pricing market access

PMA Perspectives September 2015


Hello and welcome to Remap Consulting’s September 2015 Newsletter. This issue discusses the P&R challenges faced by the PCSK9 Inhibitors; what level of price increase is acceptable for established products and how payers are trying to overcome the P&R issues associated with adaptive licencing.

We will be attending ISPOR 18th Annual European Congress in Milan from 9 -11th November 2014, where we will be presenting two posters. Do let us know if you will be attending, as we would be delighted to meet up and discuss your issues with you.

Our team continues to expand! We are pleased to welcome Verena Wolfram, who joins us as a consultant. Verena has over 10 years of biomedical and pharmaceutical experience, gained within healthcare consultancies and as a researcher in academia. She brings significant expertise in Market Access, Health Economics, and Evidence Based Medicine as well as development of communication strategies. We are still looking for talented people to join our team if you are interested or know someone who might be please visit our website or contact us for more information.

We look forward to seeing you at ISPOR in Milan.

Paul Craddy & Graham Foxon
Managing Directors – Remap Consulting

Are the PCSK9 Inhibitors, Repatha and Praluent, the new Sovaldi?

The recent approval of Repatha (evolocumab) and Praluent (alirocumab), the PCSK9 (proprotein convertase subtilisin/kexin 9) inhibitors, by EMA and the FDA have provided a much needed new treatment option for hypercholesterolaemia patients. But will the price, potential size of the patient population and payer’s recent experience with other novel treatments (e.g. Sovaldi) pose challenges to the commercial opportunity for these products?

Despite significant advances in treatments (e.g. statins) over the last 15 years, the majority of patients with a high cardiovascular risk still do not have their cholesterol levels under control. Based on the current clinical data, the PCSK9 inhibitors are a vital new treatment option for patients with high cholesterol. The PCSK9 inhibitors are monoclonal antibodies that require subcutaneous injection every two to four weeks (depending on the product). The use of PCSK9 inhibitors leads to a clinically significant reduction in LDL cholesterol levels of 54–77%, in patients that were already on cholesterol lowering medication. However, the impact on mortality and morbidity will only be conclusively known in 2018 when the cardiovascular outcomes studies read out.

The PCSK9 inhibitors have so far only be approved for limited patient populations (e.g. familial hypercholesterolaemia, approximately 600,000 patients in the US). However, the expectation is that the indication will be expanded to include those who are inadequately controlled on statins or at high risk of cardiovascular events. Estimates for this patient population range from 3.5–15 million patients, according to the Institute for Clinical and Economic Review (ICER), which recently reviewed these medications. The other issue is the length of therapy, as once patients are on cholesterol lowering medication, they typically remain on therapy for the rest of their lives.

Per injection cost
(Ex-factory, local currency)
 $542.31 GBP340.20 1,807.61 €280.50
Yearly treatment cost
(Ex-factory, USD)
 $14100 $6,780 $6659 $8,220

The annual US treatment cost for Praluent is approximately $14,600, with Repatha costing $14,100. This price tag has caused concern with payers, with CVS Health warning that the costs could “eclipse the initial costs of Sovaldi”. In the EU, the annual cost for Repatha is substantially lower, ranging from $6,600–$8,220, depending on the market. Praluent has yet to receive EU marketing authorisation.  
Payers are concerned about the budget impact of the PCSK9 inhibitors, as the potential yearly impact could hit $150 billion, if 15 million potential US patients are switched to these treatments. US payers will try to create competition between Praluent and Repatha with the aim of securing larger discounts, mirroring the same tactics that US payers used when Olysio launched into the HCV market. The level of discounts for Sovaldi increased from 22% in 2014 to 46% in 2015 once Olysio had launched. If such discounts are applied to the PCSK9 inhibitors in the US, suddenly the US price seems much more in line with the EU price level. However, the Institute for Clinical and Economic Review (ICER) has stated that even this price is too high and the PCSK9 inhibitors would need to undergo an 85% price decrease to ~$2,177 to have an annual value-based price that was cost-effective.

In the EU, it will be interesting to see how payers manage the potential budget impact and whether they resort to similar tactics as used for Sovaldi (i.e. share EU price data and threatening to implement joint procurement). EU payers have a broader range of tools to manage the PCSK9 inhibitors than in the US and some payers may try to delay reimbursement for the additional patient populations until mortality data are available. It will also be interesting to see whether NICE consider these products to be cost effective considering that their US counterpart, the ICER, does not.

