Datamonitor Healthcare attended the ISPOR 21st Annual European Congress held in Barcelona on 10–14 November. Here, we present some of the hot topics discussed at the event, including:
The opinions of panelists given below are their own, and not do not represent their affiliated companies or institutions.
Throughout the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) 2018 European Conference in Barcelona, the rising cost of prescription drugs in the US, and Trump’s recent plans to introduce international reference pricing to European counterparts, were heavy topics of debate. Unlike in Canada and many of the European markets, where governments and health technology assessment (HTA) agencies determine the prices of pharmaceuticals based on their perceived additional value, manufacturers in the US are free to set their own prices for therapies. This has led to a situation in which brand growth has exceeded GDP growth, with healthcare spend per capita dwarfing that of any other high-income country. As the gap in spending between the US and the rest of the world continues to grow, President Trump’s administration has proposed a number of techniques, including International Price Indexing (IPI) in order to curb pharmaceutical expenditure.
Speaking at ISPOR, Patricia Danzon from the University of Pennsylvania highlighted issues with the US pharmaceutical supply chain which have led to vastly increasing healthcare spend. For retail therapies, which make up the majority of US drug prescriptions, insurance firms are able to negotiate rebates/discounts for therapies with manufacturing companies in exchange for preferred formulary placement. Danzon argued that while this mechanism worked well in the past for therapies with several available alternatives or in-class generic options, it may not be applicable for new generation specialty products, for which both patients and physicians are uncomfortable with health plans dictating prescribing patterns. Based on these preferences, insurance companies tend to list specialty products as fourth-tier therapies, requiring patients to pay between 20–30% co-pay; an amount which is likely completely unaffordable for the average US patient. Considering the unrealistic expectation of these fees, protective mechanisms have been implemented, such as annual out-of-pocket limits, Medicare/Medicaid subsidies, and manufacturer coupons. With patient fees often fully covered by these protective mechanisms, manufacturing companies have minimal barriers towards setting high prices for their specialty products.
Further issues with the US reimbursement system have led to pricing bias towards outpatient, infused biologics, with inpatient therapies often facing disproportionate pricing pressures from cash-tight hospital payers. Outpatient injectables are currently reimbursed through the buy-and-bill system, in which the physician rather than the insurance company is the direct purchaser of the drug. Physicians are reimbursed based on the average selling price plus a 6% margin, which critics argue incentivizes providers to prescribe high-cost therapies as they are subsequently rewarded with increased margins. In contrast to the outpatient reimbursement system, inpatient products often face significant pricing pressures from hospital payers which operate under diagnosis-related group bundled payments. Hospital physicians are often under tight budget pressures from payers, and thus price is a major deliberation when it comes to prescribing inpatient therapeutics.
In terms of rising US healthcare spend, Danzon also pointed to the problematic budgetary effects of orphan drug advantages. The US Orphan Drug Act was introduced in 1983, and provides manufacturing companies investing in orphan therapies with R&D tax credits, funding grants, and seven-year market exclusivity from competitors. In addition to these benefits, orphan drugs typically command much higher price tags than non-orphan therapies, despite having significantly lower R&D costs. Advocates of these rules argue that orphan drugs should have higher price tags due to their smaller target patient populations. However, others argue that rules on orphan drugs in the US are too loose, with many orphan therapies approved or used off-label in non-orphan indications, exceeding the 200,000 total patient population limit. With the blockbuster era of drug development a thing of the past, Danzon argues that further restrictions need to be placed on orphan drug developments, as with orphan indications now accounting for 30–40% of NDAs at the US FDA, increasing costs of these treatments will continue to have an extremely negative impact on US pharmaceutical expenditure.
The rising US drug expenditure, and the price per unit increases that have largely fueled that rise, have been under growing public scrutiny. During President’s Trump time in power, numerous policies have been proposed to tackle the growth in pharmaceutical spending. These include enabling Medicare formularies to negotiate lower prices for drugs with manufacturing companies, as well as removing gag clauses which prohibit pharmacists from telling patients when a prescription would be cheaper if paid for in cash, rather than through insurance. The most recent proposal by the Trump administration is to internationally price index Medicare part B products against prices in Europe. This proposal has been formed off the back of statements from the Department of Health and Human Services (HHS) and the Council of Economic Advisers (CEA), which have accused European nations of “freeloading” off high US drug prices. The CEA report suggests that innovation in the EU is not impacted by pricing, and therefore payers in member states can use various restriction methods to keep prices of pharmaceuticals just above marginal cost, including cost-effectiveness methods or reference pricing policies. The report concludes that meaningful reforms could address the free-riding that takes unfair advantages of American innovation, whether through enhanced trade policy, or by tying public reimbursement in the US to prices paid by foreign governments.
