Health Economics to move up on the agenda of biotech and pharmaceutical executives

Folks, there is no doubt that 2008 will see increasing demand for health economics in biotechnology and pharma industry - see SCRIP article (below). I guess the trick will be to start early (small companies will have to beef up capabilities) to also facilitate the predicted increase in deal making between biotech and pharma with relevant health economic intelligence.

My best wishes for the holiday season to all readers of the blog!
Ulf

"A Christmas wish-list for pharmaceutical CEOs
December 19, 2007 Scrip
The past 12 months have been difficult for the industry, with health economic assessments of products becoming more rigorous, substantial job cuts and a sustained attack on intellectual property protection. So chief executives everywhere could probably think of a number of Christmas presents they would like to lighten their mood.
For most, a ream of data showing the outstanding cost benefits of their latest launched product would be just the thing. In today's increasingly cost-conscious world, it is not sufficient to have a product that reduces cholesterol dramatically or purges the body of a pathogenic virus. It is necessary, indeed vital, that these beneficial effects should be exerted in such a way that the cost of the therapy is much lower than alternative treatments.
Another welcome gift for any CEO would be a painless way of reducing costs throughout the company. The past 12 months have seen numerous firms tackling the unpleasant job of cutting jobs. They include some major players: Pfizer, AstraZeneca, Novartis, Johnson & Johnson, Bristol-Myers Squibb, GlaxoSmithKline and Amgen.
A more joined-up approach from politicians would also brighten up a CEO's Christmas. On the one hand chief executives are feted by government officials keen to have research and manufacturing facilities sited in their neck of the woods, but on the other they they are castigated by others for helping to push up the nation's healthcare costs.
...in the thick of it
In the next 12 months, there a number of therapeutic areas where CEOs would like to be in the thick of the action. These include thrombopoiesis and the prevention of thromboembolism. Indeed some companies have already embarked upon this path.
Amgen's romiplostim and GlaxoSmithKline's eltrombopag (Promacta/Revolade) are thrombopoietics which are nearing the market, while new products approaching approval that could compete with low molecular weight heparins include Bayer/Johnson & Johnson's rivaroxaban and Boehringer Ingelheim's dabigatran. Lilly's prasugrel is nearing launch as a potential competitor to the blockbuster clopidogrel.
A well-placed investment in biologic agents would similarly not go amiss. Antibody therapeutics continue to be a must-have for the modern pharmaceutical group, a point not missed by some Japanese firms. Eisai recently bought Morphotek, Astellas acquired Agensys, and Takeda announced plans to set up a new US subsidiary to conduct research on therapeutic antibodies.
...a worthy successor?
One area where a CEO probably does not need Christmas largesse is in the appointment of a successor. Numerous "CEOs in waiting" have been named over the past few months. These include Severin Schwan, the head of Roche's diagnostic division, who will succeed Dr Franz Humer as CEO of Roche in March 2008 (although Dr Humer will stay on as chairman), Andrew Witty, who will succeed Dr Jean-Pierre Garnier as CEO of GlaxoSmithKline next May, and Bernard Poussot, who becomes CEO of Wyeth at the beginning of 2008, with Robert Essner staying on as chairman for a transitional period.
Lilly has just announced that Sidney Taurel, its chairman and CEO, will retire next March, with Dr John Lechleiter, currently president and chief operating officer, becoming president and CEO on April 1st. And Shire Pharmaceuticals has reported that Matthew Emmens will step up to the chairmanship next June, with Angus Russell, currently chief financial officer, becoming CEO.
So whatever 2008 brings for these new incumbents, I would like to wish all of them, and of course the readers of Scrip, a very merry Christmas and a happy new year.
John Davis"

NICE to consult Novartis on phase III trial

Novartis has cut a deal with the UKs medicines advisory agency to jointly design a clinical trial to measure cost effectiveness as well as the efficacy of an experimental new drug, the Financial Times quoted a company official as saying.The National Institute for Health and Clinical Excellence (Nice) will charge a consultancy fee to tell Novartis the information it needs to determine whether to advise the UK health service to buy the medicine once it is launched.The move marks a radical step to justify the value of new and often expensive medicines, representing an effort to integrate and accelerate talks between companies, regulators and buyers.Novartis opened talks with Nice last month on the design of its Phase III clinical trial for the medicine which it has code-named Novartis 001 and aims to have a final protocol in place by next March, with results within about a year.
Copyright 2007 Hemscott Group Limited.

