current health systems built to evaluate and pay for traditional drugs are going to struggle with gene and other unusual therapies – but manufacturers can take steps before launch to define how manufacturers assess and value these new products.


As the approvals of CAR-T cell therapies, gene therapies, and the first digital therapy make headlines across the world, the first question asked is, “How much does this cost?” The second question is, “Who is going to pay for it?” And the third question, from the payer perspective, is “Why should I pay for it?”

In the United States, a fragmented healthcare delivery system, in which patients are forced to hop from insurer to insurer every few years, complicates matters. But even in Europe, where patients often stay with the same national system for a lifetime, the answers are not coming any easier.

The U.S. market has two CAR-T cell therapies – Kymriah from Novartis and Yescarta from Kite Pharma and Gilead – and the first gene therapy for a genetic disease, Luxturna, from Spark Therapeutics. Kymriah was approved in August 2017 for the treatment of certain pediatric and young adult patients with a form of acute lymphoblastic leukemia. Yescarta gained approval in October 2017 for treating adult patients with certain types of large B-cell lymphoma who have not responded to or who have relapsed after at least two other kinds of treatment. Luxturna was approved during December 2017 for treating children and adult patients with an inherited form of vision loss that may result in blindness.

In Europe, the gene therapy Glybera for lipoprotein lipase deficiency was approved in July 2012. Amgen’s oncolytic viral therapy Imlygic received U.S. approval for melanoma in October 2015. GSK’s gene therapy Strimvelis won EU clearance in May 2016 for ADA-SCID, or “bubble boy” syndrome.

All of these therapies have fairly high costs. Kymriah’s announced price was $475,000. Yescarta is $373,000. Luxturna is $850,000. When first announced on sale in Germany, Glybera’s price tag was close to $1 million, making it the most expensive drug in the world. Imlygic costs $65,000 for a six-month cost of treatment. Strimvelis was announced at €594,000 ($665,000) at the time of the drug’s approval.

A high price does not mean the drug will generate a lot of money for the company that made it, however. UniQure, the manufacturer of Glybera, let its license go for the product in Europe after only one patient was treated with the drug and the United States did not approve the gene therapy. And GlaxoSmithKline has sold off the platform of therapies that includes Strimvelis to Orchard Therapeutics. It took more than a year after its approval for Strimvelis to be used to treat a patient.

Still, as more gene and CAR-T therapies enter the market, especially in therapeutic categories with more patients, such as cancer, experts say manufacturers will have to up their game in establishing the true value of their therapies and working with payers on payment agreements.


What payers are saying

Jeremy Schafer, senior VP, payer access solutions, at Precision for Value, hypothesizes that when it comes to gene therapies, the U.S. healthcare system is not built for rewarding one-time products with long-term benefits.

Jeremy Schafer

“I think we saw the first inklings of this when Sovaldi came up for hepatitis C,” he says. “It was a revolutionary drug that cured the disease but the high up-front cost was a lot higher than a lot of payers were able to cope with.”

Gene therapy may be on a smaller scale because the conditions are not as prevalent as hepatitis C, Schafer says, but “if I am a payer in the United States, especially in the commercial world, I probably have my members for two to three years before they possibly switch health plans so making the investment of half a million dollars for their condition when they’re probably going to be gone in a couple of years is a tough pill to swallow.”

Before he and a colleague did a presentation about gene therapies at the recent AMCP meeting, Schafer says they surveyed a number of heath systems and payers to get their perspectives.

Schafer and his colleague, Alex Grosvenor, VP, global pricing and product strategy from the agency’s London office, found that many payers managed gene therapy by requiring prior authorization before administration.

Schafer and Grosvenor also asked about the initiatives Spark Therapeutics had unveiled when launching Luxturna. Spark had different offerings to help payers save money, whether it was having the drug go through a specific specialty pharmacy so they could eliminate the provider overhead, or a payment over time, annuity model, and also an outcomes agreement where payers would get a refund if the drug did not work. Novartis also pledged an outcomes agreement for the launch of Kymriah.

Alex Grosvenor

“We asked our pool of respondents if they actually had one of these outcomes agreements in place, and most of them, about 72 percent said they didn’t have any of those agreements in place,” Schafer says. “About 8 percent said they did for Kymriah and Yescarta, and about 12 percent for Luxturna. So they’re out there.”

When it came to asking about outcomes agreements or payments over time, Schafer says the survey asked payers if they had any interest in implementing these agreements and if they had the operational capacity to do so, “because it’s one thing to want to do something, it’s another thing to be actually able to do it,” Schafer says.