The recent proposal for IPI has been met with criticism from some of the leading health economists, who believe that the plan will not yield significant reductions in US pharmaceutical prices but could negatively impact access to therapies in Europe. Speaking at the 2018 conference, Adrian Towse, director of the Office of Health Economics in the UK, stated that the HHS scheme was either a cunning tactic to introduce some level of value-based pricing through the back door in the US, or a proxy for raising pharmaceutical prices in the EU. He argued that while this regulation might result in pharmaceutical companies setting higher list prices in Europe, the overall net price impact would be nominal as governments and HTA agencies would reactively negotiate higher confidential discounts. He also pointed to the possible worst-case scenario in which manufacturing companies abandon the European markets altogether in order to avoid reference pricing to lower-income countries. Commentators highlighted that value-based pricing of pharmaceuticals should be a highly nuanced, multi-stakeholder process, reflecting the willingness-to-pay (WTP) and budget constraints of the country in question. Linking US prices to countries with completely different healthcare systems, budget priorities, and expenditure limits goes against the concept of value-based pricing and would likely have a negative effect on R&D, with limited overall impact on global pharmaceutical expenditure.
Leading health economists at the European ISPOR conference proposed that a more workable solution to the issue of inequitable drug pricing in the US is the implementation of more consistent drug value frameworks. Danzon argues that in order to curb healthcare expenditure and optimally incentivize R&D, payers in each country should pay a consistent price per unit of health gain for all drugs (eg per quality-adjusted life year [QALY]). With incremental cost-effectiveness thresholds reflective of a country’s WTP, Danzon highlights that the US will inevitably pay higher prices for drugs than other, lower-income countries can. She argued that the use of value frameworks throughout the US healthcare system is a necessity, promoting future R&D into indications with the highest potential for value generation, and limiting overall pharmaceutical costs.
Various independent groups have developed value assessment frameworks in the US in order to determine the clinical and/or cost effectiveness of various high-cost treatments. These include value frameworks from the American College of Cardiology and the American Heart Association (ACC-AHA) for cardiovascular disease, while for cancer, there is the American Society of Clinical Oncology (ASCO) Value Framework, the Drug Abacus from the Memorial Sloan Kettering Cancer Center, and the National Comprehensive Cancer Network’s (NCCN) Evidence Blocks. The Institute for Clinical and Economic Review (ICER) Value Assessment Framework is arguably the most influential in the US, and is the first to address drug prices using cost-effectiveness methods. The body conducts evidence reviews on drugs, which combine analyses of comparative clinical effectiveness and cost effectiveness in a way that produces recommendations for “value-based” price benchmarks. While ICER is a non-governmental, independent organization, its influence in the US is growing, with a number of healthcare formularies using ICER-derived value-based prices of pharmaceuticals as a benchmark for negotiations. The most recent example of this comes from CVS Caremark’s announcement that it will allow clients to exclude any drug launched at a price greater $100,000 per QALY from their plan, based on ICER estimates.
The ability and willingness of review bodies such as ICER to conduct value assessments, and the increasing acceptance of these results by insurance companies, demonstrates the growing appetite for value-based pricing in the US. However, while widespread adoption of value-based pricing would likely solve the issue of high US drug prices, stakeholders highlight the need for legislative changes which would permit institutions such as ICER to take on a legal role in the process. Whether the US environment is ready for such a change is another question, and the likelihood of any legislation being passed in the current political climate is low, as these changes would require unified, bipartisan support.
The challenges associated with the pricing and reimbursement of potentially curative therapies continued to dominate discussions at the ISPOR 21st Annual European Congress in Barcelona, echoing last year’s meeting. Considering the increasing number of cell and gene (C&G) therapies and cancer immunotherapies gaining approvals, and their significant budget impacts, this topic has been identified as a high priority in the pricing and reimbursement space. These innovations have demonstrated treatment effects that have never been seen before, in some of the most high-risk patient populations, often providing long-term durable responses and with increasing numbers of patients being considered cured. However, there are a number of challenges that exist with the valuing and funding of these treatments, including high upfront treatment costs, uncertain evidence bases, small patient populations, system disruption, and uncertainty regarding inclusion of additional elements of value which are not part of standard cost-effectiveness methods. Leading stakeholders in the field discussed the key issues and future action points for these treatments in several sessions at the ISPOR conference, including “Valuing a cure: Are new approaches needed?”, “Do novel value measures have a place in European HTA?”, and “Embracing the societal perspective for HTAs: Will it become the new standard reference case?”.
