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Another Chance to Get Serious on Drug Pricing

Stephen Ubl

Stephen Ubl at National Press Club, 25 May 2016 (A. Kotok)

Stephen Ubl, president and CEO of Pharmaceutical Research and Manufacturers of America, or PhRMA, told a press and industry event in Washington, D.C. on Wednesday (25 May) that drug makers are eager to develop more individualized treatments for patients, but proposed regulations on drug pricing threaten that progress. Ubl also suggested, however, at the Annual State of Personalized Medicine address at the National Press Club, the industry may be open to pragmatic discussions of value-based drug purchasing.

Just one day later, Science magazine published a commentary with a proposal for calculating the economic value for new gene therapies. This proposal offers the pharma industry an opportunity to show it too is serious about solving this problem.

Personalized medicine, also called precision or individualized medicine, focuses treatments on a person’s own molecular make-up, expressed in chemical biomarkers or mutations in that individual’s genome. Ubl described the industry’s expanding role in advancing personalized medicine, evidenced by 42 percent of new drugs in development using biomarkers as targets in some way, including 73 percent of cancer therapies in the pipeline. He cited, for example, engineered chimeric antigen receptors added to an individual’s T-cells in the immune system, known as CAR-T, and returned to the patient as cancer treatments, which he called “like science fiction.”

In addition Ubl said personalized medicines can play a role in lower costs for patients. “Getting the right drug to the right patient at the right time,” said Ubl, reduces complications and in some cases can lessen the need for chemotherapy, which carries a high human cost on patients as well as system-wide costs. And he pointed out the case of Jimmy Carter, who received immunotherapy to treat metastatic melanoma, an advanced form of skin cancer, that enabled the former president to end treatments for the disease.

While he noted these advances have broad bi-partisan support in Washington, Ubl blamed “uncertainties” in regulations and “myopic proposals” that could hamper access by patients to these new advances. One measure raising objections from PhRMA is a proposed test of a pricing formula for drugs obtained at doctor’s offices and paid for under Medicare part B. The proposal would first cap drug prices at 2.5 percent of an average sales price, plus a fee. In a second phase, the plan would implement value-based purchasing tools used by commercial health plans, pharmacy benefit managers, and hospitals.

Ubl called the proposal “a clear overreach” and pointed out that poorly designed value frameworks conflict with personalized medicine. The idea of reference pricing in the proposal assumes drugs are interchangeable, said Ubl, which runs counter to finding the medication that best meets the patient’s own chemistry. PhRMA is energetically campaigning against the proposed rules both in public and Congress.

He acknowledged, however, that “we’re moving to a value-based world,” and value-based options can be helpful, particularly for patients with multiple treatment options. And while he called value-based models a “nascent science,” he said there are “pragmatic steps the industry can take” to holistically address health care costs.

A holistic, pragmatic proposal

The next day, 26 May, Science magazine published a commentary by Stuart Orkin, pediatric oncologist and hematologist at Dana-Farber Cancer Research Center, and Phillip Reilly, a partner with the life sciences venture capital company Third Rock Ventures, outlining a value-based framework for pricing new personalized treatments that seems to meet Ubl’s conditions. Both Orkin and Reilly are veterans of this field. Orkin studies inherited diseases, including gene-editing targets for inherited disorders like sickle cell disease. Reilly is co-founder or scientific adviser to 4 life sciences companies, including bluebird bio — the company’s name is spelled in all lower-case characters — and Voyager Therapeutics that develop gene therapies.

Orkin and Reilly spell out factors that should go into pricing personalized treatments for genetic diseases, often rare disorders affecting children, that transfer healthy genes to replace faulty genes, or edit genomes to remove disease-causing mutations. They list 4 of these diseases — cystic fibrosis, Gaucher disease, hemophilia A, and sickle cell disease — where managing each disorder costs between $25,000 and $300,000 a year, with lifetime costs totaling as much as $10 million.

As reported in Science & Enterprise, the authors identify several factors to consider for pricing gene therapies, which take into account economic needs:

Costs for current clinical interventions, such as organ or bone-marrow transplants
Complexity of procedures for gene therapy treatments
Development costs
Production costs, such as the expensive manufacture and quality control of benign viruses to deliver gene therapies
Size of the treatment population
Quality of the outcome, defined as efficacy and duration of the treatment

Orkin and Reilly recognize that in many cases gene therapies will be expensive, particularly where the treatments have a long-lasting or even permanent effect. And where treatments are complex or require multiple interventions, those costs need to be covered. But at the same time they argue that companies getting the benefits of incentives, such as those under the Orphan Drug Act, should share those benefits with patients. In addition, where inherited diseases affect very small numbers, government may need to step in to make drugs available for these patients.

No one including the authors claim this is an entire solution, but if the industry is smart it will take advantage of this proposal and start a serious dialog on valuing gene therapies. The ideas come from two individuals who are well versed in both the science and business of drug development, and are equipped to deal with the industry’s complexities. They are trying to provide more transparency to pricing innovative treatments, not score political points or raise money.

Moreover, the pharmaceutical industry needs to start working more proactively and collaboratively with the rest of the health care world to solve the problem of opaque and seemingly unconstrained drug costs. The ideas put forward by Orkin and Reilly may apply to gene therapies, but they can provide a template for other types of drugs. In addition, this more transparent template can establish a framework for negotiations with single-payer health authorities outside the U.S., so they pick up more of the high cost of developing new drugs.

The alternative facing the industry is more political isolation and conflict. While drug companies may try to maintain the status quo, a smart leader like Stephen Ubl should be pointing the industry toward a more sustainable future. Let’s see if he can take advantage of this opportunity.

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