Can Streamlined R&D Reduce Drug Prices?

The recent FDA approval of the first chimeric antigen receptor T cell (CAR-T) therapy to treat young patients with a serious form of leukemia reignited charges that high drug prices limit patient access to life-saving medicines. Novartis announced that it would charge $475,000 for treatment with Kymriah-less than most analysts anticipated, but a flash-point for advocates seeking to control pharmaceutical outlays.

Jill Wechsler

FDA always emphasizes that it does not consider price directly in drug regulatory decisions. But agency officials do see potential savings from several regulatory initiatives and transparency proposals. Commissioner Scott Gottlieb recently announced actions to streamline research policies to reduce the risk of failure in costly development programs. This complements agency efforts to promote competition by speeding more generic drugs to market and to challenge branded firms that “game our rules.” Payers and patients, says Gottlieb, thus should “capture those savings in the form of lower prices.” 

Research costly 

The savings may be considerable, particularly for cutting-edge therapies that benefit from FDA accelerated and breakthrough regulatory policies. A recent study claims that it costs only $648 million on average to develop a new cancer treatment, challenging the generally accepted $2.7 billion cost for developing a new drug, including the cost of failures and of capital as calculated by the Tufts Center for the Study of Drug Development. Even if the new analysis (published in JAMA Internal Medicine last month) is skewed by limited data and sketchy assumptions, it undermines the conventional wisdom that high pharma prices are needed to finance important research. 

In fact, it’s now well-accepted that drug prices reflect “what the market will bear” based on current and prospective competition and have little correlation to R&D outlays. Even so, policymakers expect that less costly preclinical and clinical testing and speedier approval and regulatory processes, as described in FDA’s “Medical Innovation Access Plan,” should lead to savings and improve public access to medicines. The agency thus seeks to modernize clinical data collection and encourage more informative clinical testing methods that provide useful data faster and more efficiently. FDA encourages sponsors to utilize “seamless” clinical trials, master protocols, model-informed development, and study enrichment strategies that help predict which patients will respond to treatment and those likely to suffer adverse effects. 

A high-profile initiative seeks greater use of real-world evidence to support decisions on product safety and efficacy. Both the 21st Century Cures Act and the newly authorized prescription drug user fee agreement expand FDA regulatory decision-making based on patient data from healthcare systems and observational

studies, an approach that FDA and stakeholders are examining further in several public workshops. The aim is to use data from health plans and registries to answer questions about treatment effects and outcomes for broader patient populations than possible in a specialized research environment.

FDA proposals for accelerating clinical research are not new, but sponsors have been reluctant to rely on them without clear assurance that the regulators will accept the data. Agency reviewers also look to expand their use of advanced computing tools and statistical and computational methodologies to evaluate more efficiently the sophisticated data submitted in applications. 

Calculating value

FDA acceptance of more real-world evidence on how well a drug treats a disease should bolster medical product value assessments that link drug prices and reimbursement to patient benefits, as Novartis has proposed for Kymriah. Under an innovative outcomes-based reimbursement arrangement, the Centers for Medicare & Medicaid Services (CMS) will pay Novartis for the drug only if patients respond after a month of treatment. 

The deal raises many questions about what constitutes “success,” who measures it, and why a one-month period was selected for measuring patient response. But the plan also is stimulating greater interest in

outcomes-based reimbursement policies. These adjust reimbursement to treatment success, with payment higher when individuals see improvement in health, and lower if patients fail to respond. There has been a trickle of such agreements between pharma companies and health plans, but progress has been hampered by limited consensus on how to measure health improvements and other outcomes, and payers have seen little or no savings so far.

Analysts acknowledge that even six-digit price tags on gene therapies may be justified if the medicine cures deadly cancer or reverses blindness. And such equations may be bolstered by comparing drug costs and outcomes to the enormous outlays involved in treating a cancer patient with bone-marrow transplants and other procedures for years. 

Long-term benefits, though, raise questions about who should pay the initial cost of drug treatment. Health plans with millions of enrollees can spread outlays for a very expensive therapy across broader populations, especially when treatment is highly targeted; the equation changes, though, when many individuals seek access to a new drug. One idea is that an insurer pay for initial coverage, followed by regular reimbursement if a drug continues to provide positive effects; another insurer would pick up the tab if the patient changes coverage. 

Strategies for reducing uncertainty in the regulatory process, and drug pricing schemes that reflect value and effectiveness, should be more palatable to marketers than public formularies, price controls, liberal drug import policies, and curbs on patent and exclusivity protections. Greater transparency in practices and prices may be inevitable, though, as payers demand more details on rebates and costs and FDA champions greater disclosure of drug safety issues and regulatory decisions that deny or delay approval of a new drug. 

Jill Wechsler is Pharmaceutical Executive’s Washington Correspondent. She can be reached at jllwechsler7@gmail.com