About 90 percent of the survey’s respondents stated that they could do the outcomes arrangement or the distribution through a specific specialty pharmacy, but only 72 percent said they could do the payments over time.

Schafer believes that “the payments over time idea is going to grow, but it’s the most lagging of the three and I think because it’s just new.

“Any time a new concept comes on it’s going to take some time to adoption. And I think the interest in implementation, about half were very or extremely interested in the specialty pharmacy or the outcomes agreement. Only 16 percent were very or extremely interested in the payments over time. The nice thing is that there is a fair amount of operational capability and interest in these alternative payment models, but like a lot of things, it will take time to grow in the market.”

Even though Europe has a socialized approach and patients are with the same payers for their lives, “they’re still struggling with upfront cost and identifying the right patients as well as directing the patients to the right area of care,” Schafer says.

According to Grosvenor, “As more of these treatments come on to the market, and see more efficacious treatments coming out of the pipeline in the gene therapy space, I think there is wide recognition from all stakeholders – payers, manufacturers, providers – that existing pricing models that we have for pharmaceutical products are just not going to be adequate for the gene therapies. These are one and done up-front treatments that have long-lasting benefits so that the current model that we have isn’t really fit for purpose when we try and force fit it to these new innovative treatments that have a very different profile to conventional pharmaceutical drugs.”


The question of a cure

Edward Saltzman, president and founder of Defined Health, which is a Cello Health business, says one of the central problems is though these therapies can be potentially be positioned as curative but there is no long-term data to back up these assertions.

“Unlike drugs for chronic management of disease where we know that they need to be administered regularly, the first and foremost strategic conundrum is what is the durability of effect and how do we price that in,” Saltzman says. “In other words, if I have to date my trial out to one year showing patients have not progressed, showing patients have no signs and symptoms of disease, is that a surrogate for five years or do I now have to have five years’ worth of data? The data do not exist not just because the therapies are new, but they’re not practical to do in a clinical development in a pre-commercial setting.”

Ultimately, it is a question of who is holding the money, Saltzman says. For example a manufacturer would rather get their cash up front. “If you’re a payer, you’d like to hold your cash, and pay with either no interest or very little interest on actual performance.”

Kymriah offered a money back guarantee after 30 days. “The problem is that, that’s defining the negative, how do I define the positive?” Saltzman says. “Is the $475,000 price commensurate to the benefit that I am able to cure over the long term a case of refractive pediatric ALL, in an 8 or 10 year old child who is now going to live a normal life? Is that worth $475,000? Is that worth $4.75 million? 99 percent of the issue here is around durability of effect. If you aren’t wrestling with durability of effect for a one-time treatment, then the value of these drugs, specifically what you’d have to show payers, is pretty much what you’d have to show them for any drug, which is that you have to justify the value.”

But trying to define a consistent financial picture in the United States for Kymriah is problematic because of the “extremely fragmented care delivery model, with differing incentives and costs along the value chain of delivery,” Saltzman says. “In the end, what will have to happen is if it turns out that pharma companies can only be paid – and it’s not about pay for performance because performance on Kymriah is binary. It’s defined as yes they responded or no they haven’t.”

In evaluating the “pay over time” model, Saltzman points out that expensive surgical procedures do not fall into that category.

“Suppose you are a surgeon, and I come to see you, and I have a heart valve defect, and that heart valve defect is a pretty serious congenital problem, and you fix it,” he says. “And for the rest of my life I lead a normal life. The surgeon, as well as the hospital and the facility and the operating room and everything else, they get paid everything right there, despite the fact that these benefits are going to accrue over my lifetime. In surgery we never talk about this, we never doubt this. You get paid, you get the full amount.”

Additionally, “surgery doesn’t come with money back guarantees,” Saltzman says.

“But for some reason when it’s a product, a gene therapy or a cell therapy, is defined from a service or an intervention, it’s looked upon differently. Logically it probably shouldn’t be looked upon differently. But it is different. I don’t think a manufacturer is going to be able to change the fact that it’s different, it will be perceived as different.”

Unlike gene therapies, however, most surgical procedures usually have decades of success to back them up. And gene therapies are still too new to have produced much data.

“There are a lot of questions, and none of them are addressed because we don’t have enough experience with these products,” Saltzman says. “There’s just going to be a lot of negotiation between payer and manufacturer and ultimately it’s going to be settled on a case by case situation.”

In trying to establish the value of their gene therapies, manufacturers may want to study how a gene therapy can replace chronic therapy in conditions such as hemophilia or lyosomal storage disorders.

