Concerns about affordability of new drugs will continue to grow as innovation results in more single or short-term transformative therapies (SSTs) that produce benefits beyond what's been seen so far, Steven Pearson, president of the Institute for Clinical and Economic Review (ICER), said Tuesday at an ICER summit on valuing potential cures.

How society responds to those concerns will determine whether the drug pipeline of the future flows with more cures or new versions of chronic treatments.

Scott Schnuckle, senior vice president of pharmacy and business development at Health Partners, noted that 10,000 drugs are in the pipeline, many of which may prove to be SSTs.

Those new drugs could be budget-breakers if priced based on the value they might deliver. For instance, Pearson said a hypothetical one-time cure for a subset of patients with hemophilia would meet the quality-adjusted life year threshold if priced at $89 million.

Preparing for what's coming, ICER has proposed adaptations to the framework it uses in assessing the value of potential SSTs. The proposals are intended to help decision-makers conduct a more reliable and transparent evaluation of the uncertainty, value and value-based pricing of the drugs.

While drug companies use value to justify high prices for SSTs, some payers and policy experts are questioning that basis. If penicillin had been priced because of the value it provided, its use would have been limited and health care would have suffered, Schnuckle said.

He recognized the need to incentivize researchers and drug manufacturers to develop innovative drugs, but he said those incentives can't be built on an unsustainable price point. "It's really clear we're at a break point," he added. He and others at the summit pointed to the need for a societal discussion on how new drugs are priced.

In the past, U.S. payers have looked to generics to lower drug prices. But SSTs that are biologics won't see competition for at least 12 years, if ever. A cure has the potential to eradicate a disease, one participant noted, so it might never have competition.

In the meantime, drug companies cite competition as another justification for high launch prices, saying they have to recoup their investment before generics or biosimilars enter the market. That raises a question of fairness as patients who need a new drug when it launches carry the burden of paying for the drug manufacturer's investment and the perceived value of the drug.

There's also a question of what payers will cover. Because of current discounting factors, payers find it cheaper to pay for chronic treatments over time than to have an up-front payment for a cure, Pearson said.

Added to the pricing dilemma is the potential public perception that cures should be priced lower because they are seen as a necessity, Pearson said.

Uncertainties

While no one wanted to see a system that encourages drug companies to develop chronic treatments rather than cures, those at the summit grappled with how to fairly price SSTs in a sustainable way. There's an "intangible sense of what's fair" that's related to what's affordable, said Michael Sherman, chief medical officer at Harvard Pilgrim Health Care.

Outcomes-based contracting has been touted as a go-to solution for SSTs. But the absence of long-term clinical data can make such contracts challenging. Who defines the value of such therapies? And what's the cost if a drug fails? Should the drug company just refund the cost of the drug? Should it also have to cover the hospital care involved in delivering the therapy? Or should it cover the cost of care for the remainder of the patient's life?

Pearson asked whether the uncertainty should be woven into a lower price for new therapies that don't have long-term data or whether there should be "a fee for failure" in outcomes-based contracts. At the same time, he cautioned against "just cooking the books to keep the cost down," adding that "this isn't about the cost."

In moving forward with new assessment tools for SSTs, Pearson said ICER will need to consider whether value-based pricing should be modulated by the uncertainties and whether they should address opportunity costs. In addition, "we're going to have to rethink our definition of SSTs," he said.

ICER's proposed adaptations offer an alternative shared-savings, cost-effectiveness scenario in which the economic surplus of SSTs would be shared in different proportions between the innovator and the health system over time. Another key consideration is the standardization of the use of multiple methods to evaluate and address the uncertainty resulting from evidentiary limitations.

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