Several speakers at the ISPOR conference stressed the need to incorporate wider value measurements into the cost-effectiveness assessments of potentially curative treatments. Health technology assessment bodies in the UK, Canada, and Australia, as well as ICER in the US, utilize the quality-adjusted life year as the key metric for their cost-effectiveness analyses. Steven D. Pearson, the founder and president of ICER, pointed to several other elements of value which go beyond the direct benefits accrued to the patient, and may not be adequately captured by the QALY metric. Some of these novel value measurements include productivity savings, severity of disease, value of hope (potential to provide a cure), positive impact outside of the family (including schools and communities), and scientific spillover.
“These additional metrics are not unique to potential cures, but I find often that their consideration is somehow felt to be more important because the cures are potentially so transformational”, stated Pearson. Pearson, along with several other panelists at the ISPOR congress, argued that by using the standard QALY metric for C&G, as well as cancer immunotherapies, key elements of value are likely to be missed. Jens Grueger, global head of access at Roche, pointed to the fact that current HTA processes were created during the blockbuster era of drug development, in which chronic treatments were developed for large, high-impact indications. These HTA systems, which are heavily focused on patient-relevant endpoints, such as mortality, morbidity, and quality of life, may not be optimal for potentially curative therapies, and instead cost-effectiveness methods should incorporate wider notions of value, such as societal impact and the value of hope.
With many novel, potentially curative treatments targeting previously untreatable patient populations, Grueger stressed the need for widened value measurements which consider both unmet need and disease severity. He highlighted that therapies targeting these previously untreated populations often struggle in cost-effectiveness assessments, due to the fact that the direct treatment costs associated with the patient populations have historically been very low. By using standard value metrics, decision makers are likely to miss some of the wider benefits accrued by these treatments and thus risk the products being deemed not cost-effective. He pointed to the value of providing a successful treatment in patients for whom other treatments have failed, and also the benefit derived from conducting research into a previously understudied area, increasing our knowledge in the space, and enabling future research which is likely to provide greater therapeutic benefits (ie scientific spillover).
During the session named “Novel value measures: Do they have a place in European HTA?”, Mark Sculpher, from the Centre for Health Economics at the University of York, highlighted that while novel value measures are likely useful when it comes to the assessment of innovative treatments, it will be highly challenging to reach a social consensus on which of these factors should be incorporated, and what weightings each should be given. He highlighted that quantifying trade-offs is extremely difficult, with many current systems often dealing with these trade-offs qualitatively, rather than through quantitative methods. Furthermore, Sculpher argued that if we widened the scope of our value measurements, we would have to broaden our notion of opportunity cost, considering additional factors other than just alternative therapeutics, and adding a further layer of complexity into the value assessment process.
Traditional payment and financing models may be suboptimal to support adoption, patient access, and continued innovation of potentially curative therapies. Panelists at the ISPOR congress repeatedly highlighted the need to consider both long-term value for money, as well as short-term affordability, when it comes to the assessment of a therapy’s cost-effectiveness. This is particularly relevant for CAR-T and gene therapies, which are associated with extremely high upfront costs and benefits that accrue over the course of a patient’s lifetime. Steven Pearson highlighted the need for new ways to measure the magnitude of lifetime gains and cost offsets for these innovative treatments, which go far beyond those generated by nearly all traditional therapies. Jens Grueger pointed to numerous financial solutions which have been suggested for C&G therapies, including annuity payments and performance-based schemes, but also highlighted that a consensus on best practice is yet to be reached. Annuity payments allow payers to fund curative therapies in installments over a number of years, improving the short-term affordability of the product, and perhaps increasing the willingness-to-pay threshold of the country. Performance-based schemes can also be employed, which either require full payment upfront and a rebate in case defined outcomes are not reached, or reduced upfront payments with a bonus payment when defined treatment outcomes are reached. Grueger stated that the most important question is to determine whether we agree that a cure is better than chronic treatment, and if so, how do we provide the right incentives and rewards to manufacturing companies investing in potentially curative therapies.
During the session named “Valuing a cure: Are new approaches needed?”, Mark Sculpher addressed three main areas of complexity which are highly relevant to curative therapies, including affordability and cost-effectiveness, evidential uncertainty, and claims for a higher societal value, and advised the audience on the tools available to address these challenges.
In terms of affordability and cost-effectiveness, Sculpher reiterated the importance of considering both long-term cost-effectiveness and short-term affordability, stating that the two must be inextricably linked when it comes to decision making. Therapies with high upfront costs, such as C&G therapies, are also associated with higher opportunity costs (ie more patients forgo greater health benefits in order to fund the expensive therapy). Based on this fact, Sculpher stressed the need for policy makers to utilize empirical estimates of opportunity cost that reflect the healthcare system’s marginal productivity, and also the requirement to modulate these estimates to reflect different levels of budget impact. He highlighted that, while relatively new, this research into opportunity costs already exists, through an international initiative, and should be utilized by healthcare systems to improve the accuracy of cost-effectiveness analyses for potentially curative therapies.
