One therapeutic area that manufacturers can look to as a proxy for where this drug price war is likely headed is oncology, and more specifically immuno-oncology (I-O). Despite only a handful of I-O drugs currently on the market, the introduction of these drugs has already seemed to galvanize budgetary concerns and pricing resistance.
This article explores some of the emerging trends likely to impact market access and pricing for I-O drugs.
Manufacturers that understand these trends and their implications for drug development and commercialization will be well positioned to capitalize on the I-O market’s true potential. More broadly, manufacturers operating outside the I-O space should also consider these trends, as payers will likely pursue similar strategies in other therapeutic areas to drive down drug costs.
Heightened attention and scrutiny
The launch in 2015 of immune checkpoint inhibitors and the development of other immunotherapy assets for several difficult-to-treat diseases including metastatic melanoma, non-small cell lung cancer, and renal cancer represent great progress. The handful of I-O therapies currently on the market continue to show enormous potential to change the way these types of cancer are treated, offering patients a more rapid and durable response to treatment, longer progression-free and overall survival, lower toxicity, and better quality of life during treatment.
Clearly, I-O presents a breakthrough for patients, and a commercial triumph for manufacturers. It’s not surprising that current I-O market leaders Bristol-Myers Squibb and Merck are seeing significant returns on their investments with Yervoy/Opdivo and Keytruda, respectively, or that other major pharmaceutical companies are queueing up their entry to this market (1). With government, private payers, and even select providers increasingly exposed to the budget and cost-effectiveness implications of these new drugs, however, manufacturers must understand that success in this space is not a guarantee. There will be winners and losers.
Drug evaluation methods and formularies
Around the world, countries are facing constrained budgets along with rising healthcare costs and cancer incidence rates. Concurrently, treatment options for oncologists and their patients continue to expand with the approval of 28 new cancer indications in the United States alone since 2014 (2). Recognizing that not all drugs in this crowded class are created equal, countries such as the United Kingdom and Canada are increasingly making difficult decisions to exclude certain therapies that deliver only incremental value (3). It’s likely only a matter of time until payers and even healthcare providers in the US make a concerted push to remove certain cancer drugs from their formularies, particularly as hospitals continue to assume greater financial risk for care delivery.
Against this backdrop, stakeholders across the industry are actively pursuing more systematic ways to assess drugs’ relative economic and clinical value and costs to inform market access and product adoption decision-making. The American Society of Clinical Oncology (ASCO), National Comprehensive Cancer Network (NCCN), and the European Society for Medical Oncology (ESMO) have focused their attention on how to best measure the benefits of new cancer drugs within clinical trials, proposing new scales that may form the basis for evaluation of all new cancer drugs (4, 5). The goal of these tools is to provide objective information that aids oncologists and patients in making value-based treatment decisions that reflect benefit as well as cost. Of course, several questions remain, including which framework (if any) will be used in access decisions by health technology assessment (HTA) agencies and payers moving forward.
Nevertheless, with I-O therapies continuing to disrupt the budgets of payers and with more entrants in the wings, the attention given to value frameworks is likely to only expand. Against this backdrop, manufacturers should be prepared to present new and existing oncology products within the context of these frameworks, ensuring that the value of products is appropriately and fully characterized. Alternatively, if manufacturers disagree with how these frameworks are designed, they can choose to either create their own or work with groups like ASCO or ESMO to modify them accordingly.
To date, biopharma industry and advocacy groups have applauded the concept of helping individual patients understand the evidence, innovation, and value of medicines to them. They have also, however, been outspoken on some of their concerns with these frameworks—most notably their failure to consider downstream cost reductions due to product use, patient preferences, or quality of life (6, 7). For example, it’s important to weigh the higher acquisition costs of I-O drugs against their impact on the whole care pathway, such as reducing the need for hospitalization or other types of care. Also, the potential for long-term survival—in terms of reduced morbidity, extended life, and enhanced productivity over many years—should be factored into the evaluation of all new I-O agents.
To successfully position their products from a value perspective, manufacturers must ensure they have the data to back up their claims. Demonstrating both the clinical and economic benefit of these drugs to stakeholders across the continuum of care and factoring this evidence into market access strategies will be crucial.
Frameworks such as the ones highlighted herein also allow payers and other stakeholders to assess and compare a drug’s value across multiple indications. This comparison opens the door to a new chapter in the war on drug prices—indication-based pricing.
