Gene therapy approvals highlight accelerated change in drug - - PowerPoint PPT Presentation

Gene therapy approvals highlight accelerated change in drug environment

April 21, 2020

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About me….

• Executive Vice-president & Chief Clinical Officer at Real Endpoints
• Senior Advisor, MIT Center for Biomedical Innovation FOCUS

project

• Board Director, Momenta Pharmaceuticals and TherapeuticsMD
• Former Associate Chief Medical Officer, CVS Health
• Former Vice-president medical affairs and clinical innovation,

Medco

• Former Director health benefits operations and clinical

performance, IBM Jane F Barlow MD, MPH, MBA

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Overview of today’s discussion

1. Understand the changing market environment and its impact on specialty drug utilization and spend 2. Explore the impact of approvals for rare disease treatments 3. Demonstrate the effect of gene therapy approvals on contracting strategies

Agenda Learning objectives 01 US market dynamics 02 Evolving specialty drug environment 03 Case study: Gene therapies 04 Implications

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01

US Market Dynamics

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US prescription drug costs have more than tripled in the last 20 years

Peterson-KFF Health System Tracker https://www.healthsystemtracker.org/health-spending- explorer/?display=U.S.%2520%2524%2520Billions&service=Prescription%2520Drug&rangeType=range&years=1999%252C2018&source=Out%2520of%2520Pocket%252CHealth%25 20Insurance&tab=1 Accessed 5 April 2020

$72.2 $286.2 $30.5 $47.1 $102.7 $333.3 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

US $Billions

Payer Pt OOP Total $374 $1,026 $0 $200 $400 $600 $800 $1,000 $1,200 1999 2018

Per Capita $

Total Prescription Drug

Prescription Drug Expenditures 1999-2018 Per Capita Prescription Drug Expenditures 1999 compared with 2018

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Key trends influencing U.S. market

Innovative, targeted treatments and specialty utilization Payers are challenged to offer affordable benefits, foster health improvement and manage trend

• Increased payer size enables significant pressure/leverage over pharma
• Vertical alignments create end-to-end control of the drug channel
• Potential end to protected classes, Part B reforms, international price

indexing, drug importation, and direct negotiation

• Specialty drug trend, driven by price and utilization, steadily increasing,

necessitating greater utilization management and restrictions Drug pricing and affordability Policy climate Industry consolidation

• Value-based contracting represents a potential shift away from the

deep rebate model

• Challenges persist in finding the right fit, developing the right model

and implementing Increase in innovative contracting and risk sharing

• Amplified demand for price transparency and reform
• Greater cost sharing pushed on patients at all levels

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Vertical and horizontal integration Government focus on Rx cost and transparency Innovators and disruptors

Three areas of exponential change having significant impact on the market environment

State Pricing Legislation

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Nearly 2/3rds of lives are enrolled in one of 9 large health plans

SOURCE: MMIT Payer data January 2020

Smaller plans have significant lives on aggregated basis – but limited opportunity to contract

Kaiser 12M

United 45M Anthem 33M Aetna 21M Cigna 16M Centene 14M Humana 12M CMS 33M

All other plans (385): 125M lives

Coverage of US Population 2019 (327M covered lives)

HCSC 16M

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Specialty is growing in absolute dollars and percent drug spend

Pharmacy Drug Spend Medical Drug Spend

% of Total Drug Spend

30% 38% 45% 50% Total Industry Specialty Spend

2012 2014 2016 2018

17% Growth Rate $92B $127B $179B $235B

Adapted from: Partners Group

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Payers and Pharmacy Benefit Managers (PBMs) are increasingly utilizing strict approaches to manage drugs

• Formulary exclusions
• Strict prior authorization criteria
• Documentation

Source: Formulary Exclusion Lists published by CVS and ESI

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…leading to tighter management by payer’s across brands

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New approaches: Innovative contracting falls into several buckets…

