Costs, Trends, Concerns and Cost Control Options Specialty Drugs
Goals for Today DEVELOP AN REVIEW PAST PREDICTIONS, IDENTIFY ETHICAL AND REVIEW OPTIONS FOR UNDERSTANDING OF THE CURRENT PERFORMANCE, FUNDING ISSUES DRIVING CONTROLLING COST AND SPECIALTY DRUG INDUSTRY AND IMPORTANT/EVOLVING COST AND INFLUENCING THE TREND AT BOTH THE AND ITS DIFFERENCE FROM TRENDS. MARKET. EMPLOYER GROUP AND TRADITIONAL PHARMA. NATIONAL LEVELS. 24-Jul-19 BAN - Specialty Drugs Trends, Concerns, and Surprises 2
The Basics History and Definitions 24-Jul-19 BAN - Specialty Drugs Trends, Concerns, and Surprises 3
Biologics and cancer drugs requiring special handling and First “mainstream administration biologics” (for marked by an techniques first example, Remicade) explosion in specialty entered clinical trials entered the drug approvals and and limited use in marketplace in the Orphan Drug the late 1970’s. late 1990’s. designations. Evolution The 1980’s and early 1990’s 2000 – 2005 of an late 1970’s late 1990’s 2010 – 2019 Industry were marked by Major investments in rapid development specialty drug of bioengineering discovery and technologies. development began Clinical successes in 2000 – 2005. were few. BAN - Specialty Drugs Trends, Concerns, and Surprises 24-Jul-19 4
Specialty Drugs: What are they? The Short Answer: It Depends… BAN - Specialty Drugs Trends, Concerns, and 24-Jul-19 5 Surprises
The Easy Definition: Cost CMS: > $670 per month (2019) PBM “A” > $750 per dose Tends to be used by public sector entities. Use by PBMs decreasing, partly because of formulary and rebate issues. Can cause confusion/misclassification when lower cost therapeutic equivalents or biosimilars enter the market. BAN - Specialty Drugs Trends, Concerns, and 24-Jul-19 6 Surprises
The Better Definition: “Functional” Traditional Specialty Drug Drug Used by most PBMs. Minimizes formulary and rebate issues within a single plan or multiple plan designs from the same carrier, TPA, or PBM. May create issues with cross-vendor comparisons. BAN - Specialty Drugs Trends, Concerns, and 24-Jul-19 7 Surprises
A Special Case: Orphan Drugs Specialty Drugs or Not? Economic and Clinical Impact? BAN - Specialty Drugs Trends, Concerns, and 24-Jul-19 8 Surprises
Definition An orphan drug is a pharmaceutical agent developed to treat medical conditions which, because they are 1. About 60% of orphan drugs are so rare, would not be profitable to biologics; 30% are cancer drugs. produce without government or 2. Orphan Drug designation has other support. These conditions are yielded more drugs and medical referred to as orphan diseases. breakthroughs that might not otherwise have been achieved. The assignment of orphan status to a 3. Manufacturers are favoring disease and to drugs developed to development of drugs eligible for treat it is a matter of public policy in “Orphan” status. and has yielded medical breakthroughs that might not otherwise have been achieved. BAN - Specialty Drugs Trends, Concerns, and 24-Jul-19 9 Surprises
The Orphan Drug Act- Good or Bad? The Orphan Drug Act (ODA) of January 1983, was/is meant to encourage pharmaceutical companies to develop drugs for diseases that Unintended consequences… have a small market. 1. More drugs eligible as market Under the ODA drugs, vaccines, and evolves. diagnostic agents qualify for orphan 2. Creates long-term market status if intended to treat a disease monopolies without price affecting less than 200,000 American controls. citizens. 3. Costs tend to shift to private Under the ODA orphan drug sponsors payors and under or uninsured qualify for seven-year FDA- 4. No provisions for profit-sharing administered market Orphan Drug or repayment of grants and Exclusivity (ODE), "tax credits of up to credits. 50% of R&D costs, R&D grants, waived FDA fees, protocol assistance and may get clinical trial tax incentives. BAN - Specialty Drugs Trends, Concerns, and 24-Jul-19 10 Surprises
The Basics Costs, Trends, and Forecasts 1 BAN - Specialty Drugs Trends, Concerns, and Surprises 24-Jul-19 1
U.S. & Global Trends The Past and Market Dynamics 24-Jul-19 BAN - Specialty Drugs Trends, Concerns, and Surprises 12
Drug Development 1996 - 2015 24-Jul-19 BAN - Specialty Drugs Trends, Concerns, and Surprises 13