“At least then you’ll have a benchmark,” Saltzman says. “The value should more or less be the same but it’s going to be a little higher for the gene therapy if it’s what you need to continuously treat the condition.”


Meanwhile in Europe

Grosvenor points out that like the United States, with so few gene therapy products on the market in Europe, “There’s not a great deal of substrate for analysis. But there are some things we can infer from some of the earlier evaluations and pricing negotiations that have been going on for these products. “

In his presentation with Schafer at AMCP he focused on Glybera and Strimvelis, and used some of the recent evaluations and pricing negotiations to give some early indications of how EMA authorities are going to handle negotiations for these treatments.

He notes that unlike the United States, where a product is available for commercialization immediately after approval, in Europe a product has to cross what is referred to as “the full hurdle.” That product, in most markets, still has to undergo an additional evaluation for pricing and reimbursement, and that assessment is looks at the incremental value that the product offers against the standard of care in any given market. “Different countries have different means of conducting those evaluations,” Grosvenor says. “They follow different methodologies to conduct what is known as a health technology assessment. So in France and Germany, it’s a very clinically based assessment, while in the UK, it’s a more technical health economic assessment akin to what you have in the U.S. nowadays with ICER.”

When Glybera was evaluated in France and Germany, they applied the same metrics and criteria for the assessment as they would for any conventional pharmaceutical product, according to Grosvenor. “There’s a saying in Europe that the payers will often bandy around, and they say they will pay for action, not mechanism of action,” he says. “They disregard the innovative, highly scientific approach that any new treatment may offer, that’s really not of great interest to the payers per se, but the focus for them is very much on the outcomes.”

Though it was the first approved gene therapy, Glybera’s lackluster reception by regulators in Germany and France stemmed from the fact that the evidence package did not show a significant benefit.

“In France they were critical of the primary endpoint, which is reduction in triglyceride levels, but they questioned the short and medium term of efficacy and the effect size on that primary endpoint as well,” Grosvenor says. “In Germany they focused a lot more on the study population, so of the 27 patients involved in the trials, they concluded only nine of those matched with the patient criteria in the label.”

UniQure in 2017 decided to withdraw Glybera from the market, and “that just kind of speaks to the fact that the drug did not offer a very compelling value proposition,” Grosvenor says. Only one person was actually treated in Germany. Despite that, UniQure managed to secure a price of €900,000, in direct negotiations with one of the health insurance companies in Germany and the treating hospital, the Charite in Berlin.

Glybera’s disappointing story ultimately underscores the challenges ahead for manufacturers, Grosvenor told Med Ad News.

“Gene therapies have been talked about for many years, and they are becoming a commercial reality, but I think there’s still work to be done to making these new treatments effective and there’s still work to be done to make sure they’re offering some of the curative potential that has often been talked about,” he says. “But what we do see from the Glybera example is that it is quite apparent that the pricing/reimbursement authorities that are conducting the HTAs will apply the same principles, the same core fundamentals to the assessments and evaluations they conduct for these new treatments. There will be no particular allowance given to the effect that these are high-tech treatments with very innovative and high-tech means of treating the underlying disease.”

Although plenty of other pharmaceutical products are launched without evidence of long-term efficacy, “the difference is that with gene therapies, this issue is magnified so that uncertainty is perhaps more pronounced for gene therapies than it would be for a new cancer medication where the manufacturer may not have long-term survival data to substantiate the survival benefit that treatment may have,” Grosvenor says. “With gene therapies you may be dealing with chronic long-term conditions, or life-threatening conditions where the gene therapy may have curative potential, but as you say, at the time of launch, the data doesn’t give a true and accurate idea of what that curative potential may or may not look like.”

The challenge for payers and manufacturers is how do they handle that uncertainty and translate that into a value-based price at launch, which may not reflect the true long-term value of the treatment. “Knowing that these gene therapies may have a very high cost of goods, there’s a risk that the value-based price at launch may not cover the very high cost of goods,” Grosvenor says. “If you have a large prevalent pool of patients that are waiting for a new innovative therapy that can create a bolus of patients that causes a big budget impact for payers that can be hard to handle from financial planning perspectives.”

One of the models that could theoretically address this issue is the annuity model, a mortgage-type approach where the cost of treatment is spread out over a number of years. “For example, it can be done such that the payment is made for as long as the patient continues to benefit from treatment,” he says. “It’s almost an outcomes-based or risk-based component to the agreement, rewards the manufacturer for prolonged efficacy and long-term outcomes while insulating the payer from exposure that the uncertainty may create with the lack of long-term outcomes data at the time of launch.”


