Pharma’s Upcoming Messaging Battles In US Pricing Debate Foreshadowed In CBO Report
Higher Medicaid Rebates For Expedited Approvals Offer Modest Savings But Target Growing Concern
Novartis CAR-T Patient Assistance Program Could Set Template For Other One-Time Treatments
Can The UK Remain A First Launch Market?
UK’s NICE Namuscla Decision A ‘Red Flag’ For Repurposed Medicines
UK: Commercial Framework Sheds Light On Working With NHS And NICE
Is International Reference Pricing Still Relevant?
Japan Pricing Environment ‘Highly Unpredictable’: PhRMA
Will COVID-19 Drive The Decline Of International Reference Pricing?
Our infographic offers the top takeaways from Congressional Budget Office report that says lower drug prices would decrease industry’s spend on research and development, while rejecting claim that costs of R&D set or impact a particular medicines price.
A New Congressional Budget Office report on research and development in the pharmaceutical industry is an important reminder to industry of the upcoming policy fights coming its way in Washington, DC.
The report is largely a 101-backgrounder on the industry and how US policies – from Food and Drug Administration regulations, to tax structures, to basic science funding and payer policies – influence company behavior, and it may not have many new or surprising findings for drug industry insiders. But the CBO’s nonpartisan analysis will likely help set the context and tone for debate that is anticipated to commence this spring when Democratic lawmakers are expected to tackle the costs of medicines in an upcoming spending bill to advance more of President Joe Biden’s priorities.
Congress will be looking for ways to pay for the legislation and savings on drug spending is an attractive target. (Also see "Will Pharma End Up Paying For The Infrastructure Bill?" - Pink Sheet, 25 Mar, 2021.)
The analysis prepared at the request of the Senate Finance Committee contains conclusions and declarations that could be used by legislators, lobbyists and stakeholders on all sides of the drug pricing debate.
Overall, the report emphasizes that expected price is just one of a number of factors that influence R&D spending and R&D spending levels is just one of a number of factors that influence what drugs get developed.
The Pink Sheet flagged key points from the report we expect to hear on repeat over the next few months:
As MACPAC moves toward formal recommendations, a CBO analysis finds that differential Medicaid rebates for drugs approved through the accelerated pathway could save the federal government up to $1bn over five years.
The Medicaid and CHIP Payment and Access Commission moved closer to formally recommending that Congress institute differential Medicare rebates for drugs receiving accelerated approvals from the US Food and Drug Administration at its 8 April meeting.
The majority of members expressed support for raising the Medicaid base rebate for accelerated approval drugs above the current 23.1% of the average manufacture price. They also endorsed a companion recommendation that would raise inflationary rebates for accelerated approval drugs if manufacturers have not conducted confirmatory trials and obtained full approval within a specified number of years.
Assuming the they are formally approved in a vote scheduled for 9 April, the recommendations will be forwarded to Congress in an upcoming report.
Medicaid costs are gaining increasing attention with the economic downturn caused by the pandemic, and congress recently took an incremental step toward lowering drug costs by eliminating the cap on the amount of rebates that could be required. (Also see "Drug Pricing Reform In Medicaid: Watch This Space" - Pink Sheet, 10 Mar, 2021.)
The accelerated approval policies are expected to achieve two main goals: help Medicaid programs lower costs and drive manufacturers to invest in confirmatory research in a timely way. They could also increase access to accelerated approval drugs if states are willing to reduce coverage and prior authorization restrictions when costs are lower, MACPAC analyst Chris Parks pointed out.
And they would be a less restrictive cost saving measure than a closed formulary, which CMS (under the Trump Administration) recently approved for the first time in Tennessee’s Medicaid program, Parks pointed out. That approval is now under review by the Biden Administration, which may revise it. (Also see "Closed Formularies In Medicaid: Biden Orders Review Of Trump-Era Demonstrations, Waivers" - Pink Sheet, 28 Jan, 2021.)
The proposed MACPAC recommendations do not specify how much rebates should increase or how long to give manufacturers before the inflationary rebates go up.
Nevertheless, the Congressional Budget Office estimated the policies could save the federal government up to $1bn over five years (savings to states would be in addition to that). The projection assumes a 10% higher base rebate for accelerated approvals and a 20% higher inflationary rebate if manufacturers do not complete confirmatory trails after five years.
The projected level of savings is relatively modest, but the policies target an area of growing concern among Medicaid programs. Medicaid is required to cover all FDA approved drugs without delay as long as manufacturers provide the statutory rebates.
In contrast, commercial payers have more latitude to treat accelerated approval drugs as investigational and delay coverage, pointed out MACPAC commissioner Tricia Brooks, a fellow with the Georgetown University Center for Children and Families. For example, some commercial payers initially denied coverage for
Sarepta Therapeutics, Inc.’s Duchenne muscular dystrophy therapy Exondys 51 (eteplirsen) on those grounds after its unusually contentious FDA approval. (Also see "Anthem Denies Coverage For Eteplirsen, Citing Lack Of Clinical Efficacy" - Pink Sheet, 7 Oct, 2016.)
Medicaid concerns about covering Exondys 51 prompted the Centers for Medicare and Medicaid Services to formally remind Medicaid directors that the programs are required to cover drugs approved through the expedited pathway. (Also see "CMS Reminds State Medicaid Agencies: Accelerated Approval Is Still Full Approval" - Pink Sheet, 10 Jul, 2018.)