Type of Contract Product/ Company Disease Contract

Outcomes- based: clinical Luxturna/ Spark Rare retinal dystrophy Unrestricted access to label following PA; guaranteed WAC pricing from buy- and-bill provider, additional rebate for non-improvement Onpattro/ Alnylam hATTR amyloidosis Unrestricted access with prior authorization following label. Multiple rebates including for discontinuation and liver transplant Outcomes- based: cost Jardiance/ Boehringer Ingelheim Diabetes Larger rebate & 1-of-1 formulary if lowers cost of CV disease at health plan Pay-over-time/

• utcomes-

based Zynteglo/ bluebird bio* Transfusion- dependent β-thalassemia 20% payment annually for 5 years; if certain number of transfusions required, no additional payments. Cost-cap/ subscription CV drug/ Biotech** CV disease Guaranteed payment for treating annually increasing % of defined CV/diabetes population with low-end of ICER pricing range & additional discount to reflect $0 copay *Unsigned and still not final structure; **MoU but final contract unsigned

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02

Evolving specialty drug environment

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Innovative treatments targeted to rare populations are driving increased drug prices

1950 - 2000: Oral primary care drugs 1995-2015: Biologics for specialty categories 2018… Rare/orphan

Price/Script Patients Payers

The most expensive drug in the world: Zolgensma at $2.1M per patient

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Specialty drug spending is poised to surpass traditional drug spending

Managed Care November 2019 based on IQVIA Medicine Use and Spending in the US, May 2019

Moved from 26% of drug spend in 2009 to 49.5% in 2018 Drug Spending by Traditional and Specialty, 2009 to 2018

738 727 699 603 595 595 605 592 546 527 262 279 289 318 385 385 438 471 489 517 200 400 600 800 1000 1200 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Traditional drug spend Specialty drug spend 2018 net per capita drug spend ($) 1,000 1,006 988 931 922 981 1,043 1,064 1,034 1,044

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Rare diseases and cancer dominate pipeline and drive growth

1Citeline’s PharmaProjects, 2FoCUS NEWDIGS Initiative at MIT, 3EvaluatePharma, Orphan Drug Report 2019, 4BioCentury, April 2019

• Oncologics comprise 35% of 2018 pipeline1
• Companies are conducting 908 gene/cell therapy trials (in 140 indications)2
• Orphans will comprise 20% of worldwide sales in 20243
• In 4 of the past 5 years, over 40% of first product launches were orphan drugs, reaching a high of 58% in

20184

5 10 15 20 25 30 2014 2015 2016 2017 2018

• No. of Products

Orphan Non-orphan

~58% ~45% ~41% ~22% ~40%

SPECIALTY: FIRST PRODUCT LAUNCHES

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Case study: Gene therapies

CONFIDENTIAL

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What is a gene therapy?

• Technique that modifies a person’s genes to treat or cure disease
• Mechanisms include:

– Replacing a disease-causing gene with a healthy copy – Inactivating a disease-causing gene that is not functioning properly – Introducing a new or modified gene into the body to help treat a disease

• Regulated by the FDA Center for Biologics Evaluation and Research (CBER)

– Biologics license application (BLA) required for marketing

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FDA website: https://www.fda.gov/biologicsbloodvaccines/cellulargenetherapyproducts/ucm573960.htm Accessed 29 September 2018

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How do gene therapies work?

Hemophilia A example

• Adeno-associated virus serotype 5 (AAV5)-based gene therapy

– Functional copy of gene that codes for Factor VIII protein is inserted into AAV5 capsid that delivers the gene to a patient’s liver cells – Cells use new functional gene to produce Factor VIII protein – Administered by a single intravenous dose

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Examples of current and near-term pipeline gene therapies

Valrox: Hemophilia A Zolgensma: hATTR Anyloidosis Zynteglo: Beta Thalassemia etranacogene dezaparvovec: Hemophilia B Luxturna: Leber’s congenital amaurosis 5 patients/M lives $2.1M 10 patients/M lives $1.8M Europe 12 patients/M lives $?M $?M 49 patients/M lives 5 patients/M lives $.85 M

