April 4, 2016
By Alex Keown, BioSpace.com Breaking News Staff
CAMBRIDGE, Mass. – The cost of prescription medications remains a sensitive topic of discussion among drug companies, patients and pharmaceutical stakeholders.
A panel of industry leaders took on the topic head-on last week and addressed value-based drug pricing at the annual meeting of the Massachusetts Biotechnology Council (MassBio). Representatives from pharma and biotech companies looked at the concept of innovative pricing, which is performance-based payment for innovative medicines used to treat serious medical conditions.
The idea is to set pricing for some medicines based on how well they work for patients. It will be an ongoing sticking point between drug companies and insurers, who argue they should pay less when drugs don’t work well in certain patients.
Many of these medicines have price tags of more than $100,000 per patient, which translates into billions of dollars. Forbes estimates that specialty drug spending in the United States is expected to reach more than $400 billion by 2020, a number that stood at $87 billion in 2012.
In a note describing the panel discussion, MassBio said drug prices are being negotiated as a value-based proposition that has the potential to send tsunami-like waves across the industry.
“How will this new thinking evolve? Will FDA off-label ambiguity restrict manufacturers from sharing pharmacoeconomic information? How will ‘clinical success’ be defined, and how will patient data be collected and shared?” MassBio asked.Some in the industry believe drug pricing innovation is inevitable.
“This is the big issue of the day,” Peter Pitts, president and co-founder of Center for Medicine in the Public Interest, said in an interview with BioSpace .
Pitts, the former associate commissioner for external relations for the U.S. Food and Drug Administration, moderated the panel. This is not the first time Pitts has talked about innovative pricing measures. He said the older pricing models are no longer working and the industry must look at new methods to ensure the drugs get into the hands of people who need them. It’s a somewhat straightforward pricing concept. Rather than paying for all drugs and seeing what works for a patient, insurers and other providers will “pay for outcome and see what works,” he said.
Innovative pricing is something that can be achieved on a wider scale as better diagnostics tools become available and money will not be wasted finding the most suitable drugs on a per-patient basis, Pitts said.
Pitts said there are players within the pharmaceutical industry who are working on innovative pricing, but he said the question is which companies will be on the “cutting edge” of the movement.
“This is a very exciting time,” Pitts said.
Roger Longman, chief executive officer of Westport, Conn.-based Real Endpoints and one of the MassBio panelists, said payers have become “more important decision-makers about prescribing options than physicians.”
Real Endpoints is a healthcare information and analytics company that prepares healthcare providers, payers and pharmaceutical companies for the value-based healthcare economy.
Longman said it’s important for the biopharmaceutical industry to understand how customers make money and the “variety of ways payers can and can’t limit use of their products.”
Longman said a Medicaid line of business for a payer will make different decisions than a commercial line of business. Biopharmas need to focus on best value in class and defining best value from the point of view of payers, Longman said.
“Because of specific payer incentives, the value of a first- or best-in-class drug is shrinking,” Longman said.
There are some steps biopharma companies will have to examine if they want to shift to an outcomes-based pricing method, Longman said, including changing the FDA’s rules around off-label marketing and figuring out ways of making the data used to establish the outcomes criteria readily available to both payer and biopharma companies.
“Value-based pricing is coming and the value frameworks will be driving key parts of the math,” Longman said.
Other panel members include Laurie Bartlett Keating, counsel for Alnylam , Sue Hager, vice president of communications for Foundation Medicine and Steven Hass, vice president for patient outcomes and medical economics at Sanofi Genzyme .
John Maraganore, chief executive officer of Alnylam, is a proponent of the innovative pricing movement. In an earlier interview with BioSpace, Maraganore said he believes medicines that are “transformative and effective” should be valued correctly by payers. If those medications are not working though, patients should not be penalized financially for them.