A more recent example of states’ concern with accelerated approval drugs involves AMAG Pharmaceuticals Inc.’s preterm birth prevention drug Makena, which may have its approval revoked by FDA, Brooks and commissioner Darrin Gordon noted. An ongoing FDA review of accelerated approvals for oncology drugs may lead to withdrawals in that space as well. (Also see "Accelerated Approval: US FDA Panel To Reconsider Six Indications For Checkpoint Inhibitors" - Pink Sheet, 11 Mar, 2021.) Gordon is a former director of Medicaid in Tennessee.
Commissioner Tom Barker, a partner with Foley Hoag, was in the minority in declining to support the recommendations. He argued that it is FDA’s responsibility, not MACPAC’s, to drive better rates of confirmatory studies for accelerated approval drugs.
Several advocates for patients with rare diseases and Sarepta global health policy, government and patient affairs senior VP Diane Berry spoke during the public comment part of the meeting, warning that the increased rebates might discourage innovation in rare and ultra-rare diseases.
But National Association of Medicaid Directors program director for federal policy Jack Rollins applauded the recommendations. He noted that states face serious budgetary challenges in paying for specialty drugs and argued the policies would be a positive step toward addressing concerns. He also maintained that value-based payment arrangements, the solution often urged by manufacturers, cannot be the primary means of managing high cost drugs.
HHS gives kickback exemption for program to provide Kymriah for free to certain eligible patients regardless of insurance provider. Treatment’s one-time use as a last resort therapy were key to the US government’s advisory opinion reasoning.
Novartis AG will be able to make its Kymriah CAR-T cancer treatment available free of charge to certain US patients without worrying about running afoul of the US federal anti-kickback statue, including the civil monetary penalty provision for beneficiary inducement, according to a new advisory opinion from the Health and Human Services Office of Inspector General.
The opinion released on 24 March could have implications for other companies looking to increase access to high-cost, one-time treatments – particularly cell and gene therapies – because the singular nature of a potentially curative therapy was a key factor in OIG’s reasoning.
“The number one thing here is that it’s a one-time dose, and number two you throw in the fact that it’s not a first-line therapy, that’s what got it over the hump of not being an anti-kickback violation,” said Michael Heesters, an attorney at Hyman, Phelps & McNamara. However, he cautioned that this opinion, like all HHS OIG advisories, are “highly fact specific to the drug.”
Novartis offers Kymriah at no charge for all FDA-approved indications to US residents who have no health insurance or have been denied coverage of the drug and have an annual household income of $75,000 or less for a single-person household and no more than an additional $25,000 in income for each additional household member.
The program is available to patients in federal health care plans, but Novartis told OIG no Medicare beneficiary has ever qualified, nor does the firm expect these applications in the future. However, Medicaid and patients using the TRICARE military health care program may qualify.
OIG said that normally the type of arrangement designed by Novartis would implicate the federal anti-kickback statue, which makes it a criminal offense to induce the purchasing or ordering of an item reimbursable by a government health care program. That’s because health centers could earn income on administering Kymriah to patients without incurring any acquisition costs, inducing them to prescribe or recommend purchases of the drug when payable by a federal heath program.
However, in this particular case OIG concluded the risk of fraud and abuse is low and outlined a handful of factors that distinguish this program from problematic arrangements used by other manufacturers.
First, OIG argues the risk of “seeding” or inducing future referrals of a drug that would be covered by a federal health program is low because most patients receive one dose of Kymriah, as opposed to cases where manufacturers offer a free initial dose of a drug for a chronic condition to induce them to continue to purchase this drug in the future.
Second, Novartis offers the program for both FDA approved indications. OIG says it would be more suspect if the free drug was offered for one indication so the company could maintain a high price for other indications when reimbursed by federal health care programs.
Third, Novartis makes the drug free regardless of where the patient receives the drug, patients are not being steered to a care setting that might lead to higher costs for the federal government, and they do not discriminate against patients due to the payer type they have.
Furthermore, because both indications are a “treatment of last resort” for patients who have undergone other therapies and did not respond to those treatments, OIG believes there is less risk health care providers will overutilize the treatment to earn fees.
Finally, OIG concludes that the free treatment is not likely to influence where patients receive the therapy or who supplies doses, so the arrangement does not implicate the beneficiary inducement civil monetary penalties.
“We are pleased with this outcome, as we believe this program is critical to helping address the unique needs of Kymriah patients,” Novartis spokesperson Julie Masow said. The company could not provide any estimates of what percentage of its US CAR-T patients use this program.
Stacie Dusetzina, a professor of health policy at Vanderbilt who focuses on medication costs and patient access, saw some positive and negatives to the advisory opinion, saying she is glad patients have an option to access the drug in these very severe cases.
But she also said that it “could be another way to deflect criticism about very high prices.”
Dusetzina said it’s possible this arrangement will be attractive to providers as well as patients. Administering CAR-T has been financially challenging for many hospitals as the reimbursement is often lower than the cost of the drug, Dusetzina noted.
“So I wonder if this also provides an opportunity for them to kind of incentivize providers to actually take the chance and continue to think about patients for whom this might be appropriate treatment, knowing that if they can’t get it reimbursed or if the reimbursement is not acceptable then there is an option for the drug to be covered by the company.”
If similar arrangements are approved in the future, she said it could give companies with a one-time use product “an edge over competitors” that are used multiple times over a patients life, she added. However, it is possible OIG might look differently on situations where patients had more options.