Addressing clinical uncertainty, Sculpher highlighted the relevance of this issue for potentially curative therapies, which are often approved based on single-arm trials, using surrogate endpoints, over relatively short time horizons. In oncology specifically, decision makers are familiar with the challenges of using progression-free survival as a surrogate for overall survival (OS), establishing whether there is a separation in OS curves based on immature trial data, extrapolating long-term OS from short-term clinical trial data, and now for putative cures, considering the long-term durability of the OS curve plateau, and what this means for the mortality risk of patients. Sculpher stated, “bottom line is – just like any other oncology product, putative cures in oncology, and indeed in any other area, give us an uncertain estimate of quality-adjusted survival, and indeed costs and potential cost offsets.” In order to address this uncertainty, he proposed numerous analytical processes, including determining the magnitude and cost of uncertainty, the feasibility and timing of research, and the extent of irrecoverable costs. Sculpher further pointed to the current policy responses which could help to address these uncertainties, including risk-sharing agreements, and the development of research either with or without funding, but highlighted that these techniques are not being optimally utilized by healthcare systems.
Overall, Sculpher agreed that further research into survival modeling, policy responses to uncertainty, and policy responses to high upfront costs, are always needed. However, he stressed that while innovative therapies require new techniques for value assessment, these are not unique to curative therapies, and the frameworks for these assessments already exist, but are not being used.
Panelists at the 2018 ISPOR congress debated the value of budget caps and expenditure limits in European healthcare systems, with special focus on their impact on health outcomes. These financial tools were originally introduced by several European healthcare authorities to control the budget impact of new hepatitis C therapies, but have since been utilized in other instances. For example, in France, a €700m per year budget cap has been set for all PD-1/PD-L1 inhibitors, and in Spain, expenditure limits have been introduced for a number of oncology drugs, including CDK4/6 inhibitors in breast cancer. Proponents of these mechanisms believe they are a necessary requirement to regulate the expenditure of a complex healthcare system based on its available budget. Critics believe that while these tools may offer short-term budget control, they ultimately hinder innovation and discourage competition between manufacturers.
Geert van Maanen, formerly with the Ministry of Health in the Netherlands, highlighted some of his perceived issues with budget caps and expenditure limits, stating that pharmaceutical spend will always hit a budget if it has been pre-set, and that there is a risk of long-term reductions in health quality. He added that in order to achieve financial stability, intelligent budgets must be created based on detailed information regarding providers and patients, and through heavy dialogue between both financial and healthcare officials.
Peter Smith from the University of York argued that budget caps and expenditure controls are a necessary feature for healthcare systems which are primarily funded by public money. While Smith highlighted a number of complexities with implementing budget control, such as duration of expenditure limits (eg annual, or over a number of years) and distribution of budgets to local entities and hospitals, he stressed that these methods were vital for maintaining solidarity and controlling long-term healthcare spending.
Felix Lobo, University Carlos III de Madrid, advocates the use of expenditure caps in Spain due to the vulnerable economic environment and lack of sound fiscal arrangement between the central government and regional authorities. Lobo highlighted that caps enable the government to define planned projections in a macroeconomic framework to fit together all expenditure functions, according to established priorities, to match macro stability and economic growth goals. However, he also recognized the potential pitfalls with these limits, including incentivizing the government not to proceed with further cost-control regulations under the perceived notion that “the work is done”. He further criticized the written contracts which form the basis of these financial agreements, stating that the clauses are not clearly written, the firms obliged to pay are not parties to the arrangement, and that the provisions in case the cap is overrun are not precise. Lobo highlighted that many paragraphs in the contracts are “softly written,” and that the outcomes of the contract, which are defined by the Monitoring Committee, are reliant on very broad guidelines. Lobo concluded his speech by recognizing that if Spain had a comprehensive and well-designed pharmaceutical policy, there would be no need for these expenditure caps. However, considering the unstable economic environment, and the lack of control between the government and autonomous regions, these financial caps are vital for keeping healthcare expenditure growth below growth in GDP.
4 Value-based pricing, rather than IPI, is the best solution to the US pricing problem
6 Toolkits for valuing and financing curative therapies already exist, but implementation is a challenge
8 Budget caps and expenditure limits: are they necessary?
10 ISPOR EUROPE 2018
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