Assessing the value of new medicines
Oliver Leatham, vice president and global head of value and access at Certara, writes about the complex issues that surrounds assigning a value to new drugs.
How do you assign a value to saving someone’s life? Then, how do you pay the bill? Those are questions that manufacturers and health authorities are increasingly being asked to answer as pharmaceutical companies attempt to gain regulatory approval and subsequent reimbursement for innovative and, in some cases, curative new therapies; products with limited evidence and small patient populations.
On 24 May, the US Food and Drug Administration (FDA) approved Novartis' Zolgensma, the first gene therapy approved to treat children less than two years of age with spinal muscular atrophy (SMA), a leading genetic cause of infant mortality. Zolgensma is a one-time treatment, which is designed to be curative, but it will cost more than $2 million, making it the most expensive drug ever brought to market in the US.
While unprecedented, Novartis' price for Zolgensma comes close to what the Institute for Clinical and Economics Review (ICER) estimated. By a measure of cost per life-years gained, ICER judges an appropriate value-based price for Zolgensma to be between $1.2 million and $2.1 million, which seems to favour both the manufacturer and the health system.
There is no question that considering reimbursement options for these new, potentially curative therapies requires a different way of thinking. "A therapy that can cure disease in a single treatment isn't a unit of drug. It's a public health solution,” stated former FDA Commissioner Dr Scott Gottlieb.
While it is easy to criticise different parties in these pricing debates, these are complex issues for which there are no easy answers. They require thoughtful discussion and creative solutions, which meet the needs of an evolving revolution in healthcare.
It can cost $2-3bn to discover and develop a new drug and submit it for review by the appropriate global regulatory agencies, payers and health authorities. If a new medication can be curative with a single treatment, its market is limited, so the sponsor has only one opportunity to recoup costs. On the other hand, health authorities and state-run programs, like Medicaid, have finite resources and must manage their healthcare budgets and costs to provide equitable access to therapies for all their members/participants. How can they pay for these extremely expensive, life-changing therapies without blowing their budgets? This problem is compounded by the fact that the assessment criteria in all countries were established long ago, to manage chronic conditions, which tend to have lower, predictable, measurable costs.
Several approaches, such as risk sharing (refunding patient failures, versus rewarding success), co-creation (developing real-world evidence studies in collaboration with health technology assessment (HTA) bodies), outcomes-based agreements, and try-before-you-buy schemes have been tested by sponsors and payers with varying degrees of success. They have often been seen as a ‘nice to have’ that can aid a corporation’s public perception, but are often only tested at a local level and not expanded to wider markets. Despite this, there is much to be learnt from best practices: what solutions are most accepted by payers and regulators? How does a solution in one market or patient population transfer to another? How do we build, package, and communicate the offering to relevant stakeholders to generate awareness and create the appetite for change?
Takeda Pharmaceutical Company has taken a value-based pricing approach with Alofisel, its stem cell therapy that is used to treat complex perianal fistulas in adults with Crohn’s disease. It has agreed to reimburse part or all of the $67,000 drug cost for patients that do not see an improvement. Other drugs that are sold under a value-based arrangement include Novartis’ CAR T-cell therapy Kymriah, which costs $475,000 per treatment for children with acute lymphoblastic leukemia, and Spark Therapeutics’ Luxturna gene therapy product, which costs $850,000 to treat both eyes of a patient with inherited retinal disease.
The UK’s National Health Service (NHS), which does not cover many very expensive drugs due to its focus on cost-effectiveness, has taken a different approach. It has reached ‘first of its kind’ agreements with Gilead, AbbVie and Merck to provide their hepatitis C therapies at ‘best prices’ in a quest to eradicate the disease. This is considered a mortgage or “Netflix” approach, where a significant cost is paid in installments over several years. In this case, the outcomes are being tracked over five years. The NHS is simultaneously conducting hepatitis C testing to gather real-world data to improve disease prevention. It is calling these agreements a “smart deal.” They offer a relatively cost-effective alternative to treating patients with hepatitis C for a lifetime or conducting liver transplants. A mortgage-based system can also work for products such as anti-infectives where demand for the product varies according to disease outbreaks. This type of agreement both guarantees the manufacturer a set level of income and ensures the healthcare system an ongoing supply of product that could be needed at any time.
How did they arrive at these agreements? Reimbursement discussions are increasingly focusing on a drug’s actual, measurable real-world impact and not just clinical trial results. Extensive evidence gathering and quantitative, science-based modelling and simulation with real-world data are being employed to differentiate the new product from on-market competitors, show its anticipated impact on disease progression, and make economic projections based on current costs and potential payment plans. If a sponsor is going to sign a sales contract based on a new drug’s performance, it needs to understand it intimately.
Once compiled, all of these data can be uploaded into value communication tools to help sponsors and payers agree on the most appropriate price for a new drug, and then determine the best price, approval, and reimbursement strategy.
Regardless of approach, sponsors and payers need to work closely together to identify what constitutes good practice and then determine how best to predict, measure and evaluate performance. Moving from large, late-phase clinical trials to resourceful, real-world reimbursement approaches will help to ensure that payer and health authority budgets are used wisely, reward innovation, and deliver the most positive impact possible on patients’ quality of life.