The Galien Forum USA 2018

Making Medicines Affordable

Progress in the science of drug discovery has made medicines a vital element in the therapeutic arsenal against disease. Since private enterprise has proven to be the predominant source of innovative therapies, the up-front costs of research and development lead to increased tension between patients desiring new treatments and industry’s need for financial returns in order to offset prior investment and make new high-risk longterm investment in research. Achieving these legitimate goals for both patients and industry requires a balanced consensus among stakeholders directed to resolving basic questions: who pays for innovation and how much?

The nature of the global medicines market makes it difficult to answer these questions. Pricing and reimbursement of drugs in most countries lacks real transparency. Negotiations take place largely in private, with little patient or public input. Payers must render judgments based on partial information, particularly in estimating how a drug might perform against existing standard of therapy in the real-world clinical setting. And many of the newest drugs transform or even cure diseases for which there is no existing therapy available for comparison. “Negotiation” may not accurately describe the process of setting reimbursement levels in countries where there is only one payer. And true assessment of “value” is not undertaken when the reimbursement methodology is reference to other countries. Even when there is a genuine attempt to determine “value,” there are multiple and conflicting approaches to assessing the value of a new drug. Is value determined by comparison to other drugs, or by the amount of money health systems save “all in” as a result of the new treatment? And how do we measure benefits to patients, caregivers, society, etc.?

Pricing is arguably the murkiest in the US market, the world’s largest. This is because the private commercial business is built around confidential rebates off the published list price that drug manufacturers must offer to a concentrated group of large pharmacy benefit managers (PBMs) who administer employer-based drug benefit programs for the majority of the US workforce. The result is that manufacturers are incentivized to keep their list prices high in anticipation of having to pay rebates to PBMs in order to access patients. In many cases, the revenues received by the PBMs who distribute the drug is comparable to that taken by the biopharmaceutical companies who originate the drug—but the PBMs do not make similar R&D investments. While the system tends to work for the insurers, PBMs and the drug companies, patients lose out. Little, if any, of the rebates flow back to patients in terms of a lower price at the pharmacy counter. Every year for the last several, patients have experienced an increase in “out-of-pocket” costs for drugs. For many Americans, these costs can total thousands of dollars, leading to choices between health and financial survival that patients should not have to make.

In general, health care is becoming more expensive in all countries. Medicines are no exception. Throughout the industrialized OECD countries, the percentage of overall health expenditures attributable to medicines has been rising, albeit slowly, into the mid-teens as more new technologies become available to patients. Growth in expenditures is, however, heavily concentrated in the most innovative segments of the market—those which address serious unmet medical need and face less competition from generics. In Europe, researchers and politicians have criticized regulatory authorities for approving high-priced cancer drugs in the face of published reports that many are failing to deliver meaningful clinical benefit to patients.

In the US, high launch prices for breakthrough cancer immunotherapies and drugs for rare diseases, combined with double-digit increases for older, non-innovative branded medicines, has damaged the industry’s reputation and prompted bi-partisan pledges to lower the price of drugs.

One of the approaches that the FDA is taking is speeding the approval of more generic drugs to compete with branded products and efforts to eliminate shortages on the market that lead to abusive price rises for older off-patent products.

Regardless of what governments do, the affordability of medicines will remain a key issue for innovative pharma and biotech companies in the years ahead. Last year, the FDA approved the first directly-administered gene therapy, Luxturna, from Spark Therapeutics, as well as the first two Car-T cell-based therapies, Kymriah and Yescarta, from Novartis and Gilead Sciences, respectively. Each drug represents a new class of medicines that can potentially cure serious or life-threatening conditions, including cancers, blindness and childhood genetic disorders. Although list pricing for these drugs are among the highest ever for a prescription medicine, the three companies have taken an active stance in exploring novel “pay for performance” contracts with payers.

Today’s panel – composed of a broad group of representatives from the biopharmaceutical industry, the insurance industry, and a government drug evaluation agency – will review grounds for building a fresh consensus around maintaining the pace of innovation in drug discovery while ensuring access to new therapies now and in the future. Can a solution be found or will new treatments fail to be accessible to those in need and will new insights into human biology fail to be translated?