|Home | About | Journals | Submit | Contact Us | Français|
With 2007 drawing to a close, employers have finalized their health benefit plans for next year. As plan designs shake out, employers are being challenged to find ways to manage higher biologic drug expenditures, a goal that seems to be elusive for most. John Malley, national practice leader of pharmacy benefits consulting for the global consulting firm Watson Wyatt, reports that although employers have experienced rising specialty drug costs, the overall effect on total drug spending has been buffered by the increased availability of generics in many therapeutic classes.
Not surprisingly, Lisa Zeitel, principal and national coleader of Mercer Managed Pharmacy Practice, sees specialty drugs trending at a much higher rate than traditional pharmaceuticals. Based on a robust specialty drug pipeline, specialty drug spending trends suggest 20 to 30 percent annual increases over the next several years. Increasingly, specialty drugs will account for a significant component of pharmacy spending, forcing employers to focus on their use.
Both Malley and Zeitel agree that employers have bought into the trend. But whether large businesses have the tools they need to manage biologics in an enlightened way is another question.
“Employers typically have been late to the table, but they realize that [rising specialty costs] are not just a flash in the pan — they are the future in terms of how prescription drugs are going,” says Malley.
Zeitel explains that one of the biggest challenges employers are up against in trying to get a handle on biologics is the role that pharmacy benefit managers have in the equation. In a sense, she believes, PBMs have created a vacuum, giving employers no proof that PBMs are delivering cost savings or improving outcomes for their work-force.
“None of the PBMs to date have provided concrete documented evidence that they are providing any client-specific value,” Zeitel believes. Instead, she sees an attitude of “Trust us, we are doing the right thing for you.”
“Given where the industry is, it will be incumbent upon PBMs to be more accountable to their clients in this area,” says Zeitel.
Price transparency is the key if employers are to get a handle on their costs, according to Zeitel. “What we would like to push for in the industry is a more transparent pricing model, where clients can gain an appreciation for the value that PBMs are providing and perhaps [evaluate] these drugs based on that value.”
Mercer has just completed its annual Prescription Drug Benefit Survey 2007, in which 510 employers participated. When asked if they wanted to improve the management of specialty drugs under their prescription drug program in the next two years, 81 percent of employers responded that they were somewhat or very likely to do so. “Clearly,” says Zeitel, “based on the results, there is an opportunity for more investigation and understanding on how these drugs are being covered and what opportunities exist for more effective management.”
For 2008, pharmacy tier designs do not seem to have changed radically; placing specialty drugs on the fourth tier continues to be the most common way employers are attempting to manage their biologic drug costs. Malley notes, however, that employers are becoming much more sensitive to cost shifting, and recognize that the employees who need biologics often have severe illnesses and should not face access barriers to drugs they desperately need. Malley says that just because a drug is on a fourth tier, it does not necessarily mean that patients will have higher costs; employers, he says, have been very sensitive in putting reasonable coinsurance caps in place.
The biggest trend in plan design, says Malley, is the effort to shift biologics from the medical side to the pharmacy benefit. “I think there is a belief that the pricing is actually better coming from the pharmacy side and that the follow-up care that specialty vendors offer is significantly better than would be received from the medical side.”
For its part, Mercer has not been aggressively advising its clients to carve out infused or office-administered drugs from the medical benefit. You don’t always know who will do a better job managing these cases, so carving out may not necessarily affect improvement, she says — “Unless you have done the cost-benefit analysis and have a sense that the clinical capabilities of the PBM would exceed that of the medical plan.” Mercer instead is pressing for greater PBM transparency.
Following Medicare’s lead in tightening its reimbursement policy for anemia drugs, Aetna has changed its payment guidelines for EPO agents. Many other insurers are expected to follow suit.
Epoetin alfa (Epogen) and darbepoetin alfa (Aranesp), sold by Amgen, and epoetin alfa (Procrit), sold by Johnson & Johnson under license from Amgen, are taken by more than 1 million cancer and dialysis patients annually in the United States. Some studies, however, have found that in higher dosages, the drugs may be harmful in some patients.
With that concern in mind, the Centers for Medicare and Medicaid Services drastically lowered the maximum dose Medicare will cover. The U.S. Food and Drug Administration subsequently made a similar recommendation, leading to Aetna’s decision to follow that strategy.
The changes already have had serious repercussions for manufacturers of anemia therapies. More than half ($7 billion) of Amgen’s 2006 revenue was from anemia drug sales; in the third quarter of 2007, Amgen’s profit fell 82 percent. CEO Kevin Sharer attributed the drop directly to developments at the federal level.
As Amgen used one hand to deal with the fallout from federal policies related to its anemia drugs, it used the other to fend off a challenge to its anemia franchise by Roche.
A federal jury agreed with Amgen’s contention that Roche’s continuous erythropoietin receptor activator (Mircera) infringed on three of its patents. At press time, Amgen was seeking an injunction to prevent Roche from releasing Mircera in the United States.
For the first time, the biotech market will see the impact of a generic version of one of its own. Novartis is planning to launch a low-cost biosimilar of Amgen’s darbepoetin alfa in the United Kingdom and Germany. The new product, called Epo alfa, will be priced 25 to 30 percent lower than the innovator product.
Epo alfa has demonstrated similar safety and efficacy to darbepoetin alfa, though it was not required to complete full clinical trials required for new drugs. Epo alfa is the first in a new generation of more complex and profitable biotech drugs to be approved in Europe. More will follow, as the European Medicines Agency has approved two biosimilar erythropoietins by generic drug makers Stada and Hospira.
IMS Health projects global bio-tech drug sales to break the $100 billion mark by the end of this decade. ... The FDA opened a drug research center, the Reagan-Udall Foundation, which will be funded by the companies it regulates. The center will research approaches for streamlining and improving the development of drugs and medical devices. ... Pfizer has opened a biotech center in South San Francisco — Genentech’s backyard —and hired former Renovis CEO Corey Goodman, PhD, to run it.
On the initial public offering scene, Exelixis pocketed $71 million in an IPO, Map Pharmaceuticals plans an IPO of 5 million shares to fund phase 3 trials, and
Pronova BioPharma touts a potential blockbuster in its pipeline in outlining plans for an IPO. But the IPO market can be anything but a sure thing as a source of capital. Targanta’s IPO opened at $10 a share, not the $12 to $14 the company anticipated. As a result, Targanta garnered only $58 million, not the $92 million it expected.
Ten days after Alnylam teamed with Isis to form Regulus Therapeutics, which will develop micro-RNA drugs, it severed its agreement with Merck to develop RNAi therapies.... Bristol-Myers Squibb has purchased Adnexus for $505 million. ... Synta Pharmaceuticals has inked a $1.1 billion licensing deal with GlaxoSmithKline for its promising melanoma cancer drug. ... Johnson & Johnson inked a $1.4 billion deal with Galapagos to develop small-molecule drugs to treat rheumatoid arthritis.