Читать книгу Pharma and Profits - John L. LaMattina - Страница 8

The company in this case” is asking for a blank check which if granted will blow up family budgets, will blow up state Medicaid budgets, will blow up employer benefit costs and wreak havoc on the federal debt.” This provocative comment was made by Ms. Karen Ignagni, former president and chief executive officer (CEO) of America’s Health Insurance Plans, the trade association of health insurance companies. The cause of Ms. Ignagni’s alarm was Sovaldi^TM, a breakthrough drug that cured the liver disease hepatitis C. Manufacturer, Gilead, priced its new medicine at $1000 a pill. Given that the standard course of treatment was once‐a‐day for 12 weeks, the cost of this cure was $84 000/patient. Ms. Ignagni’s concern was shared. Dr. Steven Miller, chief medical officer (CMO) of Express Scripts, a prescription management company, called this drug pricing unsustainable [1].

The World Health Organization (WHO) estimates that globally 71 million people have chronic hepatitis C with roughly 3 million of those in the United States. The most common modes of infection are through exposure to small quantities of blood. While largely asymptomatic, the hepatitis C virus (HCV) resides in the liver and can lead to devastating consequences such as liver scarring, cirrhosis, liver failure, and liver cancer. Many of these patients will ultimately require liver transplants to survive – a surgery that costs more than $300 000.

Older treatments were modestly effective. Cure rates ranged from 40 to 80%, depending on the severity of the disease. Patients were given a cocktail of drugs plus injections of interferon for 24–48 weeks. However, these medicines are poorly tolerated, particularly the interferon component that causes flu‐like symptoms in patients. As a result, many with hepatitis C often avoided treatment.

Sovaldi^TM provided new hope. The pill was found to cure hepatitis C in more than 90% of patients in just 12 weeks. Furthermore, it is safer and roughly 20% cheaper than the older treatments that cost over $100 000. One would think that the maker of such a wonder drug would be hailed for providing a major medical advance. Instead, Gilead was vilified.

At a Financial Times U.S. Healthcare and Life Sciences Conference in New York City, I had a chance to hear Ms. Ignagni talk about the high cost of Sovaldi^TM. During the Q&A session, I asked her the following question.

“Sovaldi^TM is a drug that cures hepatitis C. It actually saves the healthcare system money in that it will prevent patients from dying from liver cancer, cirrhosis and liver failure. Liver transplants alone can cost $300,000 and then patients must take anti‐rejection drugs that cost $40,000 per year for the rest of their lives. The price of Sovaldi^TM, while high now, will drop, first when competitive drugs in late‐stage development reach the market and then when the drug is generic. Given all of this, what price for Sovaldi^TM would have been acceptable to you – $60,000, $40,000, $10,000? What price are you willing to pay for innovation?”

Ignagni never answered the price question. Instead, she focused on the innovation part, saying that, for years, she has heard that high pricing is needed to sustain innovation. Yet innovation is still occurring. Her response ignores worrying trends that roil the biopharmaceutical industry – the mergers, the small company closings, the reductions in private investment in drug research and development (R&D). Yes, innovation is still occurring, but lower revenues result in less money invested in R&D. Less R&D equals less innovation.

Given the $1000 pill headlines, it was not surprising to see politicians jumping on the bandwagon and expressing outrage over the price. Rather than reacting to this medical breakthrough with applause, this furor sparked Senators Wyden and Grassley to probe all of Gilead’s expenses, from the acquisition of Pharmasset (originator of Sovaldi^TM) to the costs of the development program. Their aim: to embarrass Gilead publicly and, perhaps, shame them into a price cut.

These senators and other politicians have little grasp of the intricacies of drug R&D. Sure, they know R&D is difficult and expensive. They might even appreciate that the entire process, from coming up with the initial idea to getting the US Food and Drug Administration (FDA) approval, can take 15 years. But they have little idea as to how and why drug prices are determined. Do patients or physicians really care how much a company spent in the discovery and development of a new medicine? What they want to know is whether the drug works and, relatively speaking, is it safe? The same can be said of payers. Again, they could not care less about R&D expenditures. They are much more concerned about the drug’s short‐term impact on their balance sheet.

