Gene therapy approvals highlight accelerated change in drug environment April 21, 2020
About me…. Jane F Barlow MD, MPH, MBA • 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 2
Overview of today’s discussion Agenda Learning objectives 1. Understand the changing market environment and its 01 US market dynamics impact on specialty drug utilization and spend 2. Explore the impact of approvals for rare disease Evolving specialty drug treatments 02 environment 3. Demonstrate the effect of gene therapy approvals on contracting strategies 03 Case study: Gene therapies 04 Implications 3
01 US Market Dynamics 4
US prescription drug costs have more than tripled in the last 20 years Prescription Drug Expenditures Per Capita Prescription Drug Expenditures 1999-2018 1999 compared with 2018 US $Billions Per Capita $ $333.3 $350.0 $1,200 $1,026 $300.0 $1,000 $250.0 $286.2 $800 $200.0 $600 $102.7 $150.0 $374 $100.0 $400 $47.1 $72.2 $50.0 $200 $30.5 $0.0 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1999 2018 Payer Pt OOP Total Total Prescription Drug 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 5
Key trends influencing U.S. market •Increased payer size enables significant pressure/leverage over pharma Industry consolidation •Vertical alignments create end-to-end control of the drug channel Innovative, targeted treatments •Specialty drug trend, driven by price and utilization, steadily increasing, and specialty utilization necessitating greater utilization management and restrictions •Amplified demand for price transparency and reform Drug pricing and affordability •Greater cost sharing pushed on patients at all levels •Potential end to protected classes, Part B reforms, international price Policy climate indexing, drug importation, and direct negotiation •Value-based contracting represents a potential shift away from the Increase in innovative deep rebate model contracting and risk sharing •Challenges persist in finding the right fit, developing the right model and implementing Payers are challenged to offer affordable benefits, foster health improvement and manage trend 6
Three areas of exponential change having significant impact on the market environment Government focus on Rx Vertical and horizontal integration cost and transparency State Pricing Legislation Innovators and disruptors 7
Nearly 2/3rds of lives are enrolled in one of 9 large health plans Smaller plans have significant lives on aggregated basis – but limited opportunity to contract Coverage of US Population 2019 (327M covered lives) United 45M CMS 33M All other plans (385): 125M lives Anthem 33M Aetna 21M Humana 12M Cigna Kaiser 16M HCSC Centene 12M 16M 14M SOURCE: MMIT Payer data January 2020 8
Specialty is growing in absolute dollars and percent drug spend Total Industry Specialty Spend Pharmacy Drug Spend 17% Medical Drug Spend Growth $235B Rate $179B $127B $92B 2018 2016 2014 2012 % of Total 30% 38% 45% 50% Drug Spend Adapted from: Partners Group 9
…leading to tighter management by payer’s across brands 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 18 10
New approaches: Innovative contracting falls into several buckets… Type of Product/ Disease Contract Contract Company Outcomes- Luxturna/ Spark Rare retinal Unrestricted access to label following PA; guaranteed WAC pricing from buy- based: clinical dystrophy and-bill provider, additional rebate for non-improvement Onpattro/ Alnylam hATTR Unrestricted access with prior authorization following label. Multiple rebates amyloidosis including for discontinuation and liver transplant Outcomes- Jardiance/ Diabetes Larger rebate & 1-of-1 formulary if lowers cost of CV disease at health plan based: cost Boehringer Ingelheim Pay-over-time/ Zynteglo/ bluebird Transfusion- 20% payment annually for 5 years; if certain number of transfusions required, outcomes- bio* dependent no additional payments. based β -thalassemia Cost-cap/ CV drug/ Biotech** CV disease Guaranteed payment for treating annually increasing % of defined CV/diabetes subscription 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 11
02 Evolving specialty drug environment 12
Innovative treatments targeted to rare populations are driving increased drug prices Price/Script Payers Patients 1950 - 2000: Oral primary care drugs 1995-2015: Biologics for specialty categories 2018… Rare/orphan The most expensive drug in the world: Zolgensma at $2.1M per patient 13
Specialty drug spending is poised to surpass traditional drug spending Moved from 26% of drug spend in 2009 to 49.5% in 2018 Drug Spending by Traditional and Specialty, 2009 to 2018 1200 1,064 1,044 1,043 1,000 1,034 1,006 2018 net per capita drug spend ($) 988 922 981 1000 931 262 279 289 471 438 800 489 385 385 517 318 600 400 738 727 699 605 603 595 595 592 546 527 200 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Traditional drug spend Specialty drug spend Managed Care November 2019 based on IQVIA Medicine Use and Spending in the US , May 2019 14
Rare diseases and cancer dominate pipeline and drive growth • Oncologics comprise 35% of 2018 pipeline 1 • Companies are conducting 908 gene/cell therapy trials (in 140 indications) 2 • Orphans will comprise 20% of worldwide sales in 2024 3 • In 4 of the past 5 years, over 40% of first product launches were orphan drugs, reaching a high of 58% in 2018 4 30 SPECIALTY: FIRST PRODUCT LAUNCHES 25 No. of Products 20 15 10 ~58% 5 ~45% ~41% ~22% ~40% 0 2014 2015 2016 2017 2018 Orphan Non-orphan 1 Citeline’s PharmaProjects, 2 FoCUS NEWDIGS Initiative at MIT, 3 EvaluatePharma, Orphan Drug Report 2019, 4 BioCentury, April 2019 15
03 Case study: Gene therapies 16 CONFIDENTIAL
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 17 FDA website: https://www.fda.gov/biologicsbloodvaccines/cellulargenetherapyproducts/ucm573960.htm Accessed 29 September 2018 17
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 18
Examples of current and near-term pipeline gene therapies Luxturna: Leber’s congenital 5 patients/M lives $.85 M amaurosis 5 patients/M lives $2.1M Zolgensma: hATTR Anyloidosis $1.8M 10 patients/M lives Zynteglo: Beta Thalassemia Europe $?M Valrox: Hemophilia A 49 patients/M lives etranacogene 12 patients/M lives $?M dezaparvovec: Hemophilia B 19
Emerging one-time therapies create financial challenges Durable Therapies Distill Payments Upfront Durable Therapies 80 60 40 20 0 Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 6 Classic Medicines 20 10 0 Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 6 Benefit Cost Three financial challenges exacerbated Payment timing Performance risk: Actuarial risk: One-time high cost Effectiveness & Likelihood of encountering a durability case 20
New treatment innovations challenge current insurance paradigms, threatening access 21 New • Growing clinical pipeline on innovative durable therapies durable therapies • High one-time cost will likely create financial Payer coverage challenges • Sustainability for all stakeholders is at risk Patient access FoCUS: Multi-stakeholder group dedicated to making innovative cures accessible and sustainable FoCUS: Financing and reimbursements of Cures in the US 21
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