US democrats interested in UK NICE like agency

The Democratic Party's return to overall control of the US Congress last year has moved pharmaceutical cost-effectiveness much higher up the country's political agenda, but the creation of a US NICE is far from certain, delegates heard at the NICE annual conference in Manchester, UK, last week.
Andrea Sutcliffe, who spent two months in Washington earlier this year while she was still NICE deputy chief executive, said that the institute's role in evaluating the clinical and cost-effectiveness of health technologies for the UK's national health service had generated great interest among US lawmakers, civil servants, manufacturers and insurers.
The sharp differences between healthcare systems in the UK and the US made it unlikely that the US would create a cost-effectiveness agency identical to NICE, Ms Sutcliffe said. But she suggested that the institute and its methods might serve as a model for more cost-effectiveness evaluations in US healthcare.
Dr Steve Pearson, senior fellow with America's Health Insurance Plans, an insurer's association, said that an American health technology assessment agency was already taking shape.
He said that US political consensus was forming around the concept of an agency with an annual budget of $300-500 million, funded from both private and public sources. But there was still sharp disagreement over the status of such an agency - would it be inside or outside the government, for example - and the exact sources of funds for its budget.
Cost-effectiveness was also a difficult subject in the US, with sharp disagreement over its precise meaning in the pharmaceutical setting. Political developments this year and next would determine if and when a US NICE might be created, and what kind of agency it might be, Dr Pearson said.
SCRIP - World Pharmaceutical News - www.scripnews.com FILED 11 December 2007 COPYRIGHT Informa UK Ltd 2007

the latest edition of the Spanish journal of health economics is out..

Topics in this edition: Spanish NHS and healthcare cost optimization, cost-effectiveness of HPV vaccination in Spain, QoL in coronary syndrom patients, discussion around NICE and diabetes drugs etc. You can read all articles online..

NICE proposes new risk-sharing agreement for Novatis' eye drug Lucentis

The UK NICE has proposed a cap for the dosing of Lucentis, an eye drug from Novartis Pharma, to 14 shots per eye while additional dose requirements would be at the cost of Novartis.

IQWiG makes German newspaper headlines again

The German newspaper, Berliner Zeitung, published today an article regarding the mounting scandal around the instituts leader and the previous practise of contracting research projects to external experts. The accusitions to have channeled projects through a research institute where a family member is a major shareholder have lead the ministry of health to put in place an investigations on all contracts to outsiders since April 2006.

While these matters are being investigated, the leading industry associations in Germany (VfA) and the Association of Pharmaceutical Research Manufacturers in America (PhRMA) have in the meantime circulated their positions and comments regarding the method paper 3.0. In especially points were raised around RCTs as only menaingful source of evidence source, the lack of acceptance of surrogate endpoints as well as concerning IQWiG's statement that one single study would only provide "suggestion of benefit".

Tough times for Chemists

...as big pharma is moving from analytical chemistry to biology, read the timely article from Wall Street Journal highlighting the Pfizer example

IQWIG's potential approach of 'cost-benefit' assessments in order to establish maximum prices

In November, the annual fall symposium of the German IQWIG took place. You can listen live to the presentations on the IQWIG webpage. Jaime Caro presented on international standards for the setting of ceiling prices. (24th November)

Cost-effectiveness or budget impact models?

Michele Intorcia has posted a question on the linkedin network regarding the preference of payors for either cost-effectiveness or budget imact models. Its an interesting discussion and therefore I'd like to post the questions and answers he received so far.

Michele Intorcia asks
Budget Impact Models or Cost-effectiveness Analysis?
Cost-effectiveness analysis has been advocated in the health economics methods literature and adopted in a growing number of jurisdictions as an evidence base for decision makers charged with maximising health gains from available resources. However, budget-holders and payors are increasingly aware that the threshold approach has lead to decisions that resulted in increased expenditures on health care programs and are concerned about the sustainability of public funding for health care programs without any evidence of increases in total health gains. Do you think in future BIMs will be more important than CEAs?