One risk for the drug manufacturers, however, could be that offering this kind of program could give payers more incentive to deny coverage, but Dusetzina recognized this could be tricky for payers to do given that people only qualify for the Novartis program if they meet income eligibility.
The recent advisory opinion follows Novartis’ 2020 OIG clearance for a program to help needy patients and those living in rural areas pay for travel and lodging costs associated with administration of Kymriah. (Also see "Novartis Payments For Kymriah Treatment Logistics Avoid Kickback Concerns" - Pink Sheet, 26 Feb, 2020.)
While advisory opinions are limited to the particular company, product and circumstances specified, when Novartis received the travel and lodging opinion other manufactures followed suit seeking out similar approvals, said Lindsay Bealor-Greenleaf, a vice president at ADVI.
“So I think that’s a proxy that you could possibly see other manufacturers going the same route here,” she told Pink Sheet.
She advocated for more general clarity on what is acceptable so each individual sponsor didn’t need to go this route.
“This is yet another example where exceptions to the anti-kickback statue are being granted in a very specific way. But generally it would be really helpful if there was regulatory or legislative clarity around various exceptions so that seeking individual advisory opinions isn’t needed,” Bealor-Greenleaf said.
More pollical support from the National Health Service and health ministers is needed to ensure the UK’s future as a desirable launch market.
The UK could emerge from Brexit with a better system for getting innovative new medicines to patients, according to Gilead Sciences’ Gordon Lundie. However, for this to happen, the reviews that England’s health technology appraisal body, NICE, is conducting into its methods and processes must lead to much needed updates on issues including discounting and uncertainty and join up all parts of the access system, said Lundie, Gilead’s senior director of market access and reimbursement in the UK and Ireland.
Lundie also wants to hear more from NHS chief executive Simon Stevens and other NHS leaders, as well as from health ministers. They should be talking about NICE’s methods and process reviews and how to maintain investment in the UK life sciences sector. “If we have the senior leaders in the NHS talking about the importance of this review, then I think it would make it much easier to implement the changes as talking about,” he said.
Last December, NICE closed its six-week consultation on proposals for updating its methods for evaluating innovative medicines, including advanced therapies. (Also see "NICE Reform Plans Aim To Help Make Post-Brexit UK A ‘First-Launch’ Country" - Pink Sheet, 6 Nov, 2020.) A second consultation on how the institute can improve and align the processes it uses when developing guidance is due to close on 15 April. (Also see "UK’s NICE Seeks Feedback On Proposed Improvements To Its Processes" - Pink Sheet, 5 Feb, 2021.) Crucially, both reviews aim to ensure that the UK maintains its status as one of the first launch countries for innovative medicines.
According to Lundie, the process review presents a big opportunity to align parts of the drug marketing authorization and reimbursement processes that are currently “not as connected as they need to be.” He pointed to four different processes: discussions with the medicines regulator, the MHRA, on the most appropriate access pathway; the NICE reimbursement process; engagement with NHS England; and budget impact tests. “You've got four quite distinct processes now in the UK and they don't all align in the way they should do.” This means it takes longer for patients to access innovative new medicines thank it should, he added.
Lundie is optimistic about two regulatory schemes that he believes could shorten the drug approval process in the UK by up to six months and bring it into line with approval times in the US. These schemes are the new UK pathway for licensing innovative medicines, ILAP, and Project Orbis, the US Food and Drug Administration-led international regulatory collaboration that the MHRA started participating in January. However, he warned that unless “all the bits were stitched together,” the UK will be left with a “clunky system” that does not work well.
To illustrate the point, Lundie said that because Gilead’s breast cancer drug Trodelvy will follow the ILAP path, he thinks that approval could be granted within five months. However, no NICE review has been scheduled to fit in with this time. (Also see "Gilead’s Trodelvy To Test UK Innovative Drug Pathway" - Pink Sheet, 1 Apr, 2021.) As such, the company is in talks with NHS England to find a bridging solution, which could take the shape of a managed access agreement.
If successful, NICE’s review of its processes will standardize the approach that Gilead has taken, said Lundie. Over the past few years, the company has worked closely with different parts of the UK’s market access system to ensure patient access as soon as possible. Its CAR-T therapy Tecartus for relapsed or refractory mantle cell lymphoma is a notable example of getting a product to patients in record time, he said. “That is a great example of all of the bits, working together.” (Also see "Kite Strikes CAR-T Access & Discount Deal For Tecartus In England" - Pink Sheet, 19 Jan, 2021.)
“We've always been at the forefront of trying to get access under different circumstances and that's meant that we're the ones that have spent a lot of time thinking about new and innovative ways to do it,” Lundie declared.
For example, the company was party to the first risk-sharing agreements in the Cancer Drugs Fund, he said, adding that these new ways of thinking are being reflected in the process review. “It's really taking a lot of the stuff that NHS England and the Cancer Drugs Fund and NICE have been doing for the last three or four years and regularizing it all. But it needs to happen for every innovative new product, not just because the companies that are involved at any earlier stage are able to be thinking about new ways of doing things.”
NICE’s process review hints at other improvements that could benefit innovative products. For example, it suggests that promising technologies could enter directly into managed access agreements without a full health technology appraisal (HTA).
Lessons could be learned here from the COVID-19 pandemic, suggested Lundie. For now, Veklury (remdesivir), Gilead’s antiviral that was approved last July for treating patients with COVID-19, has not had to undergo a NICE assessment, so as to avoid delays to access.
