New Strategies Sought to Pay for Costly Cures

As Congressional leaders and White House policymakers assess a range of measures designed to manage or reduce outlays for prescription drugs, pharma companies and other stakeholders are weighing innovative reimbursement models for new therapies promising to cure or treat serious illnesses. Payers, manufacturers, providers, and patient advocates are collaborating on projects proposing to pay for such medicines over time and that vary related to

Jill Wechsler

evidence of treatment effectiveness and safety.

The issue has moved to center stage as more biopharma companies near market approval for new therapies with six- and seven-figure price tags. Sight-loss therapy Luxturna from Spark Therapeutics is priced at $850,000 in the US; new cellular cancer drugs list for $400,000 to over $600,000, and more are on the way. Novartis’ new gene therapy treatment, Zolgensma, promises to cure spinal muscular atrophy (SMA), a lethal inherited disease in infants, but at a $2 million cost for one-time treatment. This is slated to set off a battle for market share with Biogen, which already offers a competitive treatment, Spinraza, at a lower initial cost but requiring repeat injections through the patient’s lifetime. Biogen recently negotiated a coverage deal with the UK’s NICE (National Institute for Health & Care Excellence) to make Spinraza available to certain SMA patients at an undisclosed price. 

Cost concerns were on the agenda of the recent annual meeting of the American Society of Gene & Cell Therapy (ASGCT) in Washington, D.C., a departure from the usual scientific presentations on test results for promising therapies. So far the small number of patients eligible for treatment with the new therapies limits outlays, but that will change as more new breakthrough treatments come to market. Over the next 10 years, experts estimate that 40-60 cellular and gene therapies will be approved in the US, offering viable treatments for about 50,000 patients. The cost of curing a range of

serious genetic disorders, deadly cancers, and rare diseases will exceed $200 billion, according to the MIT FoCUS (Financing and Reimbursement of Cures in the US) consortium. 

These exciting gains are prompting a broad assessment of the promises and challenges for financing curative therapies. The FoCUS group and others are examining “precision financing” concepts, such as annuity-type arrangements that would allow one insurer to hand off a contract to another, and milestone-based contracts designed for state Medicaid programs. Installment payments by insurers and risk-based contracts for costly new therapies were discussed at the ASGACT meeting, along with concerns that such approaches may require exemptions from Medicaid “best price” reporting requirements.

Value-based payment arrangements for manufacturers and payers have received considerable attention, but raise questions about whether initial positive treatment results prove to be durable, or if promising therapies turn out to have limited benefits-or even harms-over the long run. In such cases, how would financing agreements respond and change? And how would long-term follow-up be covered? Such financing plans require agreement on what constitutes treatment “failure” and “success” and whether one insurer will accept a contract transferred from a competitor. In some cases, costs and benefits may not support treatment for an elderly individual, or for a patient that responds less than expected. 

Legislation likely?

These issues have emerged as Congress and the Trump administration struggle to devise legislation able to reduce drug costs more broadly. Analysts seek to maintain rewards for innovation, while expanding patient access to treatment at a cost that society can afford. Many policy makers insist that drug prices are too high to begin with and look to peg US rates to those at other industrial nations, such as the UK, Canada, and Japan. 

The administration has ordered pharma marketers to post list prices in DTC drug ads in the name of price transparency, but is reconsidering earlier proposals to limit or alter rebates paid by manufacturers to pharmacy benefit managers (PBMs). There’s much interest in boosting competition from generics and biosimilars to put pressure on brands, particularly to lower insulin prices, along with growing enthusiasm for more lenient importing of medicines, despite long-standing safety concerns. 

An agreement between Democrats and Republicans on some kind of legislation around drug pricing appears more likely this year than in the past, as consumers, states, payers, and Washington look to rein in healthcare spending. 

Industry and some patient advocates try to make the case that R&D cutbacks could limit the development of more innovative therapies, but political pressures appear to be boosting the chances for legislative action by 2020.

Jill Wechsler is Pharmaceutical Executive’s Washington Correspondent. She can be reached at jillwechsler7@gmail.com