Preparing For A Pricing Shift: Roche Admits Cost Is An Issue In Oncology And Beyond

From The Pink Sheet
Preparing For A Pricing Shift: Roche Admits Cost Is An Issue In Oncology And Beyond
Pricing by indication could be one approach to the growing problem of the cost of oncology drugs, Roche Pharmaceuticals Chief Operating Officer Pascal Soriot suggested at the firm's analyst event at the recent American Society of Clinical Oncology annual meeting.
"It is clear that cost is going to be an issue," Soriot said. "We are certainly starting to think about it, and over the next few years we will develop strategies for this."
Though it has come up with increasing frequency in recent years, the need to address oncology pricing was a clear takeaway from the ASCO annual meeting, where mentions of emerging data on Avastin (bevacizumab) in ovarian cancer were paired with comments about the cost of the therapy.
Genentech was pioneering with its payment assistance program for Avastin, which caps the price for on-label uses at $58,000 a year (after a patient hits 10,000 mg of use, the company provides the drug free for the remainder of the year). But ovarian cancer holds the potential for longer durations of use, as evidence suggests Avastin could play a role as a maintenance therapy ("Roche's Long View: ASCO Marks Progress In Shifting To Lengthier Treatment Duration For Avastin, Rituxan," "The Pink Sheet," June 14, 2010).
Beyond Roche, Dendreon's $90,000 price tag for Provenge and Bristol-Myers Squibb's $120,000 for Yervoy – the most expensive oncology therapies to date – have cost considerations moving up the agenda. Pharmacy benefit manager Medco highlighted growth of oncology drug and companion diagnostic costs in its "2011 Drug Trend Report" ("Payers Are Preparing For Coming Companion Diagnostics, Medco Notes," "The Pink Sheet," June 20, 2011). And some payers are exploring "clinical pathway" programs to establish standards of care for high-cost cancers (“What New Cancer Pathway Programs Mean For The Drug Industry,” IN VIVO, May 2011).
Soriot noted that the cost problem transcends oncology, pointing to rheumatology as an example.
"Over the next few years, the payers of course are going to be helped a little bit by the fact that some other drugs will lose patent protection, but it is not going to be enough, I think," he said. "We have to definitely tackle this issue, and I believe … more and more we will have to start thinking of pay-for-performance but also pricing for an indication."
The executive did not elaborate but mentioned that he had been meeting with opinion leaders and decision-makers from European countries to talk about setting up a different approach where pricing is done by treatment of cancer type.
While such talk is in the early stages, the groundwork needs to be laid now. "We need to put in place the tools," Soriot concluded. "That's why we need to partner with payers and decision-makers in various countries, to put in place the tools so we can do that."
But, he added, "we have an incentive and we are in a very good position as a company to do it because we have a very broad portfolio. So we have various products that we can leverage to do that."
Price also came up as part of Roche's business rationale for personalized medicine: a slide on the benefits of patient stratification listed pricing power alongside increased market share, time to market, lower development costs and higher probability of success.
Personalized health care, and its advantages for R&D productivity, was the theme as Roche/Genentech talked up its oncology prowess for investors.
Protecting Its Dominance
"We are a leader in oncology today, and we intend to remain one," Soriot pronounced at the on-site analyst event. The firm has a comfortable margin, with 31% of the global market in 2010 followed by Novartis with 11% ("Global Oncology Rankings: It’s A Long Way To The Top," "The Pink Sheet," June 6, 2011).
Oncology has a high profile within Roche's overall business as well. "Half of our investment and half of our projects are in oncology," Soriot noted, with 52% of the big pharma's new molecular entities in clinical development for cancer. There is a move to do more in other areas, like inflammation/immunology and CNS. "But oncology remains, clearly, the mainstay of our research and development investment."
The execs also touted Roche/Genentech's above-average success rate in development, although 2010 was dogged by a series of failures. "We actually dropped to an average success rate like the rest of the industry," Karl Mahler, head of investor relations, boasted. But since October, the firm has now had 18 trials in a row that were positive, he noted.