Indication-based pricing
Indication expansion has been and will likely continue to serve as an effective lifecycle management strategy for manufacturers to maximize their products’ return on investment (ROI). This particularly holds true in the I-O space, where there is significant potential for these drugs to demonstrate superior efficacy in multiple tumor types. For instance, in the case of BMS’s blockbuster Opdivo, US regulators awarded seven approvals in 2015 for use against three different cancer types (8). Clinical trials for this product currently focus on more than 20 tumor types, and other major pharma players such as Roche and Merck are following suit with their respective I-O products (9).
With a multitude of potential indications, the relative economic and clinical value a single I-O product delivers compared to current standards of care will almost certainly vary across tumor types. Traditionally, therapeutic products have been given a single, uniform price across all indications. This is largely due to the fact that most national pricing and reimbursement systems across the globe are not equipped to handle differential pricing at an indication level.
Improvements in data availability and an increasing focus on value-based payment, however, have made experimentation with indication-based pricing models possible. While the UK and other markets are still in a “brainstorming phase” on this issue, payers and PBMs in the US are implementing such pilots or have announced intentions to do so in the near future (10). For instance, Express Scripts is in the process of rolling out its Oncology Care Value Program, which features an indication-specific pricing model for drugs to treat certain cancers (11). In addition, CVS/Caremark is considering a similar program for late 2016, and CMS recently indicated that it too plans to test indication-based pricing (12, 13). While participation in Express Scripts’ program is voluntary, as more pilot programs are implemented, pressure on manufacturers who want to ensure their treatments are covered will continue to grow.
A shift to indication-based pricing reinforces the need for a robust and consistent approach to evidence generation across all indications. It’s no longer sufficient for manufacturers to dedicate significant resources to a product’s initial indication, only to scale back these efforts for future indications once that product’s price has already been established. This is particularly relevant for manufacturers of I-O drugs, given the wide range of indications they’re currently pursuing.
Beyond monotherapies: Commercial opportunities and challenges
Immunotherapies targeting programmed cell death protein 1 (PD-1), programmed T cell death ligand 1 (PDL-1), and cytotoxic T-lymphocyte-associated protein 4 (CTLA-4) have generated great enthusiasm following demonstration of clinical efficacy as monotherapies for a wide range of tumor types. There is now intense interest in leveraging these drugs in combination with other drug classes. For instance, combinations including chemotherapy, molecularly targeted agents, vaccines, and other immunotherapies are increasingly being pursued. Major pharmaceutical players including Bristol-Myers Squibb, Roche, Merck, and AstraZeneca are currently engaged in more than 260 clinical trials involving drug combinations either through sponsorship or collaboration (14). Based on this number alone, it is not surprising that combinations of targeted and I-O agents are expected to account for more than 90 new molecular entity launches and line extensions over the next five years (15).
Pharmaceutical companies developing these combination therapies recognize their potential to deliver multiple commercial opportunities, including protection of existing marketed assets, differentiation from their competitors, and the possibility for substantial price premiums. However, with new combination therapies come new levels of complexity--both in terms of development and marketing for these new molecular entities. Many of these potential combinations are likely to come from two or more manufacturers with more than 90 combination trial agreements reached between companies in 2014 and 2015 and several already announced in 2016 (16-18). Not only can this complicate trial and commercialization strategies, but pricing flexibility and product promotion can also be affected. For instance, because discounts will be expected and needed when drugs costing more than $100,000 each are combined, manufacturers with multiple in-house products will likely have an edge over those having to negotiate pricing arrangements with partners.
What’s at stake for manufacturers?
While 2015 saw many advances in the I-O field, momentum for I-O drugs shows no signs of slowing down. This class currently makes up one quarter of the total 374 experimental cancer drugs in the pipeline, and numerous clinical trials are ongoing across a range of tumor types.
Taken together, it is not surprising that analysts project more than $35 billion in annual worldwide sales for I-O drugs by 2024, which would account for half of all spending on cancer drugs (19). In addition, major pharmaceutical companies are all expected to spend nearly $1 billion a year on I-O research, early access, development programs, and clinical trials (20).
What does this mean for manufacturers who find themselves in an operating environment that is scrutinizing more closely than ever before a drug’s value and costs to patients, payers, providers, and society as a whole? Simply put, manufacturers will need to re-examine how each of these products, either alone or in combination, are brought to market--from trial design, efficacy endpoint assessment and safety evaluation, to the role of health economics and outcomes research and, ultimately, how price is determined. Failure to give sufficient consideration to each of these areas may significantly jeopardize a product’s market access, not to mention corporate earnings and valuations.