Answers (5)

Pablo Lapuerta
Chief Medical Officer, Cogentus Pharmaceuticals

The importance of CEA is likely to grow more than BIM: while the healthcare system has always been concerned about costs, in the future it has to focus more on value. Consider the example of the UK: the NHS spends as much per capita on health as Kaiser Permanente (a US managed care plan) but its quality of care is measurably inferior (Feachem et al, BMJ 2002;324:135-41 ). Simply put, Kaiser provides better value for money, and experts in the UK realize they must improve the NHS.

Eddie Gibson
Business unit director, Oncology at Bristol-Myers Squibb

The question supposes that both CEA and budget impact are or can be used in similar ways to educate the decision making process. If we dissect the process a little into questions of policy and implementation we could look for where CEA andbudget impact have differential uses: Policy - long term health policy is more likely to be influenced by CEA, which itself looks for long-term enhancements in healthcare and better deployment of resource. This is only likely to strengthen and to expand into other areas of healthcaree beyond its proven ground of pharmaceuticals (note the incorporation of a public health remit into NICEs constitution in the UK) Implementation - CEA has not been used to (and probably is not an appropriate way of defining) to total envalope of healthcare funding; nor can it be used (as your question highlights) to really assess the short term affordability of any action. Here budget impact and some more convential economic approaches of efficiency and productivity drive the activity; the key question is not can the system afford a cost effective therapy but can the budget be freed to implement policy from other areas or does the envelope need to be expanded. So, my feeling is that CEA is here to stay and will become embedded much more strongly than today in many healthcare systems. This will introduce a number of conflicts within these systems in the short term while the budget impact of effecting change catches up with the broad policy direction.

Joel Brill
Chief Medical Officer at Predictive Health, LLC

Michele: In health care, everything old is new again. If you look at how Medicare Part B is funded, we are already using a budget impact model. Infusion / chemotherapy drugs, physician work and practice expense, and facility costs from ASC / IDTF / outpatient hospitals are paid out of the same pool of $$. Thus, as costs for non-professional services increase, professional reimbursement drops - the legacy of the flawed SGR formula. Gail Wilensky made the case for CMS to establish a center for comparative effectiveness in Health Affairs in November 2006 http://content.healthaffairs.org/cgi/content/full/hlthaff.25.w572v1/DC1.
posted 1 day ago Flag answer as...

James Bonnette, MD
CMO, SVP at Vanguard Health Systems

Michele, I agree with Joel Brill, Medicare already uses a budget impact model--but one could argue to no real level of success, thus the now yearly need for Congress to step in and "fix" the SGR so that physicans do not suffer a loss per unit of service--of course what no one has the fortitude to say is that the rate of use of procedures done by physicians is what is driving the problem, and the non-proceduralists are the one who would suffer the most. So we have at least with Medicare part B a heavily flawed, heavily tinkered budget imapct model, that ill serves providers and patients. In terms of CEA, I also agree that it is here to stay, but in some ways it is as flawed as WTP (willingness-to-pay) models and I agree CEA often leads to higher total healthcare expenditures sometimes with demonstrable better outcomes, and sometimes with squishy outcomes (QoL measures for example) Jim Bonnette, MD

Ulf Staginnus
Associate Director Outcomes Research at Bristol-Myers Squibb

Hi Michele, I think CEA considered from an overall economic perspective has not really delivered. We all know the inherent flaws with CEA as a mean for prioritizing healthcare provsion. In analogy to the Austrian school of economics (Friedrich August von Hayek) we should not forget that it is difficult to 'compute the world'.... Healthcare provsion and disease are far too complex matters in order to fit decision making into a single technocratic threshold analysis implemented by several HTA agencies. We may see more use of it, there I agree with the other commentors but it will not address the main question, which is how to better allocate scarce resources to maximize health in general. From a payors perspective the affordibility question is evident and therefore many will increasingly welcome budgetary impact models. Here the problem is the silo mentality in many healthcare systems. Going foreward, there will probably be a need for more thinking around novel financing options for innovative technologies. I think the field would generally benefit from more economics along the product development decision making and in that regard I would like to recommend an article from John FP Bridges "What can economics add to health technology assessment? Please not just another cost-effectiveness analysis!" http://www.future-drugs.com/doi/abs/10.1586/14737167.6.1.19

