Blog | 6/22/2015

Pricing Orphan and Specialty Drugs-Insights from the World Orphan Drug Congress & ISPOR

Andrew Funderburk interviews Carrie Jones on her recent attendance at the World Orphan Drug Congress and Julia Gaebler and Martha Boylston on the International Society for Pharmaeconomics and Outcomes Research (ISPOR) annual meeting.

Andrew: Carrie, you recently attended the World Orphan Drug Congress in DC.What was some of the buzz at the conference, particularly from the industry side?

Carrie:  One of the most hot, popular talks was a panel discussion that they had on the first day, which was the “great debate” and the topic to debate was, "The Price is too Damned High, or is it?" They had three different panelists talking about the price of orphan drugs and whether the pricing is sustainable moving forward, or if something needs to be done to try to get these prices down so that these therapies can be made available and payers will continue to pay for them.

Andrew:  I'm guessing if they had payers on the panel, they were in the ‘prices are too damn high’ camp?

Carrie:  They sure were. There were two of them, one was from Medicaid and one was from Aetna. Jeff Myers was on the ‘prices too damn high’ side, as well as Ed Pezalla, the national medical director for pharmacy policy and strategy at Aetna. Both of them were arguing that the prices are too high, and it the third, industry panelist who was supposed to attend did not attend at the last minute but an audience member stepped up to participate.

Andrew:  What were some of the bigger points raised by the panelists? How well was the impromptu industry participant able to defend the pricing of these drugs?

Carrie:  He had a lot of support from the audience, that's for sure. The payers actually started the conversation and they both had a few minutes to state their cases. Jeff Myers from Medicaid talked a lot about how expensive Sovaldi is for treating hepatitis C.

Andrew:  Which is interesting, because that's not really an orphan indication.

Carrie:  Exactly, and that is one of the arguments that Doug Paul, who filled in the industry spot, had when he was able to speak later on. Throughout the conference a lot of the payers, when they did speak, would talk about Sovaldi, and I think the industry population was a bit frustrated because Sovaldi isn't an orphan product. That was definitely one refute that came from Doug.

Andrew:  It seems like there's the Sovaldi overhang, where it's almost this fear that everything could explode like hep C, even for indications where there's no plausible way the population could be even a small fraction of the hep C population.

Carrie:  Yes. One other argument Jeff Myers made from Medicaid is there have been a lot of price increases among specialty products without any new innovation, and so I think that was another frustration coming from the payer side. One of the arguments from industry is that price is needed to support innovation, and a large percent of that is coming from the US system, or at least the US payer is paying for a lot of the drug innovation that's happening in the world today. A point that Jeff made was that he's seeing large price increases among specialty products without any real justification. He cited insulin, which again, is not a product used in orphan diseases.

Andrew:  Julia, I'm curious about your perspective, because you're a market access guru often helping companies justify the prices of very expensive therapies for rare diseases. How much do you see them being able to put together solid arguments that can support a price tag of $200,000 or more a year?

Julia:  This was a big topic at ISPOR this year, but not necessarily in the context of orphan drugs...

Andrew:  And this is a huge conference.