“So, there is the potential for commercial access agreements and managed access agreements to provide similar opportunities to new medicines where there's an immediate benefit to patients without having to go through a NICE HTA.”
NICE’s review also asked for input on how companies can avoid having to make multiple submissions for a single product that has numerous indications, something which is onerous and time consuming. Also positive, according to Lundie, is that the process review includes proposals on helping patients better engage with the process. For example, the review has proposed the possibility of requesting that a company provide a summary of information for patients along with its evidence submissions. Patient voices are a very important part of NICE’s reimbursement process and can explain the importance of a medicine in a way that clinicians and companies cannot.
With regard to the methods review, the recommendations that NICE has put forward are not necessarily transformational, but will hopefully be meaningful, according to Lundie. They reflect the fact that NICE is catching up and dealing with issues that advanced therapies have brought to the fore, the Gilead executive said. “Some of the technical aspects of [these products] have actually run ahead of NICE’s capability.”
Companies that have advanced therapies going through a NICE HTA assessment are not always confident they will succeed, said Lundie. He pointed to three main issues that companies repeatedly come up against and which, if tackled adequately, could help future proof NICE for innovations to come, though he conceded that the devil will be in the detail when more concrete proposals emerge.
The first issue, and one which is increasingly pressing as more advanced therapies that can bring lasting improvements are coming to market, is discounting.
Discount rates are used to help model a medicine’s long-term costs and benefits to incorporate them into its present-day value. They can have a big impact on the perceived value of a drug and are particularly important for costly gene and cell therapies that are potentially one-off, long-term treatments.
Industry argues that higher discount rates discriminate against such treatments because the rates compound year on year. These therapies are therefore deemed less valuable because the rate is applied over a longer time period and quality adjusted life years (QALYs) are lost over a number of years.
“That doesn't really impact chronic treatments anywhere near as much as it impacts potentially curative treatments,” said Lundie. “And it is a big disconnect in terms of what NICE and the government are trying to incentivize, which is curative therapy where possible rather than chronic treatment.”
The standard discount rate that NICE uses is currently 3.5%, although NICE’s current methods guide makes some room for applying a lower discount rate of 1.5% in some instances.
NICE has acknowledged that discount rates need to be addressed, although according to Lundie, it has not been firm enough in giving direction on the matter.
The second big problem is uncertainty. The drive to bring innovative medicines to patients more quickly in areas of unmet medical need means that such products are supported by immature data, for example from uncontrolled Phase II trials in small patient populations.
This uncertainty in the evidence is difficult for NICE committees to tackle as it is reflected in cost-effectiveness estimates, and can drive up ICERs (incremental cost-effectiveness ratios). Initial ICERs for some of Gilead’s cell therapies have reached as much as £150,000 per QALY because of the uncertainty, said Lundie. He added that in such cases the company had to work closely with NICE, NHS England and the Cancer Drugs Fund to give the “right context” for the uncertainty.
Lundie believes that lessons can be learned from other industries. For example, the insurance industry takes a more systematic approach to understanding the real level of risk involved. On the contrary, NICE evidence review groups often present extreme cases of the potential risks involved with funding a medicine, perhaps in terms of the potential budget impact or cost effectiveness. “And then you're in a position of trying to argue why the most extreme cases not the one the NHS will face.”
Here, again there are learnings from the COVID-19 pandemic where medicines for the infection have been rapidly approved and reimbursed. “There has been a higher level of acceptance of risk to allow treatments to be used until we can properly evaluate them … I think COVID has actually revealed an ability of the NHS and NHS England to take more risk in order to make sure that patients get the early benefit of new treatments. And I think we should use that coming out of COVID.”
There are also tools for managing uncertainty, including risk sharing schemes. NHS England and the Cancer Drugs Fund have been creative in terms of these deals, though they are still relatively new, commented Lundie.
The third issue that needs to be examined adequately is modifiers.
Most treatments delivered by NICE do not “massively move on treatment,” and deliver fractions of a QALY over a lifetime, said Lundie. However, products that deliver greater health gains and more QALYs are treated in a similar fashion. Treatments that transform outcomes should have higher cost-effectiveness thresholds, argues Lundie. One way to do this is to apply QALY modifiers that increase the ICER threshold. So far this has only been used for end-of-life medicines that meet certain conditions. In these instances, the cost-effectiveness threshold is £50,000 per QALY, which is more than the standard £20,000-£30,000 per QALY.
There are many other scenarios where a medicine can be transformative but will not have access to the same sort of cost-effectiveness threshold, said Lundie.
New processes and methods will be finalized in September and implemented from October.
Lupin and patient groups have slammed NICE’s “unprecedented” preliminary decision not to mandate funding for the repurposed rare disease treatment Namuscla for patients on England’s National Health Service who are already taking the drug. The move could set a precedent and is concerning for patients and R&D investments, says the company.
UK health technology assessment (HTA) body NICE has defended its negative draft guidance that if unchanged would mean that patients receiving Lupin Limited’s repurposed drug Namuscla (mexiletine) for ultra-rare nondystrophic myotonic disorders (NMD) on the National Health System since 2019 would no longer receive the treatment.
NICE says it is the first time it has made such a decision and that recommending that these patients continue on Namuscla would effectively cancel out negative guidance.
Lupin was disappointed by the decision and Ben Ellis, the company’s UK general manager told the Pink Sheet that the move to stop treatment for existing patients was a concern for companies working to repurpose medicines in the rare disease space.
