By Peter Loftus
Express Scripts Holding Co., a large manager of
prescription-drug benefits for U.S. employers and insurers, is
seeking deals with pharmaceutical companies that would set pricing
for some cancer drugs based on how well they work.
The effort is part of a growing push for so-called
pay-for-performance deals amid complaints about the rising price of
medications, some of which cost more than $100,000 per patient a
year.
Some insurers and prescription-benefit managers are pushing back
by arguing that they should pay less when drugs don't work well in
certain patients. Drug companies are countering with pricing models
of their own, such as offering free doses during a trial
period.
Express Scripts this month told clients it is seeking deals with
drug makers for differentiated pricing for certain cancer drugs
based on how well they work against different types of tumors,
Express Scripts Chief Medical Officer Steve Miller said in an
interview. Currently, Express Scripts and most insurers pay the
same per-unit rate for a cancer drug regardless of the type of
cancer it is being used to treat.
Dr. Miller pointed to Tarceva, a drug co-marketed by Roche
Holding AG and Astellas Pharma Inc., which has shown a smaller
benefit in pancreatic cancer than in lung cancer. In one clinical
trial, Tarceva extended the median survival of pancreatic cancer
patients by less than two weeks versus placebo. In a separate
trial, it prolonged survival among lung cancer patients by about 3
1/2 months versus chemotherapy.
In an "indication-specific pricing" model, the per-pill cost of
Tarceva would be lower for pancreatic-cancer patients than for
lung-cancer patients, given the reduced efficacy, Dr. Miller said.
Tarceva currently costs about $6,850 a month per patient, according
to GoodRx, a website that tracks drug prices.
"One of the big frustrations has always been people paying top
dollar for drugs that aren't always giving them the best response,"
Dr. Miller said. "If pharma is truly sincere about wanting
value-based reimbursement, we now have the sophistication to do
that."
Although Dr. Miller used Tarceva as an example, he wouldn't
identify the drugs for which Express Scripts is seeking
indication-specific pricing. The company has begun approaching drug
makers about arranging such deals, which could go into effect for
2016, he said.
A spokeswoman for Roche's Genentech unit said that when Tarceva
was approved to treat pancreatic cancer in 2005, it was the first
medicine approved for the disease in more than a decade. She said
the drug is now rarely used to treat pancreatic cancer because
other drugs have since been approved for the disease. She said
Genentech would welcome a system of pricing a medicine based on how
it performs in different indications--and has one in place in
Italy--but there are challenges to doing so in the U.S., including
fragmented patient-record systems.
Express Scripts has in recent years been a vocal critic of high
drug prices, which the company has used to promote its services to
potential customers as it competes against CVS Health Corp. and
others to administer drug benefits for health insurers and large
employers. Pharmacy-benefit managers also sometimes keep a portion
of the rebates and discounts they negotiate from pharmaceutical
companies.
Express Scripts' approach would be similar to that proposed by
Peter Bach, director of the Center for Health Policy and Outcomes
at Memorial Sloan Kettering Cancer Center.
In an article published last year in the Journal of the American
Medical Association, he suggested that in an indication-specific
arrangement, the monthly price for Eli Lilly & Co.'s cancer
drug Erbitux would plummet from $10,320 a patient to about $470 a
patient for its least effective use, treating recurrent or
metastatic head and neck cancer. The drug also is used to treat
locally advanced head and neck cancer, as well as colorectal
cancer.
A Lilly spokeswoman said Lilly supports efforts to make cancer
drug reimbursement "better reflect treatment value for different
patient populations," and it is "exploring alternative options to
accurately represent the value our medicines offer across multiple
indications."
Drug pricing has been "very hard for the payers to do anything
about," said Steven Pearson, president of the Institute for
Clinical and Economic Review, a Boston nonprofit that evaluates
cost-effectiveness in medicine. "Now they're starting to think very
hard about it, to look for practical ways to have more of an
influence on pricing."
It can be difficult for drug companies and payers to agree on
terms of alternative payment deals--and to actually administer the
deals.
Pay-for-performance contracts often involve tracking certain
health measures and outcomes in specific patients, such as changes
in blood-sugar levels for diabetes patients. The cost and
complexity of such tracking can offset the benefits, and the number
of such deals in the U.S. to date has been relatively small.
"They're very data intensive to administer and track these,"
says Larry Blandford, executive vice president and managing partner
at Precision for Medicine, a consulting firm advising drug makers
on dealing with payers.
U.S. insurers and pharmacy-benefit managers also push for simple
price cuts, and sometimes win them in the form of rebates paid by
manufacturers. But drug makers have been able to avoid big,
across-the-board price cuts in the U.S. because the market is so
fragmented, with multiple public and private payers, and because
rebate contracts are typically confidential. That allows drug
companies to minimize or avoid discounting certain drugs for some
payers.
Some drug companies have explored their own variations of
alternative pricing, such as annuity-style payments for very
expensive drugs. This involves an upfront payment and then ongoing
payments stretched out over several years based on how well the
drug works in individual patients.
One example is Bluebird Bio Inc., which is developing an
experimental gene therapy for rare diseases. At a health-care
conference in February, Chief Executive Nick Leschly said that if
the therapy makes it to market, he would consider asking insurers
to make an upfront payment to cover costs and risk of development,
plus additional ongoing payments if it works for a patient.
Other drug makers are trying different models. Since 2011,
Acorda Therapeutics Inc. has provided its drug Ampyra, which can
help multiple-sclerosis patients improve their walking, free for
the first two months.
The reason: Studies have shown it only works in about 40% of
patients, but there is no way to predict before starting therapy
who will benefit. The two-months free program gives patients time
to figure out if the drug is working--they usually know within
several weeks, says Acorda Chief Executive Ron Cohen. If the drug
works, the company begins charging the regular price, or about
$21,000 a year per patient.
Acorda implemented the two-months free policy partly because
some insurers were restricting its use. The two-months free program
isn't part of any contracts with insurers, but Dr. Cohen believes
it sows goodwill among doctors and insurers.
"We saw that as a risk-sharing arrangement," said Dr. Cohen.
He says "a significantly wider swath" of the drug industry is
exploring alternative-pricing models than in the past. "A lot of
the pressure emerges simply from the ongoing issues around the
increasing cost of medicine," he says.
Alnylam Pharmaceuticals Inc. would consider performance-based
pricing if its experimental rare-disease drugs reach the market,
CEO John Maraganore said in an interview. The company's lead drug
in development is a treatment for a rare disease called
TTR-mediated amyloidosis. Regulators haven't yet approved the drug
for sale and Alnylam hasn't set a price.
Mr. Maraganore said blood tests can measure the effectiveness of
its experimental drug. "I think there are many opportunities for
our medicines to be evaluated and potentially reimbursed on a
performance basis," he said. "We certainly would be open to that
type of approach."
The drug industry has made various stabs at alternative-pricing
before. Several European state-run health systems have implemented
pay-for-performance and indication-specific pricing arrangements
with drug makers over the past decade. In the U.S., health insurer
Cigna Corp. has signed deals that tie reimbursement for EMD
Serono's MS drug Rebif and Merck & Co.'s diabetes drug Januvia
to certain patient outcomes.
Joseph Walker contributed to this article.
Write to Peter Loftus at peter.loftus@wsj.com
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