The combined company currently has 32 new molecular entities in oncology, including four in Phase III and four in Phase II (see chart).
Hal Barron, chief medical officer and head of global product development, pointed out that the company is moving outside of its core area of expertise – monoclonal antibodies – to an "increasingly large portfolio of molecules" that include small molecules, oral agents and combinations of antibodies and small molecules.
Antibody-drug conjugates, which link an antibody to a small molecule cytotoxic, make up the lion's share of Roche/Genentech's oncology pipeline. Behind the lead project, trastuzumab-DM1 (which stalled after the company tried an early submission in breast cancer), the company has 37 additional ADCs.
The company believes ADCs will change the way cancer is treated, and having that platform technology with a wide stable of molecules (now targeting 11 cancers) could be very good positioning. But although the company's attempt to be first to market may have backfired with the "refuse to file" action on its T-DM1 submission, it continues to accrue evidence. At ASCO it presented data showing T-DM1 was effective in Herceptin-refractory patients, "highlighting the fact that not only can these molecules be safer, they can have activity that might be in excess of what you would see with a naked antibody," Barron said.
Like most of the pharmaceutical industry, Roche espouses the personalized health care movement. Most of its development projects have a biomarker program, and the theme of the oncology pipeline is "really to develop drugs in a very targeted way, to identify which patients need which drugs and ensure that we study them in a robust manner," Barron said, noting that this means a more pronounced treatment effect and more accentuated benefit/risk profile.
Taking Advantage Of In-House Assets
It also means an evolving business model. "In the future, more and more what we actually will be commercializing is not a medicine; it's actually a solution, a medicine and a test," Soriot said. "It sounds easy when you talk about it, but I can tell you it is not that easy to engineer and operationalize that."
That's where the company thinks it has an advantage: Roche's legacy diagnostics business gives it an in-house source for the companion diagnostic work to go along with the personalized therapies. It is "a great advantage in the marketplace," Soriot said, "because both teams are in the same company and have the same rules and [are] able to cooperate and coordinate their activities much better than we would if we were two separate companies."
"We are trying to leverage the strengths of having pharma and diagnostics under the same roof and across the entire value chain," he continued. In the research stage, that involves sharing knowledge from the beginning and working together to understand the biology and the pathways, "by making sure that the teams share data very early on, in a very free fashion, and hopefully leveraging IP each time we can." In development, it means prospectively identifying biomarkers and doing the right sample collection. And, "from a commercialization viewpoint, we are working hard on defining the label at launch and coordinating the launch of the two products."
Soriot acknowledged that the company has been talking the personalized medicine talk for awhile. "And I must say, for a number of years we didn't have a lot to show for it." But he argues that in the last year the company has come closer to turning the strategic vision into reality.
"In particular, since the merger of the two companies, you can see an enormous acceleration of [the] number of projects [and] collaborations that exist between our diagnostics unit and the pharma team." And over the next three to four years, he expects an acceleration of that trend and multiplication of the number of joint projects.