Repurposing companies invest significant amounts in phase III trials to get the product licensed and it is bad news for everyone if existing patients on these drugs have to stop treatment because of the HTA process, he said. “It’s a red flag for pharma in terms of investing in research,” he declared.
Ellis added that he was concerned that the decision, if upheld could set a precedent for similar decisions in the future. It could also mean that as an alternative, patients might be moved to an unlicensed therapy, or be left with no medication.
Muscular Dystrophy UK said that it was “extremely concerned” by this “unprecedented and highly unusual decision by NICE.” It urged “NICE to rethink its decision because we have heard from patients how beneficial the drug is when treating their symptoms of myotonia.”
The consultation on the draft guidance closed on 5 March. Comments and further evidence are to be discussed.
Mexiletine has been used off-label to manage NMD for many years. Lupin won EU marketing approval for Namuscla in this indication in 2018 and subsequently provided the product at a confidential interim price discount for use on England’s NHS.
In February, NICE issued negative guidance declining to recommend the drug for treating the symptoms of myotonia in adults with NMD. The HTA body said the drug was not cost-effective, despite the confidential discount.
The draft guidance does not require that NHS patients who were started on Namuscla through an interim agreement that came into effect in April 2019 should continue to receive treatment with the drug. “Commissioners are not required to continue to fund that treatment,” it said.
The draft guidance acknowledges this “is a departure from NICE’s usual practice that negative guidance ought not to affect NHS treatment started before the guidance is published.”
The HTA body’s decision for Namuscla means that patients already being treated with Lupin’s drug will no longer receive the treatment if the final guidance remains the same.
NICE explained that it appraises medicines that are not already established in clinical practice and that the case with mexiletine is unusual because of the chronic nature of the condition, the drug’s “long NHS heritage” and the interim funding arrangement for Namuscla in place since 2019.
These factors combined means that NICE’s regular “stopping statement” on allowing patients already taking the drug to continue on treatment “would negate the impact of the technology appraisal.” This is because it “would commit the NHS to paying for a treatment for a substantial cohort of patients over an extended period – in effect acting as a positive recommendation, even if the outcome of the appraisal is negative.”
NICE says it recognizes the need for an NMD treatment that is clinically and cost-effective. “That is exactly why we have been working tirelessly with the company, patients and clinicians on finding a way that allows access for patients,” it said.
“It is disappointing that our draft guidance cannot recommend this licensed branded form of mexiletine because it is not cost effective at the price the company is asking,” said NICE. “We urge the company to work with NHS England and NHS Improvement to find a solution.”
The consultation on the draft guidance closed on 5 March. Comments and further evidence will be discussed at the next independent committee meeting in April. Ellis said that Lupin would be challenging NICE’s decisions through the consultation and that it would provide more data through clinical elicitation.
Separately, NICE is participating in a national drug repurposing scheme aimed at increasing the number of new indications of existing drugs. It will be looking at whether it should review its methodology and provide better guidance on the use of repurposed medicines. (Also see "UK Set To Launch Drug Repurposing Project" - Pink Sheet, 10 Mar, 2021.)
Lupin was also disappointed that its product had not gone through NICE’s Highly Specialized Technologies (HST) program for ultra-rare diseases. This process is “more forgiving” when there is a scarcity of data and therefore more uncertainty, said Ellis. The incremental
cost effectiveness ratio under this program is £50,000 per quality adjusted life year, compared with £20,000-30,000 per QALY under the standard process.
“There is no middle ground,” said Ellis. In contrast, the Scottish Medicines Consortium operates a standard process, an orphan process and one for ultra-rare conditions. Last year, the SMC approved Namuscla for funding on the Scottish NHS after evaluating the drug through the orphan process.
Several companies have complained that entry requirements for the HST process are too strict. (Also see "UK: NICE’s Rare Disease Gatekeeping Comes Under The Microscope " - Pink Sheet, 30 Jan, 2020.) (Also see "Zynteglo Funding Rejection Sets "Dangerous Precedent" For Gene Therapies In UK" - Pink Sheet, 12 Feb, 2021.)
The final text brings some changes, including the introduction of an escalation process when companies and NHS England cannot agree.
England’s National Health Service has published a new NHS Commercial Framework for New Medicines, which the Association of the British Pharmaceutical Industry says brings clarity on how to work with NHS England and the health technology assessment (HTA) institute, NICE, when seeking reimbursement for branded medicines.
The commercial framework was put out for consultation in November 2019. (Also see "Fair Pricing A Key Feature Of NHS England Drug Funding Proposals" - Pink Sheet, 11 Nov, 2019.) It sets out how commercial arrangements regarding publicly funded branded medicines should operate. The framework comes following commitments made in the 2019 Voluntary Scheme for Branded Medicines Pricing and Access (VPAS), which provides a framework to manage branded medicines spend. It was agreed by the government, NHS England and the ABPI.
"The NHS commercial framework for new medicines provides welcome clarity on how companies can partner with the NHS and NICE to get new medicines to the patients who need them,” said Richard Torbett, chief executive of the ABPI.
He added that a system that provides suitable flexibilities and which supports faster uptake and adoption of new medicines is required as more new medicines are discovered. "The Framework provides important recognition of this, and the ABPI will work closely with NHS England as the Framework is reviewed and developed over time," said Torbett.
The framework:
The final version of the framework takes into account some concerns and points raised in feedback to the consultation.