Whilst there are strong parallels with Sovaldi’s launch (e.g. high price speciality drug; potentially large patient populations; significant budget impact; game changing levels of efficacy), there are differences. Sovaldi is a cure for HCV for the majority of patients, which will result in decreasing budget impact over time as the patient pool decreases. In contrast, the PCSK9 inhibitors are not a cure and patients will require life-long access to the treatment. Whilst the PCSK9 prices are six times lower than Sovaldi price, the budget impact will be significantly larger for the PCSK9 inhibitors, due to the high prevalence of cardiovascular disease and the increasing number of patient who will be on treatment. As such, it is expected that the PCSK9 inhibitor class will go on to be the top selling class of pharmaceuticals of all time.

The recent advances in medical science are producing a new wave of innovative, highly effective, speciality drugs, such as Sovaldi and the PCSK9 inhibitors in areas where there is high unmet need. The challenge payers are facing is the ever increasing budget impact posed by these products. Payers have been responding with new and creative ways to try to ensure patient access, but at the end of the day, there is only a finite budget. It does appear that if prices continue to rise for breakthrough products, we must soon reach a tipping point where healthcare pharmaceutical funding mechanisms must change. The current price increases and funding implications seem unsustainable in the long run.

Recommended articles that caught our attention

  • Americans want Medicare to help negotiate down drug prices: A recent survey highlights that the majority of the US population are in favour of Medicare negotiating drug prices.
  • Drug pricing comes under the microscope: Interesting FT article arguing if a value based approach is appropriate for pharmaceuticals, given the market dynamics and barriers to entry.
  • Cancer Drugs Fund axes 16 treatments after overspending: More cancer treatments are scheduled to be removed from the CDF and have their funding stopped due to significant budget overspend.

Should pharma companies’ increase prices for established products?

The recent controversy over the US price increases for Daraprim, where the price of a generic product that has been approved for over 60 years, was increased by 5000%, is part of a broader question. Should pharma companies’ be allowed to increase prices for established products and if so, what is the right level?

Pharmaceutical pricing is currently a hot topic, particularly considering the storm around the launch prices for Sovaldi, PSCK9 inhibitors and oncology medicines. The traditional pharma business model has argued that such prices are justified to enable investment in R&D to develop new innovative products. The traditional view has been that older products revenues will decrease as their patent expires and they compete in a competitive marketplace. Payers have been compliant with this approach, as there are typically substantial savings to be made upon generic entry.

However, numerous pharma companies are now focusing attention on their established and generic brand portfolio in order to seek to maximize value across the products’ lifecycle. This is partly driven by global pharma companies re-evaluating their portfolios and either divesting or re-focusing on the pricing of their mature portfolio, in order to increase profitability. One of the easiest mechanisms companies can use to extract value is to increase the price. This is causing issues for payers, as the expected budget savings from older products are not being realized.

Turing Pharmaceutical’s argues that the price of Daraprim is undervalued at $13.50 per pill, given the clinical value and prices of comparable products in other indications. Daraprim is in the favorable position of having no generic competitors, limited budget impact as it is an acute treatment and a tightly controlled supply chain, which has given it control over how it supplies the market. The naïve assumption was that the price could be increased to $750 per pill in one single go without causing a public outcry. Had Turing pharmaceuticals increased the price by 50% a year, it would have taken ~10 years to arrive at a comparable price level and would probably have gone relatively unnoticed. Indeed, the previous owners (CorePharma) had originally increased the price from $1 to $13.50 since 2010, itself a 1350% increase (or over 270% per year) without facing significant criticism.

The example of Turing is extreme but not unique. There are multiple other examples where established products have significantly increased their price the US, such as digoxin (heart disease), Fiorinal (migraines) and Synthroid (thyroid medicine). Whilst these price increases are good for shareholder value, it can have an impact on patients, as they can see their copays rise rapidly. In the case of digoxin, copays rose from $1.15 to over $30/month, which puts significant strain on family finances, particularly for the elderly.

The UK has experienced a similar high profile case, where Flynn Pharma and Pfizer are currently being investigated by the Competition and Markets Authority for a 20 fold price increase for Epanutin for epilepsy. Prior to the deal, Pfizer sold directly to wholesalers. After 2012, Pfizer sold to Flynn pharma at 8-17 the original price, whilst Flynn pharma then sold Epanutin to the public at a 20 fold increase to the original price.

There is a strong argument to be made that pharmaceutical companies should be allowed an inflationary price increase to be able to maintain their gross margins and ensure a sustainable business in the future. In the EU, payers do see the value of maintaining supply of essential treatments at cost effective prices. EU payers do have mechanisms by which prices can be increased, assuming the product is essential and has limited competition, but a strong rationale is needed for the payers to accept the price increase. The price increases typically seen (e.g. 5 – 20% every 3-5 years) are also a tiny in comparison to the US, where year on year double digit price increases are the norm.