What manufacturers should do

Schafer, in surveying health systems and payers before ACMP, asked what their primary concerns about gene therapy are. About a third said selecting appropriate patients, and another third said the potential need for retreatment.

The top information need according to about three-quarters of the respondents was about durability of response, Schafer says. “Understandably, the manufacturers may not be able to produce a lot of durability of response data at launch, but they should supply whatever they have. If they did Phase II studies or even Phase I a long time ago that may have some of this information, they should he able to supply whatever they have on the long-term followup events. Payers want to know that, so they should also have a strategy in place to show the durability of response over time.”

Manufacturers also should come to the market with some alternative payment model as Novartis did. “When they came into market, not only did they come in at a price point that was lower than expected, which I think was also smart, they had this outcomes arrangement in the press release,” Schafer says. “Right away there was less focus on the price and more focus on ‘what an innovative approach.’”

Almost 90 percent of respondents to the Precision for Value survey wanted a profile of the appropriate patient. “If as a payer I am going to put through a prior auth, and that’s going to be expected of me by my employer clients, so knowing who that patient is, is going to be absolutely critical,” Schafer explains. “It’s one thing if you accidentally administer a $2,000 drug to the wrong patient, it’s another thing when it’s a half-million-dollar drug.”

Another critical thing for manufacturers of gene therapies to remember is to get their products at least a temporary billing code for Medicare at launch. For example, Gilead blamed the slow uptake of Yescarta in the United States on the lack of a Medicare. Hospitals had put patients on a waiting list while waiting for word that they would get reimbursed.

“We only had five health system respondents in our survey but we did ask them if they have patients that are appropriate to therapy but if they don’t have payer approval yet, what do they do? And three out of the five said they require the patient to wait until they get payer approval that they’re going to be paid, without exception,” Schafer says. “One said they would administer the therapy but only if the patient signs a form saying they’ll pay for it if their health plan doesn’t. I am not sure how effective that is, because not a lot of people have a half a million laying around. And then one said it would depend on the severity of the condition.”


Prospects of the first digital therapy

Dr. William Carson, president and CEO of Otsuka Pharmaceutical Development & Commercialization, spoke at the Veeva Commercial Summit in Philadelphia about the challenges of Abilify MyCite, the first therapy that combines a pill with a sensor that digitally tracks if patients have ingested their medication. FDA approval came in November 2017. Otsuka conservatively went after approval for just three indications for Abilify MyCite: the treatment of adults with schizophrenia; the treatment of bipolar I disorder; and major depressive disorder.

William Carlson

The system works by sending a message from the pill’s sensor to a wearable patch. The patch transmits the information to a mobile application so that patients can track the ingestion of the medication on their smart phone. Patients can also permit their caregivers and physician to access the information through a web-based portal.

Otsuka is in negotiations at present with payers about Abilify MyCite and he can’t share any details of what the possible reimbursement will be, Dr. Carson told Med Ad News. Additionally, even though Otsuka has several gene therapies in development, the company will not be able to apply the lessons learned from the eventual launch of Abilify MyCite to these therapies.

“I think it’s going to be so different,” Dr. Carson says. “Pricing is clearly quite important and the challenge of trying to attach pricing back to the work that was done, the illness, all of those things are really very challenging but I think that you’d have to think of it almost on an individual case perspective. Especially when you start looking at very specific therapies, because orphan designations or rare disease designations really challenge our current understanding of how things work. “

There will be no strategy that the company can apply to HTA agencies around the word, Dr. Carson says.

“Wouldn’t it be great if we could have some overarching strategy, but we haven’t gotten there so far,” he says. “I think the agencies themselves are starting to work and talk together in a way that they haven’t beforehand, but I don’t believe that you’ll have a scenario where there will be one umbrella strategy around the globe. I think you will still have very specific strategies for each jurisdiction.

“They do want to know what other regulatory authorities know and are doing, but that doesn’t mean that changes their assessment. They’re going to be knowledgeable, but I don’t think that will change them doing their own specific thing.

“Again, the populations they are responsible for are different populations. And everybody wants to make sure – again, I am mostly talking about FDA, Europe, and Japan – you can’t compare necessarily the health systems, the patients, the treatment, and the lifestyle across each of those without saying here are differences, and here is how we recognize those differences. Now granted, when you get down to very specific things, like gene therapy, it gets a lot more closer, because that is more consistent with cause, so there would be a lot more similarities than we have now.”

Abilify MyCite will be available on a limited basis in 2018. According to Dr. Carson, this forestalled a rush of physicians and patients clamoring for the treatment “So all of us are waiting to see who, which payers, which providers, and which patients. And that’s going to be driven by whoever are the payers that we work with.”

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