For example, some feedback on the consultation suggested that the framework should include an escalation and case review process, according to NHS England’s engagement response document. The framework’s section on commercial options now sets out the process for how either NHS England or the company can escalate a disagreement if there has been a failure to reach an agreement.
The process would start with an initial “level 1” discussion between the head of the commercial development team or deputy at NHS England and the company’s most senior national manager or deputy with knowledge about the issue.
If no agreement is reached, “level 2” discussions can take place between the NHS’ commercial medicines director and a senior independent representative for the company who has not been previously involved in the commercial discussion.
If there is still no agreement following level 2 discussions, the “the relevant commercial discussion will be treated as having come to an end,” says the framework.
In addition, some respondents pointed out that complex commercial arrangements put a large administrative burden on the NHS and called for the framework to encourage simple schemes. The new text now explicitly states that the “fastest (and preferred) route to market in England is for companies to propose simple discounts via a PAS [patient access scheme].”
Responders had also sought “reassurance that the framework was not actively promoting the off-label use of medicines,” says the engagement response document. The document put out for consultation says that the relevant commissioning body, such as NHS England or individual clinical commissioning groups will have to make a policy decision on whether a small number of off-label indications are accepted for routine commissioning. The final version includes an additional paragraph stating that the “framework does not advocate the use of off-label indications or suggest companies promote off-label usage of their medicines.”
The framework sets out the options available for companies, which are: PASs, commercial access agreements, managed access agreements, and budget impact schemes.
According to the framework, simple and complex PASs are the starting point for companies developing a value proposition for NICE. They allow companies to improve a product’s cost-effectiveness beyond the cost effectiveness allowed by the list price. A PAS should always be included in a company’s initial submission unless it wants NICE to consider the list price. There are two types of PAS, simple and complex. Simple PASs offers a fixed discount on the list price. They are confidential and are “always the preferred option.”
Complex PASs are transparent because they involve a more complex reimbursement proposal, which will be more difficult to administer. Transparency helps ensure that administrative and cost burdens are minimized, while ensuring the value of the treatment is achieved.
Commercial access agreements are similar to complex PASs, but are confidential. These can be considered if
“there are unusual or unique circumstances that mean launching a product is considered particularly challenging or commercially unviable,” or if the company wants to put forward “an enhanced value offer.” Examples of confidential commercial arrangements include: budget caps, price/volume agreements, cost sharing, stop/start criteria, outcomes based agreements or payment by results.
Managed access agreements can be used when “uncertainty exacerbates the challenge for NICE,” says the framework. Areas of uncertainty include clinical and financial uncertainty. They allow for interim commissioning until a product is reappraised at a set date, based on new data that is to be collected in line with a data collection agreement. As the framework document points out, these agreements have most frequently been used in the context of the Cancer Drugs Fund and NICE Highly Specialized Technologies guidance.
When considering the possibility of a managed access agreement, data collection must be considered to have the potential to collect data on relevant outcomes and overcome uncertainty.
With regard to budget impact schemes, companies and NHS England will enter into commercial discussions if the net budget impact of a product is expected to be more than £20m ($28.3mn) a year in the first three years of the technology’s use.
International reference pricing is becoming more irrelevant as increasing emphasis is placed on other cost-containment measures.
“International reference pricing [IRP] is coming under attack from different directions,” according to Peter Zimmermann, of Model N, a provider of revenue management solutions to the life sciences industry.
Speaking this week at the virtual World Evidence, Pricing and Access Congress 2021, Zimmermann said that the shift towards individual pricing agreements for medicines could “end” IRP.
IRP is one of the most popular cost containment tools used across the world, said Zimmermann, who is senior director of customer success at Model N. Only a small number of countries in Europe refrain from using IRP, while markets in the Middle East and Asia, including China, have adopted it, he said, adding that the US will potentially use it too.
IRP is a popular tool because it helps countries to avoid paying a higher price for drugs than the price paid in other countries. “It is a simple method to anchor prices. It's easy to implement and helps set limits around maximum allowed prices,” he said.
However, as Zimmermann points out, there are a number of limitations. For example, IRP uses gross prices, and not the net price, which tends to remain confidential between the payer and provider. This can mean that pricing decisions are based on a false picture.
IRP does not necessarily protect countries from paying a higher price. It leaves little scope for differential pricing, which means the price a lower income country pays is closer to the price paid in wealthier countries. In addition, some lower-price countries face launch delays or exclusions as companies try to avoid price erosion in higher priced markets.
Zimmermann argued that IRP is becoming less relevant as a cost-containment tool as health care providers increasingly undertake more negotiations on access and pricing agreements with companies.
There has been an increase in the number of volume-based rebate agreements. These see companies pay rebates when agreed volumes are met. These volumes could be the number of patients treated or a level of spending for either a particular product or across a product group.
There is also an increase in the number of value-based agreements, particularly where more expensive, innovative products are concerned. These include outcome-based agreements where payment is made only if certain outcomes are met.
Indeed, in the Netherlands, which was an early adopter of outcomes-based agreements, there has been a growth in the number of pay-for-performance contracts for certain classes of drugs, including gene therapies, said Jolanda Koenders, head of patient value and access at Takeda. “Because who can tell if these gene therapies have lasting effects for 30, 40 or 50 years?” she said during a separate presentation at the congress.
“IRP is, essentially, less and less relevant in containing costs as we see more and more of these individual negotiations happening with the providers of treatments. And therefore, the difference between the gross price that is publicly available, and the net price that is actually being paid is varying, more and more,” Zimmermann said.