The issue changes when pharmaceutical companies price increases are implemented without any perceived justification, as this appears to be short term profit taking, rather than longer term partnership. In the US, unlike many EU countries, there are limited mechanisms to restrict the impact of large price increases, beyond public and media pressure. Several presidential candidates have already commented on Turing Pharmaceuticals’ price increase and implied that they would act on drug price increases if they were elected. This could have significant implications for the US healthcare market and pharma companies in general if it were enacted.

In summary, pricing is currently a highly controversial topic for payers, politicians and media alike. Pharmaceutical companies need to be mindful of this and should work with the payers to provide strong rationale as to why their product is undervalued and why realistic price increases are needed. Pharmaceutical companies need to consider the long-term impact, such as government control of pharmaceutical prices in the US, as well as the short term financial gain of price increases. The rationale for pharmaceutical price increases should clearly be explained to payers alongside implementing a manageable budget impact approach that is acceptable for payers. This proactive approach will help to improve relationships with payers and the public, as well as helping to improve pharmaceutical companies’ reputations.

MMAPs – how do you align Regulator and Payer needs to secure earlier patient access?

Medicines Adaptive Pathways to Patients’ (MAPPs), the new EMA term for adaptive licensing, is a proposed life-cycle approach to evaluation and licensing of medicines. The ultimate aim of MAPPs is to enable quicker access for patients whilst providing adequate and evolving evidence as to the clinical benefits and harms. MAPPS are defined by the EMA as ‘prospectively planned, adaptive approach to bringing drugs to market.’ The idea is that products, in areas with high patient unmet need, will initially get an authorized niche indication. Once achieved, iterative phases of evidence gathering and progressive licensing adaptations will provide further evidence to support the initial indication and obtain potential further indications.

The vision of achieving faster regulatory approval for products in areas of high unmet needs is a great initiative, however, consideration must be given to how these products can achieve price and reimbursement. Current HTA processes are likely to limit or reject reimbursement at a price that manufacturers would consider to be acceptable for these MAPP products due to the lack of clinical data available at the time of HTA submission. The HTA process would also delay patient access (a typical NICE evaluation takes 21.4 months), defeating the aim of the MAPP initiative.

To ensure EMA’s aim for MAPPs can be achieved a project known as ADAPT SMART (Accelerated Development of Appropriate Patient Therapies: a Sustainable, Multi-stakeholder Approach from Research to Treatment-outcomes), involving key stakeholders, such as payers, patient groups, industry and academics has been initiated. The objective of ADAPT SMART is to ensure any issues that may delay patient access can be addressed through the development of a MAPP framework that is responsive to the needs of all stakeholders. Throughout its endeavor ADAPT SMART will need to address a myriad of questions as to, amongst others: what products qualify for MAPP; the patient groups that benefit; the required evidence base; the impact on healthcare and social security systems; alternative pricing and reimbursement models; pragmatic trial designs and the re-evaluation of medicines, from a regulatory and reimbursement perspective, based on real world evidence.

NICE has agreed to be an active partner of the ADAPT SMART project and hopes that the process can identify activities that make the development and regulation of medicines more efficient. Sarah Garner, Associate Director for Science Policy at NICE said: “MAPPs represents a more considered and integrated approach to the development and assessment of new drugs … the project will explore the feasibility of alternative reimbursement models and more pragmatic trial designs which are needed in the adaptive landscape”. Finn Borlum Kristensen, Secretariat Director, EUnetHTA, Danish Health and Medicines Authority, also added: “ADAPT SMART will act as a catalyst with an expectation that, as a multi-stakeholder project, it will make a meaningful contribution to efforts aiming at seamless introduction and faster patient access to effective health technologies within sustainable health systems.”

This ADAPT SMART initiative illustrates that there is a real desire for both regulators and HTA bodies to engage in a collaborative project to ensure that patients, in areas of high unmet need, can have earlier access to innovative treatments. The mention of alternative reimbursement models from NICE and EUnetHTA gives rise to the possibility that a ‘Value Based Pricing’ approach may be resurrected. This could result in the initial price of a product approved through the MAPP process being adjusted, upwards or downwards, as new real world evidence for the product becomes available. It is clear that NICE are willing to consider such new alternative reimbursement models, the questions remains as to whether other major EU countries are willing to consider new approaches to pricing and reimbursement of innovative treatments.

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