It is a costly process, but Soriot thinks it will pay off in terms of increased R&D productivity. Nodding to analyst criticism that big pharma has been spending too much on R&D with little to show for it, he admitted that "we haven't been very popular … because we are one of the highest spenders in the industry."
"The way we see it is that it's not a question of cutting investment, it's a question of increasing productivity of the investment," Soriot said. "And clearly personalized health care is a massive lever to improve this productivity by reducing attrition rates and identifying biomarkers prospectively." It will also help with development costs by enabling shorter studies in smaller sample sizes because of patient selection. It can also mean a quicker path to market, he said, pointing to the BRAF inhibitor vemurafenib under FDA review for treatment of metastatic melanoma in patients with a certain BRAF mutation.
The Saving Grace Of A Biomarker
Roche will get a test of the benefits of starting out with a personalized medicine from day one with MetMAb. The monoclonal antibody is in development for lung and triple-negative breast cancers and shortly in colorectal cancer, all stratified by levels of the MET protein. "If you look at MetMAb, it would not be a product without the biomarker," Soriot said.
The initial Phase II trial in lung cancer did not show a benefit in the overall population; a retrospective analysis showed advantage in the cohort of patients with high levels of MET, and a survival analysis of this group was presented at ASCO ("Roche's Diagnostic Foothold Gives Genentech A Leg Up In Oncology," "The Pink Sheet" DAILY, June 2, 2011). Phase III is slated to begin later in the year.
The company is also attempting to retrofit some of its marketed products with a personalized health care strategy. With the lung cancer therapy Tarceva (erlotinib), Roche has taken research about EGFR mutations and re-run studies ("NSCLC Market Snapshot: Promising Biomarkers, Testing Challenges," "The Pink Sheet," May 30, 2011). The EURTAC trial presented at ASCO gave proof that erlotinib has better effect in patients with EGFR mutations and is helping move the drug into the first-line setting (it is approved for second-line and maintenance use in the overall population).
In the initial studies of Tarceva in the front-line setting there was no benefit on top of chemo. "And if you think about the history of drug development in any field, particularly in oncology, once a molecule would fail in a certain disease … the idea that you would actually repeat the study and not only go head to head with a chemotherapy but actually be superior to that was essentially unheard of," Barron said. "But by selecting out … these EGFR mutations, the biology was telling us this could be a viable study." The data now show a 63% reduction in risk of death or progression.
Tarceva and MetMAb also exemplify another of Roche/Genentech's oncology tenets: the impact of synergistic combinations. Based on research showing that amplification of cMET played a role in resistance, and preclinical evidence of synergy, the company ran a Phase II trial of erlotinib +/- MetMAb. The combination was well-tolerated and had a marked improvement in progression-free survival and overall survival; a Phase III study in MET-positive patients is slated to start later this year.
The company is also hoping a biomarker can support Avastin's continued marketing in metastatic breast cancer. In response to CDER's determination that the indication should be withdrawn, Genentech has offered to run another confirmatory trial using plasma VEGF-A levels as a predictor of efficacy ("Genentech Banking On Biomarker Data To Save Avastin In Breast Cancer," "The Pink Sheet," June 6, 2011).
Multiple sessions at ASCO, however, addressed the difficulty of identifying a biomarker for VEGF inhibitors.
By Mary Jo Laffler


Risk Sharing: The Need to Think Differently

Dear All,

Olivier's and my article on risk sharing is finally published in this months edition of ISPOR Connections. For the full article with figures & tables click here.

Risk-sharing: The Need to Think Differently

Olivier Ethgen, MSc, PhD, Associate Professor, Department of Public Health Sciences, University of Liège, Liège, Belgium, and Senior Manager, Global Health Economics, GlaxoSmithKline Biologicals, Wavre, Belgium; and Ulf Staginnus, MA, Head, Pricing & Health Economics Europe, Novartis Oncology, Barcelona, Spain

Under continuing economic pressure, the assessment of new therapy now goes well beyond the three ex-ante regulatory hurdles (quality, safety and efficacy). The last several years have witnessed the emergence of payers and health technology assessment (HTA) agencies as key stakeholders in market access negotiations. In this context, cost-effectiveness analysis has been given a central role and is now likely the most searched and applied type of analysis.

Cost-effectiveness models are principally based on ex-ante and relatively scattered information. Models are built upon the combination of Phase III data, observational data and reviews, should they be systematic or not. Results are more than often positively reported and support the claim that the new technology is cost-effective at the prevailing threshold.

Real World
Considerable uncertainties remain in post real-world cost and effectiveness outcomes i.e., in the non-investigational, local and practical setting in which the product is effectively given. It is precisely in that setting that the real costs for the health care system are incurred. Those uncertainties are thus worrying for the payers, regardless of how well uncertainty has been factored in the ex-ante cost-effectiveness exercise. Payers increasingly require alignment of their payments with the real-world achievements of new products. Meanwhile, spurring innovation and providing access to innovative treatment for deserving patients remain a priority for any health care system.

Reference Pricing
From a pricing perspective, international price referencing (IPR) is increasingly used by many countries as a cost containment measure, notably in Europe. A specific country gathers and compares the prices from other countries and according to certain formulas (such as the average, the lowest, etc.) sets its price level. As a result, price modifications in one or more external markets have immediate implications on the price levels in other markets. This may trigger a spiral of cross-referencing and price adjustment, which usually results in a downward pricing spiral.

In this context of increasing ex-post value appreciation and price referencing system, there is now a call for new market access solution. This is where risk-sharing mechanisms or the so-called innovative pricing or market access agreement approaches come into play. Those new type of agreement are precisely a mean of ensuring access to innovation, while at the same time mitigating payers’ ex-post financial exposure and providing fair return on investment for manufacturer.

