Bill due for drug­mak­ers’ win­ning strat­egy

Modern Healthcare - - NEWS - By Jaimy Lee

Faced with ex­pir­ing patents on many of its big­gest-sell­ing drugs, the phar­ma­ceu­ti­cal in­dus­try came up with sev­eral al­ter­na­tive block­buster strate­gies a few years ago. One in­volved slap­ping high prices on spe­cialty drugs that treat rare dis­eases and then ex­pand­ing their use to more com­mon con­di­tions. It has paid off hand­somely for many com­pa­nies de­spite re­cent push­back by in­sur­ers and health­care providers.

This lat­est wrin­kle in ag­gres­sive drug pric­ing com­pounds the broader drug-price prob­lem for in­sur­ers and providers, who al­ready face sky-high bills for the lat­est cancer drugs and im­proved treat­ments such as Gilead Sci­ences’ So­valdi, a first-in-class cure for hepati­tis C that be­came an overnight block­buster be­cause of its $1,000-a-pill price tag. Yet, there’s lit­tle chance that pur­chaser ou­trage will lead to im­me­di­ate changes in how or­phan and other spe­cialty drugs are priced, an­a­lysts say.

“There has been some push­back, es­pe­cially from in­sur­ers,” said Joshua Co­hen, a re­search as­sis­tant pro­fes­sor for the Tufts Cen­ter for the Study of Drug De­vel­op­ment. “But most of it is ver­bal push­back.”

Or­phan drugs are ther­a­pies ap­proved by the Food and Drug Ad­min­is­tra­tion to treat rare con­di­tions or dis­eases that af­fect fewer than 200,000 people in the U.S. Drug man­u­fac­tur­ers that de­velop ther­a­pies to treat these con­di­tions re­ceive a num­ber of in­cen­tives to do so, in­clud­ing seven years of mar­ket ex­clu­siv­ity and tax cred­its.

In re­cent years, the num­ber of newly ap­proved or­phan drugs has in­creased, as have the prices that com­pa­nies charge for these drugs. But or­phan drugs, once ap­proved, are some­times ex­panded to cover mul­ti­ple in­di­ca­tions af­ter their mak­ers, the Na­tional In­sti­tutes of Health and physi­cian-sci­en­tists suc­cess­fully con­duct clin­i­cal tri­als ex­plor­ing other uses of the drugs.

A clas­sic case in­volves John­son & John­son’s Rem­i­cade, which was first ap­proved in 1998 to treat Crohn’s dis­ease, a chronic bowel dis­or­der that af­fects about half a mil­lion people in North Amer­ica but re­ceived or­phan- drug des­ig­na­tion based on clin­i­cal tri­als show­ing its ef­fec­tive­ness in chil­dren. It has now re­ceived FDA ap­proval for 16 in­di­ca­tions in­clud­ing rheuma­toid arthri­tis, which is sig­nif­i­cantly more com­mon than Crohn’s, and is be­ing pre­scribed off-la­bel for 15 additional in­di­ca­tions, an­a­lysts say. The drug gen­er­ated nearly 10% of John­son & John­son’s to­tal rev­enue last year.

Ex­perts say in­sur­ers and providers gen­er­ally have been un­suc­cess­ful in get­ting drug com­pa­nies to lower the prices of ex­pen­sive drugs like Rem­i­cade. There are dozens of drugs with or­phan des­ig­na­tions whose sales are de­rived wholly or in large part from treat­ing more com­mon con­di­tions (See chart).

The next steps? An­a­lysts say con­sumers should brace them­selves for greater cost-shar­ing as in­sur­ers and providers look for ways to get pa­tients in­volved in driv­ing pric­ing re­form. Con­sumers soon may be se­lect­ing health plans based on their drug-ben­e­fit de­sign rather than fo­cus­ing on the plans’ provider net­works, said Dr. John Whang, co-pres­i­dent of Re­im­burse­ment In­tel­li­gence, which de­vel­ops re­im­burse­ment strate­gies for drug com­pa­nies. “Cost-shar­ing on the pa­tient side is fi­nally go­ing to drive the con­ver­sa­tion.”

But even that strat­egy may not work. There usu­ally are no al­ter­na­tive treat­ments for pa­tients with rare dis­eases, which means the com­pa­nies are free to set ex­or­bi­tantly high prices for the small pa­tient pop­u­la­tions that suf­fer some of the 7,000 known rare dis­eases, only about 500 of which have ap­proved treat­ments.

For in­stance, Biomarin Phar­ma­ceu­ti­cal, a No­vato, Calif.-based biotech­nol­ogy com­pany, in Fe­bru­ary re­ceived FDA ap­proval for Vimizim, an en­zyme-re­place­ment treat­ment for Morquio A syn­drome, which af­fects fewer than 800 Amer­i­cans. The treat­ment is priced at $380,000 per pa­tient a year, mak­ing it one of the most ex­pen­sive or­phan drugs on the mar­ket.

While it’s un­likely other uses will be found for an en­zyme-re­place­ment ther­apy, other drugs are more like Rem­i­cade, where the high price jus­ti­fied by the or­phan in­di­ca­tion then gets spread across hun­dreds of thou­sands of pa­tients and turns the drug into a bil­lion-dol­lar block­buster. That is­sue was front and cen­ter in a law­suit brought last year by PhRMA, the drug in­dus­try trade group, over a 2013 HHS reg­u­la­tion for the 340B federal drug dis­count pro­gram, which al­lowed hos­pi­tals to buy or­phan drugs at cheaper prices to help providers serv­ing low-in­come and unin­sured pa­tients even when used to treat more com­mon con­di­tions.

In May, the U.S. District Court for the District of Columbia gave PhRMA a big win when it ruled the govern­ment did not have the author­ity to is­sue the reg­u­la­tion. If the rul­ing isn’t re­versed—HHS has un­til June 13 to ap­peal—the rapid ex­pan­sion of 340B in re­cent years to ru­ral hos­pi­tals will likely slow down. “If this de­ci­sion re­sults in the in­abil­ity to use 340B pric­ing for or­phan drugs when used for a non-or­phan pur­pose, the in­crease in pric­ing will likely cause many of these hos­pi­tals to eval­u­ate the ben­e­fit of the 340B pro­gram and whether to con­tinue par­tic­i­pat­ing,” said a spokesman for the Safety Net Hos­pi­tals for Phar­ma­ceu­ti­cal Ac­cess.

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