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Emerging one-time therapies create financial challenges

Three financial challenges exacerbated

Payment timing One-time high cost Performance risk: Effectiveness & durability Actuarial risk: Likelihood of encountering a case

10 20

Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 6

Classic Medicines

Benefit Cost

20 40 60 80

Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 6

Durable Therapies

Durable Therapies Distill Payments Upfront

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New treatment innovations challenge current insurance paradigms, threatening access

New durable therapies Payer coverage Patient access

• Growing clinical pipeline on innovative

durable therapies

• High one-time cost will likely create financial

challenges

• Sustainability for all stakeholders is at risk

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FoCUS: Multi-stakeholder group dedicated to making innovative cures accessible and sustainable

FoCUS: Financing and reimbursements of Cures in the US

FoCUS Financing and Reimbursement of Cures in the US FoCUS NEWDIGS Initiative • MIT Center for Biomedical Innovation

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• Burden of multiple high cost

therapies

• Concern about what this will

represent in 3-5 years with respect to total cost

• Potential off label use
• Operational management of

a larger pipeline

• Adverse selection

Other reasons for high concern

98% 84% 91% 91% 65%

2% 16% 9% 9% 35%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Total cost is material for my plans Payment timing relevant to benefit realization Product performance risk Actuarial risk Other

Reasons why managing the financial risk of high-cost durable therapies is a high

• r extremely high concern (n=65)

Agree Disagree

Survey: US Payers’ concerns reflect all these issues

FoCUS Financing and Reimbursement of Cures in the US FoCUS NEWDIGS Initiative • MIT Center for Biomedical Innovation

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Greatest payer interest lies in addressing performance risks

6% 9% 3% 18% 14% 1% 29% 27% 13% 31% 40% 34% 16% 9% 49% 0% 10% 20% 30% 40% 50% 60%

Reducing upfront budget impact of the new therapy by smoothing payments over time Aligning the timing of the therapy costs with its benefits Only paying for therapy that works

All Payers (N=77)

Not a benefit Slightly beneficial Moderately beneficial Very beneficial Extremely beneficial

FoCUS Financing and Reimbursement of Cures in the US

Most payers plan to develop strategies for these therapies over the next 2 years

Payers are inclined to manage these therapies differently The question is high priority over the next two years

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FoCUS NEWDIGS Initiative • MIT Center for Biomedical Innovation

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Three precision financing solutions are emerging to address reimbursement challenges

FoCUS NEWDIGS Initiative • MIT Center for Biomedical Innovation

• Short-term milestone-based contracts
• Usually < 2-year duration
• Pay for treatment upfront
• Specified rebate payments tied to early outcome
• Multi-period performance-based annuities
• Usually > 2 years (likely 3 to 5 years)
• Payments spread out over contract period
• Payment tied to performance over time
• Orphan Reinsurer and Benefit Manager (ORBM) and Risk Pools

–Carve out risk and management of novel breakthroughs Solutions must be customized for the therapy/disease AND satisfy each stakeholder

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Overview of a milestone-based contract (MBC)

FoCUS NEWDIGS Initiative • MIT Center for Biomedical Innovation

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One-year MBC timeline:

Via the provider or intermediary

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• 3 January 2018: Massachusetts insurer Harvard Pilgrim Healthcare announces outcomes-based

agreement for vision gene therapy

Treatment & Payment 30 Month Eye Test Manufacturer rebate if under-performance

X

Manufacturer rebate if under-performance 30-90 Day Eye Test

X

Example milestone-based contract for vision therapy

FoCUS NEWDIGS Initiative • MIT Center for Biomedical Innovation

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Overview of a performance-based annuity (PBA) contract

FoCUS NEWDIGS Initiative • MIT Center for Biomedical Innovation

Pay when patient and healthcare system receive benefits

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Initial Upfront Payment Assess Outcome Metric Payer milestone payment if outcome met Treatment 1 2 3 4 5 Years