Practical Approach
A risk-sharing type of agreement basically consists in the form of contractual agreement between a payer and a manufacturer. The purpose is to share the whole or a part of the financial risk associated with the use of a new therapy in real-world or non-investigational conditions. The agreement is primarily set to advance patient’s access to the new therapy when the payer deems its ex-post financial risk exposure too high and consequently challenges the demanded price and/or reimbursement conditions.

A key feature of a risk-sharing approach lies in its practicality and expediency. These agreements are very flexible by nature and can take a myriad of forms, (from financial-based to performance-based type of agreement) and can be applied at different levels (at the population level or at the individual patient level). The refunding can also function according to different mechanisms, from price adjustment to rebate or to the funding of further evidence development.

A risk-sharing type of agreement might be expected to multiply over the forthcoming years in a market access environment where claiming cost-effectiveness on ex-ante data and sometimes complex models, seem less and less compelling in the eyes of payers. In addition, the flexibility given by risk-sharing can allow the manufacturer to optimally deploy its launch and pricing strategy under the budgetary constraints and the price referencing system increasingly imposed by payers. For instance, a manufacturer that is carrying out a new launch sequence in Europe may strategically secure a “high” visible price in a specific country while operating in the meantime a “rebate back” via a risk-sharing scheme to allow the new compound to meet the prevailing cost-per-QALY threshold in that country.

Uncertainty versus Risk
The risk-sharing approach calls for a fundamental difference between the concept of uncertainty and the concept of risk. Too often, risk and uncertainty are considered as similar construct and used interchangeably. In health economics models, we mostly focus our effort on the analysis of uncertainty in the cost-effectiveness ratio.

Uncertainty and risk, however, are different concepts, related concepts but different. Uncertainty is by essence a common feature of the universe and relates to variables (should they be qualitative, quantitative or behavioural) that are unknown and changing over time. On the other hand, risk is a matter of exposure to uncertainty, notably to the adverse realization of uncertainty.

In others words, uncertainty in the ex-post outcomes of a new intervention can be the same for both the payer and the manufacturer, but the risk of paying for disappointing ex-post outcomes (the adverse realization of uncertainty in the outcomes) is borne by the payer only. Payers are thus the one to be exposed to the financial risk of introducing a new intervention in real-world conditions, should adverse uncertainty be realized. They bear the financial consequences of the adverse realization of uncertainties. The purpose of a risk-sharing agreement is precisely to shift part of the financial risk from the payer to the manufacturer as a mean to hasten market access.

New Type of Model
The distinction between uncertainty and risk is fundamental. During the negotiation phase, modeling the financial implications (the financial risk!) of uncertainty in the real-world setting can be helpful. From a modeling standpoint, uncertainty is as we know accounted in through probabilistic sensitivity analysis. A financial risk analysis, however, necessitates further work. The basic principle is to combine the evolution of uncertainty over time with the related consequences of the adverse realization of uncertainty.

The size of the target population and its evolution, the market dynamics (the adoption and the diffusion of the new compound in clinical practice) and the implementation costs are just as many additional features that need to be accounted for. As compared to cost-effectiveness models, the modeling of a potential risk-sharing agreement is at the interplay of 3 dynamics. Cost-effectiveness deals with clinical dynamics and pathways, through cohort-based types of models that reflect individual-based clinical decisions and outcomes. Risk-sharing scheme simulations need the additional consideration of both the target population and the market dynamics (Fig. 1). Practically, a risk-sharing model intended to aid both parties in negotiating a scheme would need the 3 components (Fig. 2):

Defining — both parties need to define the uncertainty at stake, the adjacent risk and the potential scheme terms and conditions, i.e. the risk-sharing equation;
Forecasting — the evolution of uncertainty and the consequent risk over time need to be forecasted. This can be done through multiple scenario analysis with different population, clinical and market dynamics; and
Sharing — the financial risk to be shared can be simulated through the application of the risk-sharing equation defined earlier to the results of the forecasting exercise.

This is a back and forth process. The results of the third “sharing” step can lead the parties to redefine the risk at stake and the sharing equation, and so on. In addition, the schemes implementation and administration costs (fixed and variable as per the number of patients enrolled) need to be accounted for in the modeling endeavour.