US research-based association says move to annual drug repricing undermines country’s recent efforts to support innovation and again calls for inclusive discussions around broad health system reforms to create funding headroom.
Recent reimbursement pricing reforms are making Japan a “highly unpredictable” market and starting to affect companies’ considerations of commercial attractiveness for the introduction of new products.
That at least is the view of the major US R&D-based industry association PhRMA (The Pharmaceutical Research and Manufacturers of America), whose Japan office reiterated during an 18 February briefing the need for a “stable and predictable” healthcare environment in the country if patients are to benefit from the latest advances in a timely manner.
Pitching the role of innovation against the backdrop of the pandemic and local roll-out this week of the first coronavirus vaccine, James Feliciano, the chairman of PhRMA’s Japan-based executive committee, said such progress was made possible by the pharma industry’s experience and investment, along with support from governments and academia.
If the industry is to respond as strongly to future emergencies, there is a need to recognize and reward innovation – but “Japan’s commitment to this is coming into question,” as evidenced by recently policy changes, the AbbVie Inc. executive told the online event.
He singled out for particular criticism the first “off year” general drug reimbursement price cuts under the national health insurance (NHI) scheme, slated for this April, which mark the start of an intended shift to annual, rather than the long-standing biennial, price revisions.
The policy in general is designed to bring officially reimbursed prices (funded by the government) into line with actual discounted market levels, based on a preceding market survey and with certain exceptions for newer eligible products. The over-arching aim is to control rising state healthcare expenditure amid a rapidly aging population.
This year, the move is set to cut national drug expenditure by a total of around JPY432bn ($4.17bn).
Although major innovative pharma industry associations in Japan have been requesting a delay, due in part to the wider impact of the pandemic, it looks like the cut will go ahead following a formal policy decision in December. This is also set to widen the scope of reductions beyond those that would normally fall outside an allowable standard range of discounts.
Feliciano noted the reductions this year will apply to around 69% of all reimbursed medicines, including 59% of patented drugs, and extending beyond heavily discounted products in a departure from previous practice. (Also see "Japan's Price Cuts Slated For April Bring Old, New Blues For Industry" - Pink Sheet, 10 Mar, 2020.)
The policy-setting process has already been criticized by multiple industry groups in Japan, including PhRMA, which observed in the briefing that discussions on the change at the Ministry of Health, Labour and Welfare’s advisory Central Social Insurance Medical Council (known as Chuikyo) kicked off only in November, with a final decision made just a month later.
While pharma industry groups were given two opportunities to testify to hearings on the planned changes, these were held before the concrete proposals were made, which means these could not be addressed, Feliciano observed.
“The price cut decision went beyond expectations and did not seem to take account of industry’s views,” he said.
Along with local representatives of the EU and Japanese industry federations, EFPIA and FPMAJ, the US group said in December that the change to annual repricing “undermines the predictability of Japan’s drug pricing system and is completely unacceptable.”
Standing back to look more widely at Japan’s policy environment, Feliciano, who is Japan country president for AbbVie, pointed out there have been no fewer than 50 revisions to Japan’s highly complex drug pricing methodology over the past four years.
Taken with the latest changes, PhRMA is not alone in seeing what he described as “significant deterioration” in the operating environment for innovative firms in Japan, something also flagged up by in recent years by EFPIA.
Replying to a question from The Pink Sheet on what industry might feasibly do given the changes are already enacted, Feliciano said PhRMA would continue to engage with politicians and other policy-makers, put forward proposals and seek dialog.
“There’s a lot of low-hanging fruit [within the healthcare system] that could be addressed to make space [to fund innovation]. This includes further increases in generic use, looking at efficiency in primary care, polypharmacy and ‘doctor shopping.’ There could be pilot schemes in selected areas,” he suggested.
“COVID has really presented an ideal opportunity for a reset. The industry is eager and willing to look at best practices and one reason to have this briefing today is to show that we want to talk.”
PhRMA last October made a list of formal policy proposals along these lines, highlighting the need for science-based pricing and appropriate evaluation of the value of innovation.
He also pointed elsewhere in the Q&A session to other possible moves that could be made to reduce Japan’s long average hospital stays, increase over-the-counter product use, and make savings on the pricing of long-listed products – all of which could cut the 75% of national health spending that is non-drug-related.
While recognizing the value of regulatory initiatives such as the “sakigake” scheme of expedited reviews for pioneering products, and conditional early approvals, PhRMA added that it remains disappointed in the scope of Japan’s health technology assessment system. This began to be regularly applied last year to selected products post-approval, as a form of “sense-check” on whether granted prices are indeed appropriate.
While there have been no launch delays associated with the scheme, it does seem as though the assessment is aimed mainly at reducing prices, rather than a broad consideration of benefits, and it should be a one-off process, Feliciano stressed.
Taken with the other policy changes, the executive said that when his company does modelling on the economics of bringing pipeline drugs to Japan, the picture has become less enticing. This is particularly so if the drug will not be within the first three in its class to be launched, meaning it will miss out on the price maintenance premium (PMP) system of exemption from the now annual price cuts.
“If you are for example fourth to market, despite what might be other benefits for your product, there is now much more uncertainty in planning,” he noted.