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NEWDIGS Initiative • MIT Center for Biomedical Innovation • CONFIDENTIAL 29

bluebirdbio company presentation, ready to recode; September 23, 2019. http://investor.bluebirdbio.com/static-files/8c4eb7bb-37d6-4fba-941c- 1a154c8bbfd6 Accessed November 18, 2019

• Spread payments over

up to 5 years

• Get paid only if the

treatment works

Example performance-based annuity for β-thalassemia (Europe)

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Orphan Reinsurer and Benefit Manager (ORBM) concept

• Carve-out actuarial risk
• Enable scale for innovative

contracting and financing

• Provide medical management

Source: Trusheim M, Mytelka DS, Warren GL, Han D, Ciarametaro M. Improving Management of Gene and Cell Therapies: The Orphan Reinsurer and Benefit Manager (ORBM). PharmExec 2018 Sept 10. Available at: http://www.pharmexec.com/improving-management-gene-and-cell-therapies

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Source: http://lab.express-scripts.com/lab/insights/specialty-medications/delivering-on-the-promise-of-modern-medicine

Beginning with 2 Gene Therapies

Cigna offering ORBM-Lite: Embarc

FoCUS Financing and Reimbursement of Cures in the US

Payers may favor different solutions based on their particular dynamics

Approach Commercial Fully Insured Medicaid Medicare Advantage Self-Insured Employer All Payer Segments Population risk-pooling 69% 40% 52% 50% 55% Short-term MBC 75% 50% 61% 20% 60% Long-term MBC 58% 36% 43% 30% 46% Annuity: Spread payments over >2 years 33% 14% 24% 20% 24% Performance-based annuity: spread payment over >2 years/tied to performance 47% 21% 35% 30% 35%

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Milestone-Based Contract (MBC): Pay for therapy upfront and receive refunds tied to performance over the short-term (< 2 years) or the long-term (> 2 years)

MIT FoCUS payer survey completed April 2019: 77 participants representing over 280M lives

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Important to start the dialogue on financing solutions early as barriers need to be addressed

FoCUS NEWDIGS Initiative • MIT Center for Biomedical Innovation

Structural Strategic Administrative

• Pricing and Reporting

Regulations, esp. Medicaid Best Price

• Insurance Reserve

Regulations

• Accounting Cost and

Revenue Recognition Rules

• Ability to sign multi-year

agreements

• Coverage
• Patient mobility
• Reinsurance strategy
• Tracking patients over

time

• Ability to align on

relevant outcomes measures and milestones

• Ability to align on terms
• Program administration

effort

FoCUS Financing and Reimbursement of Cures in the US

FoCUS insights and resources available online

https://www.payingforcures.org/toolkit

FoCUS Financing and Reimbursement of Cures in the US

Purpose Target Audience Format

• Payer and biopharma teams who have not designed a precision financing

solution and are considering it

• For specific products
• For the coming pipeline
• Policy-makers who wish to understand key FoCUS insights

Toolkit: Purpose, Audience, Format

• Web-based
• Self-directed
• Simple -- “peeling the onion “ iteratively
• Resource for practitioners considering offering or adopting a precision

financing solution:

• Easy access to FoCUS learnings
• Jump start own solution design
• Accelerate use of precision financing

NEWDIGS Initiative • MIT Center for Biomedical Innovation

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04

Implications

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Summary

US drug trend continues to grow fueled by specialty and increasingly drugs for orphan conditions Market consolidation leaves few payers with most of the negotiating power Gene therapies introduce new areas of uncertainty: Payment timing, performance risk and actuarial uncertainty New reimbursement models are under consideration to address gene therapy risks New tools are emerging to support stakeholders in their assessment of gene therapies

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Actions

Educate

• Stay abreast of the changing environment
• Identify resources and tools to help

Assess

• Understand the impact of orphan drugs including gene therapies on

your plan

• Consider cumulative impact in addition to the individual drug impact

Innovate

• Explore new reimbursement models
• Define a strategy to achieve negotiating power

Thank You!

jbarlow@realendpoints.com