Julia:   About 3,000 people. Attended by people from biopharma, and increasingly from diagnostic and device companies, and then there's a very large presence of consultants and vendors. This year one of the main themes was the high cost of drugs. I saw a really interesting presentation by Dana Goldman, professor from the University of Southern California, who used to be at the Rand Corporation. Dana presented a new analysis of the cost ofSovaldi for the treatment of hepatitis C, which I hadn't seen before, nor as a health economist had I really thought about it, but it seems obvious now. Even though Solvaldi only prevents what many argue is a small number of high cost liver transplants and cases of liver cancer, standard cost-effectiveness analysis suggests that it’s still cost effective at its high price. But what Dana showed was that if you were to attach a cost to all of the benefits associated with treatment, including a reduction in the prevalence of hep C, brought about by the curative effects of Solvaldi, and increased life expectancy of the current population with Hep C, then what you see is that the costs of treatment are a tiny sliver compared to the value of the benefits. It felt like the whole room was echoing, "Oh, that's a really new way of looking at it." Because we don't tend to price the benefits, we tend to just focus on either the cost of therapy, or the cost of treatment, or the cost of avoiding longer‑term outcomes. This approach put a dollar value on life extension, and with of the decline of the prevalence of hep C, it was a pretty impressive presentation. The questions that came up afterward focused on the fact that governments and payers still can't afford it. So maybe it's cost effective, and maybe the benefits outweigh the costs, but they still can't afford it. Solvaldi is forcing us to make really hard choices. It's true everybody has a budget, but I think the conversation is more around how do we help governments or payers be explicit about the tradeoffs that they're making. ISPOR has a much more international flavor, and so the question is can the US learn from places like the UK, and Germany, and France that have national health care budgets to consider?

Andrew:  Do you think from your experience, those types of arguments, like you just outlined in the hep C area, could potentially be made in other diseases including many of the orphan diseases, and how much do they hold water with payers, government bodies, and Health Technology Assessment agencies?

Julia:  I think in Europe they do. It's a hard to say exactly, but we've done a lot of research looking at orphan drug pricing recently in European countries, and where some of the countries have very fixed thresholds, either cost effectiveness thresholds, or budget impact thresholds for non‑orphans, those thresholds become a little more porous and a little more flexible with orphans. I think we are still seeing a cap on what's possible for orphan drug prices, but it's not entirely clear - there's not just a fixed set of criteria. There is more flexibility. What we’re seeing is that the higher‑priced drugs are childhood-onset diseases that are fatal in nature. These drugs seem to get more of a pass than others.

Andrew:  Some of the concerns that I've heard from companies is that it's very difficult to assemble this quality data at the outset, at launch. It can take years to have the data to demonstrate that really long‑term benefit that justifies a very high price. Then you're stuck in a catch‑22 with a drug. Carrie, was that part of the conversation at the World Orphan Drug Congress, as to how to build this case when in a rare disease, any trial is tough? A rare disease trial that is really rigorous that might have a five year or more end point would probably be completely infeasible.  How are companies wrestling with this, and how much leeway are payers willing to give them?

Carrie:  That certainly came up in the questions that were asked of the payers. I'm not sure there was a real answer, or at least a satisfactory answer for the industry representatives there in terms of how to do that. I think payers recognized, particularly in the orphan space, that these are small populations and they're not going to have the robust data that you'll have out of a drug launching in a larger disease area or at least that there certainly needs to be some flexibility.

Julia:  For example in Germany, if you are an orphan, which they define as earning less than $50 million euros in a 12‑month period...

Andrew:  They're saying they define it by the dollars, and not the patient?

Julia:  They do, they basically take care of your price‑volume situation right there for you. As long as you're in that situation then you can get a very solid benefit rating, so a two or a three in the German system, which is good (lower is better) which allows you to enter price negotiations with more leverage.

Andrew:  So no one gets a one, basically.

Julia:  No one gets a one unless you cure cancer. Two or three is fantastic. Being an EMA-designated orphan drug automatically gets you a two or three, and then you have a year to collect other data. The advice that we give our clients is that you need to start preparing for those real‑world data points.

Andrew:   You talked about having a year to show data. Is there a recognition that you might need longer, or would there be cases where you could have longer? Some of these diseases, while they're terrible, they are slow progressing, and you don't necessarily see the full impact over a year. Take something where you're affecting a child's development in a significant way, it might take 5 or 10 years to really show impact. Is there any provision for that?

Julia:   That's why we have this incremental cost effectiveness analysis, for those situations, which by definition takes short‑term data and models it way out. Some of the countries recognize this as the way to demonstrate cost-effectiveness. You don't necessarily have to have the 10 or 20 year data, although something beyond 12 weeks would be nice. A year, I think, would be somewhat reasonable in the orphan category.