PhRMA pointed out at the briefing that even non-industry observers are now questioning Japan’s policy direction, with some government officials recently calling for a fundamental rethink in Japan’s vaccine policies amid the pandemic, or noting that current drug prices are lower than required to recoup development costs, and are being cut solely for budgetary reasons. (Also see "Pharma Power Japan Barely In COVID Vaccines Race. Why?" - Scrip, 16 Dec, 2020.)
The introduction in 2010 of the PMP system is seen by the innovative industry groups as having worked well to attract investment. Feliciano pointed out that over the 2009-15 period in Japan, biopharma R&D investment grew 22%, ahead of the global 16%. Since then, there has been substantial deceleration.
Meanwhile, growth in local clinical trial activity has been rolling off, falling to around 3% in 2016-20, versus 13% in 2009-16. Citing data in part from Pharmaprojects, Feliciano noted that meanwhile such activity in China - which has made a string of positive policy changes - surged by 26% in the latter period.
In 2020, there were 2,674 medicines in all stages of development or that were registered in China, versus 1,638 in Japan.
What the US association would like to see most is a truly comprehensive approach to broad reform within Japan’s health system, and a transparent and comprehensive policy dialog with all stakeholders.
“This is necessary to allocate resources more efficiently and ensure long-term sustainability,” Feliciano said.
International reference pricing has created narrow price corridors that can limit access to medicines and vaccines in lower income countries. The issue will start to impact higher income EU markets if US plans to introduce IRP come to fruition.
The COVID-19 pandemic has shone a spotlight on the importance of equitable access to medicines and vaccines as well as flaws of international reference pricing (IRP) systems, which can price out lower income markets, said speakers at the virtual ISPOR Europe 2020 event in November. Delegates discussed how IRP should evolve and the importance of a system that allows differentiated pricing.
Global solutions to global health problems are needed, which is why technologies that can control the pandemic, such as vaccines, must be available in every country, regardless of their economic status, said Zoltan Kalo, professor of health economics at the Center for Health Technology Assessment, Semmelweis University, Hungary.
“So really the question is, can large markets and powerful countries accept the differential pricing of new vaccines so the rich ones pay a higher price compared to the poorer ones, and a globally coordinated allocation of new vaccines?” he asked.
If richer countries do accept differentiated prices and the global allocation of new coronavirus vaccines is successful, then such policies must also be considered for gene therapies, orphan drugs and oncology treatments, Kalo declared. “If we did it for this disease, why can’t we do it in all other therapeutic areas?” he asked.
Many countries use IRP to set a benchmark for price setting by referencing the price of the same medicine in other countries. IRP has not been good for access to medicines, particularly in lower income countries.
Companies have responded to reference pricing policies with “avoidance strategies.” These include not launching in countries with lower willingness to pay and narrow price corridors to dodge “an IPR-driven price race to the bottom,” said Andras Incze, CEO of Swiss-based consultancy Akceso Advisors and lecturer at the Baden-Württemberg Cooperative State University in Germany. This inevitably means lower access to medicines, he said.
Incze pointed to research by Akceso Advisors on Novartis’s heart failure drug Entresto (sacubitril/valsartan). Using Germany as a baseline for access, researchers examined uptake in 33 other markets with high functioning health care systems in North America, Europe and Asia Pacific. In Germany the drug is available to 12% of the eligible patient population, according to the research.
The study found that failure to offer the drug on comparable terms as Germany in the other 33 markets resulted in a loss of 500,000 quality adjusted life years. On top of the lost health gains, the company suffered a cumulative one-year revenue loss of more than $2bn, according to the research. This sum could be enough to develop a new drug and demonstrates the negative impact of reference pricing on R&D, said Incze.
Companies prefer to launch first in markets in countries with free pricing, such as Germany, the UK and Sweden, while lower income countries like Latvia, Estonia, Poland, Bulgaria and Hungary tend to come last, said Jaime Espin from the Andalusian School of Public Health in Granada, Spain.
Such issues could be exacerbated if the US implements delayed plans to base drug prices on the lowest price paid in other developed countries, and companies may double down on their avoidance strategies, warned Incze. The big, higher income markets in Europe could see companies decline to launch for fear of driving down US prices. This will hit patient access and pharma revenues and in the long term there will be fewer funds for drug development, he suggested.
Louis Garrison, professor emeritus at the Comparative Health Outcomes, Policy, and Economics Institute in the School of Pharmacy at the University of Washington, agreed that the US IRP could lead to higher prices outside the US and lower access to medicines. “And we will have less scientific progress,” he said, pointing out that the scientific advances made so far have enabled the pharmaceutical industry to develop COVID-19 vaccines.
However, it is unclear whether the US pricing plans will come to fruition. Plans have already been delayed and faced lawsuits, and President Trump’s executive orders could be overruled by President Elect Joe Biden when he takes office. PS143330
The pandemic is delivering some painful lessons, said Kalo. “We can’t be selfish, problems in other countries may reach us. In national policies we should consider the international implications and the market externalities,” and failure to do so could have undesirable effects, he warned. If narrow price corridors prevent other countries from being able to afford COVID-19 vaccines, those countries may well look for other solutions, such as relaxing intellectual property rights, for example.
Garrison argued that stakeholders should be working towards a global system that incorporates a broad concept of value that better aligns rewards with the value that is delivered. “We have to figure out how to manage a global enterprise in differential pricing,” he said.
Prices should be adjusted to take into account a country’s economic status because what is value for money in a higher income country will not be value for money in a lower income country, Kalo noted. If prices do not offer local value, the product will not be reimbursed, he added.
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