With Higher Prices, the Need to Promote Longer-Term Value of Pharmaceuticals

The keynote session at the Academy of Managed Care Pharmacy’s Nexus meeting this week aired notes of resistance and denial, resignation, and acceptance. This may sound familiar, especialAMCP logoly if frustration was substituted for actual grief, and closely reflects the process for dealing with the death of a close friend or relative. In this case, one could say that the dearly departed is pharmaceutical pricing rationality.

The panel discussion was in many ways a eulogy. Alan Weil, Editor-in-Chief, Health Affairs, moderated the service. The chief question at hand was whether we are willing or able to pay for innovative therapies that may cost a half-million dollars or more? Mr. Weil pointed out that apart from their cost, these new therapies (e.g., CAR-T) “fit poorly into our current payment model.”

Steve Miller, MD, Senior Vice President and Chief Medical Officer, Express Scripts, said that the answer is no. We are apparently not willing to pay for them, based on the hepatitis C treatment paradigm today. He noted that the antiviral treatments available today are highly curative. “Although hepatitis C treatments have come down in price, we, as a society, do not pay. We’ve treated only one third of the patients so far. And now, we’re challenged with a $1 million treatment. We need to change our mindset.”

Jane Barlow, MD, MPH, MBA, Senior Advisor, Massachusetts Institute of Technology Center for Biomedical Innovation, countered that in the end, “We will pay. The patients want these innovations. The question is really the sustainability.”

J.D. Kleinke, Medical Economist, agreed, saying that “We as a country demand access, and we demand progress. People will sue for it, have bake sales for it, to force the system to pay for it.”

“If the hepatitis C vaccine cost originally $10,000 per month and it was to be taken chronically, people would not worry much about paying for treatment, said Robert DuBois, Chief Medical Officer, National Pharmaceutical Council. The original price tag of $84,000 for a limited treatment course, however, did set a firestorm of controversy.

There also seems to be a different reaction when speaking to payers one to one, according to Dr. Barlow. She said that in private conversations, payers express less concern than in groups [or in the press]. “When we say we’re spending too much, we seem to be spending more,” she said.

Web image 1With new gene therapies and immunologic approaches, the pricing models and relatively few people treated will force payers and purchasers to take a different evaluation approach to value, said Dr. Kleinke. This may involve a longer view towards future productivity or “value capture.” With this concept, if a drug company charges $100,000 for an intervention that helps produce $1 million in productivity or additional benefit, the drug “captures” 10% of the value of the transaction.

Perhaps our ability to pay for them is a very different question. Until now, pharmaceutical pricing could be explained relative to other similar therapies or compared with the likely costs of future care avoided. It may be that future productivity gained, rather than medical costs avoided, may be a better framework for evaluating the pricing of these next generation interventions.

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