Martha:   However that might be evolving in the coming years, there's a lot of talk about orphan drugs having just gotten by with having higher ICERs and budget impacts, but governments aren't able to pay for that anymore, so they're starting to target the orphan drugs with stricter criteria, as there are more and more of them, and it adds up.

Andrew:   If you count every orphan disease, then a shockingly high percentage of the population has an orphan disease.

Carrie:  It’s over 7,000 diseases, so in the US I think it represents around 30 million people.

Andrew:  Right, with specialty, and specialty basically means high cost, so now suddenly hep C is in, all of oncology is in. It is a huge issue.

Julia:  Payers have to deal with it. To Martha's point, I think they are taking note, and I think we will see situations where governments try to deny access to specialty drugs. Sweden recently rejected Kuvan, the first orphan drugs that a government formally denied access to. That kicked a lot of dust up, and then we've seen some similar issues in the US, like with PKU.

Andrew:  We see it in Medicaid programs, which have the most restricted budgets, and suddenly a drug like Kalydeco, or Sovaldi/Harvoni comes along, and their budget is just blown out – then they're in a tough spot.

Julia:  That's where you get to the trade‑off issue. Do you treat six CF patients, or do you treat people much more prevalent common diseases? I don't know the answer to that, but other governments have given more thought to how to make that trade‑off explicit.

Andrew:  We don't do explicit tradeoffs very well in the US. We tend to bury our head in the sand and hope the problem goes away, which has not been a very successful strategy, traditionally.

Julia:  In the US we're scared of the R‑word, rationing. We don't say that word here.

Andrew:  But you it happens, because all health care is rationed in some way. Martha, any other big highlights, that you saw coming out of ISPOR?

Martha: Going back to hep C, one of the experts gave a podium presentation on trying to annualize payments for these expensive drugs, he was equating it to a mortgage on a house or student loans, and trying to develop a scheme like that.

Andrew:  There have been discussions around that with gene therapy with a million dollar price tag, but it was just discussion. It's very tough in the US where you have so much turnover of the insured population. Perhaps you could do it better with Medicare, but then if you're dealing with Medicare Part D there's still turnover. It's a tough nut to crack in a lot of ways, but at the same time when you've got the drug costs that are so high, especially if it is a one-time or short‑term duration therapy with a long‑term benefit, intuitively it makes a lot of sense.

Julia:  I think it makes the most sense if you've got the same payer with the same patient for many, many years. If you're with the UK government, or you're in Sweden, or you're in the Netherlands, and it's a cradle to grave system, that seems to be the first place that I would pilot something like that, because that patient, unless they move out of the country, it's the same payer that's going to be responsible for the patient, both reaping the benefits, and paying over time. That would probably be the first place to test it. The other thing that I heard a lot about at ISPOR is biosimilars. Just that they're coming, and we have to figure out where they will play..

Andrew:  Does anyone want to take a bold guess on the average discount for biosimilars, because I've heard anywhere from 15 percent to 70 percent, depending...

Martha:  There was a poll done, for all the people that attended the symposium.

Andrew: What was the wisdom of crowds?

Martha:  30 percent.

Andrew: That's right around the mid‑point of the range that I heard.

Julia:  The audience corroborated what the researchers had found.

Andrew:  Of course it's going to depend on how competitive the market is, and how many entrants you have.

Martha:  But it wasn't 80 percent, I think is the point. It's 27 or 30 percent.

Andrew:  Did you see payers being eager to push adoption of biosimilars, in terms of the way they put them in their plans? I've read that Express Scripts, not surprisingly, is trying to bring more of the medical pharmacy spend into the pharmacy benefit to have better control, and be able to push their leverage for use of biosimilars. It will be very interesting to see how a lot of these big issues that are going to have dramatic affects play out over the next 5 to 10 years. Opinions expressed here are solely those of the authors and do not reflect the views of Health Advances LLC, its management, or affiliates