Big pharma to hit bottom

Daniel Grima from Cornerstone Research in Canada brought this news link to my attention. According to the numbers presented in the article, we are in for a very bumpy ride. The Wall Street Journal estimated that generics will be taken out $67 billion annual U.S. sales from the top pharmaceutical companies over the time frame 2007 to 2012. The alarming piece of news is that these $67 billion represent 50% of the total U.S. sales of those companies.

Scandals at IQWIG?

It hasn't been an easy autumn for the German IQWIG institute. The local press is full of talk around the recent rumors of IQWIG's head favoring a family company with research projects from his institute- and other issues related to the institute's leaders management and communication style have layered darck clouds over IQWIG. http://www.dfg-online.de/ and others are reporting on the matter...

eunethta proposal on HTA collaboration in Europe open for public consultation

The EUnetHTA has issued a proposal on building a European health technology assessment collaboration. The EUnetHTA Collaboration aims at contributing towards comprehensive, coordinated health technology assessment and provision of expert HTA input to inform health policies in Europe. Several workstreams are underway and can be found at http://www.eunethata.net/

Oncology to outgrow global pharma market

A new report from bionest partners outlines future trends of the oncology market. The area of oncology is posed for high growth, with Roche/Genentech to lead the pack - however strong competition to be expected. Biologics will be one of the main growth drivers with pricing and market access challenges ahead.

Pharmaceutical innovation in Europe, a call to action by Arthur Higgins - EFPIA president

In a recent conference in Portugal the EFPIA president adressed innovation issues in Europe and called for action on four areas, such as better patient access to new discoveries whereby Health Technology Assessment should not be used as a means of restricting access to new medicines, fair reward for innovation - including incremental innovation, strong intellectual property protection and new thinking to balance healthcare costs - shift away from the cost of medicines to their value.

European School of Health Economics - the 2008 course program is out

Dr. Gisela Kobelt is hosting again the annual course of Health Economics in Cannes. Its a great combination of academic and industry faculty covering a broad and global spectrum from technical aspects to health policy issues. Needless to say that the location is fun especially around spring time...

Cost-benefit evaluations of drugs as an instrument of health policy - new insights from Australia, Canada and the UK

HealthEcon in Switzerland published a very interesting book (so far in German only) on experiences with HTA agencies in these three countries. The author - Rainer Rohrbacher - concludes that these types of government interventions have not lead to the desired impact on drug spending nor improved the quality of provision with medicines in these centralized healthcare systems...

New monograph on biotechnology drugs published in Spanish Journal for Health Economics

The fall edition of the ReES (Spanish Journal of health economics) has a special edition on biotech drugs. Articles are both in Spanish and English on actual topics such as EU regulatory issues, bio similares, innovation and patents, manufaturing and economic evaluation of biologics etc. A great read! Check it out...

How to move the QALY forward?

The ongoing QALY debatte was once again focus of a workshop organized by ISPOR in Philadelphia (Nov. 7-8). Proceedings will be posted at the ISPOR webpage in early 2008.

Value based pricing soon in the UK?

Earlier this year the Office of Fair Trading (OFT) recommended to the UK government that the PPRS should be reformed substantially. The idea is to get more 'bang for the buck' on a given budget. The question remains how prices will turn out in relation to the NICE QALY theshold? It remains to be seen if there will be price increases in drugs with relatively cheap QALYs already funded and decreases be negotiated on those with a higher cost per QALY than the threshold? More open questions such as what will be conisdered cost-effcetive etc. remain open, however for sure is that there are important changes ahead for the UK HTA scene.