Global Cost Comparisons Exhibit 1 National Trends in Per Capita Pharmaceutical Spending, 1980 – 2015 $1,200 United States $1,000 Since 1995, The U.S. has Switzerland Germany had the highest per Canada $800 capita drug spend and France trend. United Kingdom $600 Australia Netherlands $400 Norway Sweden $200 $0 1980 1985 1990 1995 2000 2005 2010 2015 Notes: Final expenditure on pharmaceuticals includes wholesale and retail margins and value-added tax. Total pharmaceutical spen ding refers in most countries to “net” spending, i.e., adjusted for possible rebates payable by manufacturers, wholesalers, or pharmacies. Data from all countries include only the portion spent on retail prescription medications, except for the Netherlands and the United Kingdom, where spending on pharmaceuticals includes prescribed medicines, over-the-counter medications, and other medical nondurable goods. Pharmaceuticals consumed in hospitals and other health care settings are excluded. Data: Organisation for Economic Co-operation and Development, 2017. Data for Australia and Canada from 2014. Source: D. O. Sarnak, D. Squires, and G. Kuzmak, Paying for Prescription Drugs Around the World: Why Is the U.S. an Outlier? The Commonwealth Fund, October 2017. BAN - Specialty Drugs Trends, Concerns, and 24-Jul-19 14 Surprises
U.S.-based manufacturers fund a disproportionate share (50%) of global drug development costs. These costs are “passed through” to U.S. employers and PBMs largely due to price controls in other countries (see below) Why is the Other countries have artificially low U.S. an per capita costs due to external reference pricing and other cost and price controls. Outlier? The lower prices in these other countries reflected their more centralized processes for procuring pharmaceuticals and determining coverage. BAN - Specialty Drugs Trends, Concerns, and Surprises 24-Jul-19 15
50% of Development Costs, But… 24-Jul-19 BAN - Specialty Drugs Trends, Concerns, and Surprises 16
U.S. Brand and Generic Trend 24-Jul-19 BAN - Specialty Drugs Trends, Concerns, and Surprises 17
U.S. & Global Trends The Present and Market Dynamics 24-Jul-19 BAN - Specialty Drugs Trends, Concerns, and Surprises 18
Bad News: Global U.S. Cost Comparisons 1. On a drug-by-drug basis, U.S. retail unit drug costs are 5% to 117% higher than in other countries. 2. Drug utilization rates are similar to those seen in other countries. BAN - Specialty Drugs Trends, Concerns, and 24-Jul-19 19 Surprises
Good News: Recent U.S. Cost Trends Contrary to forecasts over the past 5 years, specialty drug trend is now well below 10%. BAN - Specialty Drugs Trends, Concerns, and 24-Jul-19 20 Surprises
FDA Approval: Q3- Q4 2019 24-Jul-19 BAN - Specialty Drugs Trends, Concerns, and Surprises 21
• Nearly half of specialty drug costs are adjudicated through medical claims Other (“Non - PBM Drugs”). These drugs are administered in an outpatient facility Important setting and are 2X – 3X more expensive than the same drugs purchased through a Issues: PBM and administered in a free-standing infusion center or at home. Hidden • Some states are passing legislation prohibiting mark-ups of professional Costs services and supplies in outpatient facility settings. These regulations could also impact Non-PBM Drug Pricing.
• The overwhelming majority of specialty drugs are prescribed to control serious Other chronic conditions. With few exceptions, these drugs do not have curative Important potential. • These drug costs become a fixed Issues: operating expense for the plan and have resulted in increased numbers of Large Fixed Claimants. • Although these costs are predictable, Costs their “persistence” is causing issues with stop-loss and fully-insured quotes and renewals.
• The Health Care industry in the U.S. is beginning to experiment with value-based Other pricing for specialty drugs (already in place in Germany). Important • This trend raises important practical and ethical issues: Issues: • How will “value” be measured? • What will be the “value” threshold Value for drug approval or coverage? • What financial model will be used?
There are early indications that biologics may: Other • Be used to treat much more common conditions outside of the current complex Important disease model. An example is the use of antibodies to treat osteoarthritis pain. Issues: • Be replaced by genetic re-engineering of the immune system (Examples: CAR-T treatment for lymphoma/leukemia and Immune system Black “restart” ,rather than chronic specialty drug treatment, with stem cell transplant in MS). Swans • These therapies were not “expected” or predicted a few years ago. *A black swan is an event or occurrence that deviates beyond what is normally expected of a situation and is extremely difficult to predict.
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