Reimbursement for Oncology, Specialty Drugs

When Peter Bach, MD, and his colleagues on the formulary committee at Memorial Sloan-Kettering Cancer Center assessed drugs to treat advanced, metastatic colorectal cancer, they made a decision that drew the attention of the healthcare industry.

Following FDA approval of Zaltrap^® (ziv-aflibercept) in August 2012, the committee compared the new drug with Avastin^® (bevacizumab), which the center’s physicians had been using. Both products had the same mechanism of action and similar benefits, however, bevacizumab had a better side-effect profile and required shorter administration times.

In addition, the patient copay for ziv-aflibercept in the private markets and Medicare would be twice as expensive as for bevacizumab. So, the center opted to continue using bevacizumab for patients, refusing to treat them with ziv-aflibercept.

“I cannot really stress to you how radical a move that was,” Roger Longman, chief executive officer at Real Endpoints LLC, a healthcare consulting company, said at the Bio CEO & Investor conference in February.

The choice to avoid using the new drug made national news in October 2012 when Dr. Bach wrote an op-ed piece for the New York Times. Discussing the decision at the conference, Dr. Bach admitted it likely cost Sloan-Kettering money because more expensive drugs have higher profit margins.

Still, representatives from other institutions had contacted Dr. Bach and noted they hoped to make similar moves in the future. Sanofi, the manufacturer of ziv-aflibercept, responded by offering providers discounts of up to 50%.

“We wanted to emphasize that we can make reasonable decisions that are in the best interest of our patients’ health and still be financially advantageous for them,” Dr. Bach said. “We felt like that was an easy call.”

Although most new FDA-approved oncology and specialty drugs are accessible to patients, the reimbursement environment is beginning to undergo changes, according to Rena Conti, PhD, assistant professor of health policy and economics at the University of Chicago.

Dr. Conti said the Patient Protection and Affordable Care Act includes provisions that focus on quality of care and cost effectiveness.

“It is not just about the efficacy of hitting an end target,” Dr. Conti said at the conference. “It is about all the other, indirect value that matters here because you have smart, savvy physicians and [pharmacy and therapeutics] committees who are sitting there comparing what the next best option is.”

As recently as 2 years ago, physicians made decisions on specialty drugs based on evidence or profitability and payers “were afraid at best to get into that space,” according to Dr. Bach. Payers are now “upping their intelligence” about specialty drugs and having third parties manage utilization and/or access to the products.

For example, the University of Pittsburgh Medical Center uses pathways for cancer treatments to provide physicians with Internet-based tools to decide on a treatment plan for patients. Rather than drug manufacturers focusing most of their attention on gaining FDA approvals, Dr. Bach said they are becoming more concerned about payers’ reimbursing their drugs.

“I think that is where we are headed,” he said.

When Dr. Conti speaks with oncologists, they say they spend a lot of time on the telephone with insurers, asking if they can write the prescription for oral drugs or infusion chemotherapy.

“It is clear that it is not just guideline-based care now,” she said. “It is also value-based care that payers, in particular, are becoming focused on.”

Cynthia Smith, vice president of market access and commercial development at Affymax, Inc., spoke at the conference about how she has seen the environment shift in recent years. Manufacturers of oncology and specialty drugs used to worry about getting their products approved and then convincing physicians to prescribe the drugs. Now, during the drug development process, companies must spend more time thinking about how to convince payers to place their products in a preferred position on the formulary.

“We are trying to predict what value decision makers are going to be (focused on) by the time the drug gets to the market,” Ms. Smith said. “That is evolving so quickly. It becomes more difficult.”

Most insurers are covering specialty drugs under the pharmacy benefit, according to Mr. Longman, where they can have more control through tiering and other methods. Dr. Conti noted drug manufacturers, anticipating they must demonstrate value and “go through the ringer” of pharmacy benefits, are raising the unit prices of drugs because they must provide discounts and negotiate with pharmacy and therapeutics committees to get on the formulary.

Under the traditional system for infused drugs such as peginesatide, providers buy the drugs and then are reimbursed by the payer and receive a 6% infusion fee regardless of the price. Thus, they commonly prescribe higher cost drugs to make more money. However, in the bundled payment system, providers are paid a set amount of money, which led to a decline in the use of expensive ESAs.

Still, Ms. Smith said Affymax focused not only on peginesatide’s cost, but also on its cost effectiveness, side effects, and value in helping patients without having them incur more costs in the future.

“[The changes are] very, very real,” Ms. Smith said. “It is the world to come…I am not surprised Peter [Bach] is making these kinds of decisions. I think we will see it more and more.”

Click here for an expert response to this story: Developing a "Value Proposition" for Oncology Products