VfA: confusions around methods at IQWIG in Germany

The German pharma industry organization (VfA) critizised in a recent press release (8th of November) in relation to the 3rd anniversary of the IQWIG institute the confusion around methods that are not coherent with international standards for pharmacoeconomics.
As we know the institute apparently has hired a group of experts to shape is methodological direction. For sure developments in Germany remain interesting to say the least... Ulla Schmid, the German health minister however was quated to not having any intention to regulate pharmaceutical prices before launch..

Health Economics survey of European hospital pharmacies

An interesting survey has been conducted by Caro Research Institute with EU hospital pharmacists. As they are vital in hospital formulary decision making in many countries it appears that they could benefit from expanded knowledge about health economics in order to fully appreciate the dosiers presented to them. The authors of the survey encourage pharmaceutical companies to make a greater effort to collaborate with clinical experts in the dissemination of economic data in timely and transparent drug reviews.

Valuing biotech drugs - improved portfolio valuations by incorporating outcomes based access analysis

With the ever increasing access hurdles introduced by health technology assessment agencies, product valuations at early development stages depend increasingly on their inherent pricing assumptions in relation to outcomes based market assess (in other words the price at which a product is deemed cost-effective and worth reimbursing in the eyes of payors). In a recent article we examined the increasing role of health economics in make or break decisions for lisencing in the biotech industry. We belive that pharmacoeconomic considerations will have to play a greater role in complementing traditional valuation methods for new products in order to capture the full commercialization risk spectrum.

QALY time - Again!

... the never ending QALY discussion has been revisited by the BMJ in summer. Looks like with all the talk and difficulties associated around QALYs its time to bring some more economics back into the field and grow out a bit of the doctrin of biostatistics. In that regard a highly recommend the article from John FP Bridges "What can economics add to health technology assessment? Please not just another cost-effectiveness analysis!" http://www.future-drugs.com/doi/abs/10.1586/14737167.6.1.19

New master programe in health economics: "International Pharmacoeconomics and Health Economics" in Idstein, Germany

A new innovative degree can be obtained from the programe of the Europa Fachhochschule Fresenius and Cardiff University...

The earnings of US health economists

For all of you on the job hunt - especially considering the exploding demand for health economists that maybe the article to have ...$170.000 on average for health economists in the for profit setting - $200.000 on average for those with PhDs. Source: Journal of Health Economics 26 (2007) 358–372

Health and Pharmacoeconomics for biotech CEOs

Yali Friedman, the author of "Building biotech" and editor of http://www.biotechblog.com/ is writing his new book for biotech executies. Stephen Russell, a business partner, and myself are contributing a chapter called "Maximizing the strategic impact of health- and pharmacoeconomics in biotechnology companies." We are looking forward to Yali's new book. Watch out his blog for more news...

Economics of Biologics

Last year,a conference was organized in Durban, South Africa on the economics of biologics drugs. More and more medicines will have a biologic origin in the future but increasingly economic considerations are hindering their uptake.. attached presentations give an introductiuon into the topic as well as an overview on market trends for biologics
http://www.bhfglobal.com/files/International_Perspective_Ulf_Staginnus.ppt

Patient access to cancer dugs

Together with the Karolinska Institut we published a couple of month age a report examining the patient access of cancer drugs in Spain. The report caused an interesting debate in Spain about regional inequalities in patients access to novel cancer drugs. The Spanish minister of health, Elena Salgado, recently cited the propositions made in the report as appropriate measures in improving the situation.
It seems to me that this type of evidence is a unique way of adressing economic issues beyond the individual cost-effectiveness analyses of drugs that may not have the desired impact on a macroeconomic scale in securing funding for innovative cancer medicines. I am sure we see more projects of this type also in other disease areas..

See also my interview with El Mundo (in Spanish).

IQWIG method paper in development

The German pharma industry association has recently circulated a briefing document around the new method paper/process of IQWIG assessment in Germany. As it looks like only after a relative effectiveness assessment has been proven better utility for the new drug - as before based on RCT's only! - a cost-benefit assessment will be conducted... (still max prices apparently will apply) modeling and QALY's should apparently not be part of the equation... the industry association protests against missing international standards.. Germany's HTA remains mysterious so far.