All these practical things and resulting impacts on both the payer budget and the manufacturer return are simply not possible within the cost-effectiveness analytical framework. Therefore, when contemplating a risk-sharing agreement, it is important to bear in mind that there is a need to think about new type of models and not only about cost-effectiveness cohort-based models. Table 1 stylizes the opposition between risk-sharing modeling and the current cost-effectiveness modeling approach where much of our decision-making modeling efforts is devoted to the ex-ante appraisal of the iCER only.

To Share or Not to Share?
A risk-sharing model can help both the payer and the manufacturer to address a fundamental question: should we share or not; and if yes, under which set of optimal conditions for both parties? Admittedly, payers and manufacturers have the choice among multiple strategies during the market access negotiation. For instance, to mitigate its financial ex-post exposure, a payer can deny to cover the new compound, can slash the price or the reimbursement rate, can restrict the indication or the reimbursement criteria, can ask for patients’ copayment, etc. In most instances, payers have legally the discretionary power to do so. On the other side, if the manufacturer challenges the payer decision, the manufacturer can sponsor the development of further evidence at the cost of delaying its access to market or can propose a risk-sharing type of agreement to enter the market earlier.

The outputs of a model that depicts the financial implications of a risk-sharing schemes can be imported into a cost-benefit analysis (from a payer perspective) or a capital budgeting analysis (from a manufacturer perspective) to help both the payer and the manufacturer to find and propose an optimal win-win solution to each other.

Conditions for Success
Last but not least administration cost and logistics need to be minimized in order not to overburden the scheme. IT improvements both on payer and industry side and new technologies for patient tracking and data reporting will improve the transaction cost of these schemes over time. It is through practical risk-sharing models and micro-costing pilot studies that these costs can be accounted for in the overall evaluation of the proposed schemes.

Willingness to explore new ways of engagement between payers and manufac-turers as well as a de-regulation of IPR and other legal obstacles to risk-sharing are important prerequisites for success. Risk-sharing and innovative pricing should not become an additional hurdle for market access. In such a system there is no place nor need for cross-border price referencing as the bilateral risk sharing agreement is exactly designed to create the individual win-win solution that is desired.

The current market access context is encouraging recourse to a new type of agreement and negotiation base. Payers increasingly emphasize the importance of the real-world value delivered by new products. In the meantime, they also seem willing to negotiate alternative approaches with the objective to mitigate as much as possible their ex-post financial risk exposure. Therefore, manufac-turers face harder access hurdles but also more flexible negotiation conditions that leave room for innovative access and pricing strategies. Risk-sharing agreements represent an opportunity to link volume, quality and payment in delivering innovative health care solution to patients within increasingly budgetary constrained health care systems. In addition to cost-effectiveness, some new and practical form of modeling can be used to help in the design of efficient schemes, benefiting all parties at stake: the patient, the clinicians, the payer and the manufacturer. In all instances, the proposed scheme implemen-tation and administration costs are to be factored into the model. Considering the current health care environment and macroeconomic conditions, risk sharing and alternative pricing are important opportunities to take differences in relative wealth between countries into account and to overcome access barriers thereby improving and speeding up patients’ access to innovative medicines


Spain: Payment by results on the horizon

Dear all,

According to El Pais, the autonomous Spanish community of Cataluña has indicated that it would like to move towards performance based for hospital drugs similar to the Italian risk sharing model. The idea is that prices for hospital drugs, especially in the oncology area, are fixed at the central minsitry of health level but than the autonomous community negotiate with the manufacturers according to outcomes based risk sharing models. The responsible for pharmaceuticals in the Catalan NHS sees this as a way of getting novel medicines to the patients while at the same time maintaining the sustainability of the system. Accoding to the article the program is going to be initiated in one hospital in Barcelona and aparently an agreement with one manufacturer has almost been finalized. It remains to be seen how the ministry of health is reacting to this initiative.



Compensation survey Health Economics, Pricing and Market Access

Dear Readers,

after the many questions I received around compensation in our field I finally decided to put a short survey together (only 8 questions).

This is going to be the first of its kind and I am sure it will become a very valuable source of information, which of course I will share with you. All of this is obviously very anonymous as I do not ask any private nor personal information. Please share the link among your friends and colleagues so that we get a large and representive sample.

Click here to take survey

Many thanks for your kind contibution!
Cheers Ulf