Biopharmaceutical companies try to elicit sympathy by talking about failure rates. The industry works on the cutting edge of medical science, looking for novel compounds to prove or disprove medical hypotheses. This is difficult and often frustrating work. Far more projects fail than succeed. Thus, in justifying the high cost of new drugs, companies will cite figures showing that billions of dollars need to be invested across a portfolio of programs to get one new drug approved. Indeed, for a biopharmaceutical company to survive, it has to be profitable. It must provide a return on investment for its shareholders. However, patients, physicians, and payers do not shed tears over a company’s litany of failures. The belief is that companies should be rewarded for success, and not for “nice tries.”

Thus, in the minds of patients, physicians, and payers, the pricing of drugs should have little to do with the expense of biomedical R&D, nor should it be associated with recouping R&D investment. Pricing should be based on only one thing – the value that the drug brings to healthcare in terms of:

1 Saving lives.

2 Mitigating pain/suffering and improving the quality of life for patients.

3 Reducing overall healthcare costs.

OK, if one were to take that position, how do new, expensive medicines stack up in terms of delivering value? Are they worth the prices sought by drug companies?

In the case of Sovaldi^TM, we have a drug that cures hepatitis C and, in doing so, prevents the downstream consequences of patients contracting liver cancer or needing a liver transplant. Rather than questioning Gilead’s management on the R&D costs generated in Sovaldi’s^TM development, Senators Wyden and Grassley should ask the following questions:

1 How does this compound compare with existing hepatitis C treatments in terms of efficacy and safety?

2 How expensive are these other treatments?

3 Without this drug, how many patients with hepatitis C will die?

4 How many patients with hepatitis C will contact liver cancer or will need a liver transplant if their disease remains uncured?

5 Without SovaldiTM, what would be the ultimate cost to the healthcare system to treat the resulting cases of liver cancer and liver transplantations?

If these senators do this, they will find that even at $84 000 per patient, Sovaldi^TM is well worth the expense. Its value is neither the R&D costs incurred in its discovery and development nor in the years or time and money invested at exploring other approaches to hepatitis C cures that did not work. Its value comes from saving lives and ultimately saving the healthcare system millions. When it comes to drug pricing, to paraphrase a former President Clinton’s advisor, James Carville: “It’s the value, stupid!”

To this point, the focus has been on Sovaldi’s^TM $84 000 price, which is its list price. This number is often the starting point in negotiations with payers to gain access to their formularies and healthcare plans. In the period when only Sovaldi^TM was on the market, payers had a relatively weak hand. That, however, all changed when AbbVie launched its hepatitis drug, Viekira Pak^TM. AbbVie’s list price was modestly lower at $83 319 for a course of treatment. However, now payers had a choice and competition can drive costs down. Big payers like Express Scripts and CVS Health do not pay the list price – the one usually quoted by the industry’s critics. Instead, given the vast number of patients in their plans, payers can negotiate significant reductions.

At a Forbes Healthcare Summit [2] shortly after AbbVie’s launch of Viekira Pak^TM, the aforementioned Dr. Steven Miller, then the CMO of Express Scripts, could not hide his glee that Sovaldi^TM now had competition. In fact, he had selected Viekira Pak^TM for the 85 million members in the Express Scripts network. At the Forbes meeting he surprisingly announced that the price paid in the United States for hepatitis C drugs was less than in Europe. The Express Scripts number remains confidential. However, drug prices in Europe are public. At that time, the United Kingdom paid $55 000/patient for hepatitis C drugs and Germany $67 000. Given Dr. Miller’s comments, we can speculate that the US price for these drugs was under $50 000.

After the launches of Sovaldi^TM and Viekira Pak^TM, however, a new generation of hepatitis C drugs became available such as Harvoni^TM (Gilead), Zepatier^TM (Merck), and Mavyret^TM (AbbVie). The last is particularly interesting. AbbVie’s list price for the drug, which is approved for all genotypes of hepatitis C, was $26 400 for an eight‐week treatment. If the infection was not cured after this time, another four weeks of treatment would cost an additional $13 200 (total of $39 600 for 12 weeks). Suddenly, curing hepatitis C had become relatively cheap.

Against this backdrop, it was surprising to hear Gilead’s then CEO, John Milligan, apologize for the original price of Sovaldi^TM. Milligan’s act of contrition was made at another Forbes Healthcare Summit [3]. Forbes had assembled an impressive panel of biopharmaceutical CEOs to discuss the sorry state of the industry’s reputation. Any conversation of this topic immediately turned to drug pricing and Gilead’s Sovaldi^TM took center stage. Milligan was asked if Gilead’s pricing strategy was a mistake.

“Yeah, it was an interesting launch for the HCV product. We priced the product at exactly the same as the existing standard of care, which worked about 50 percent of the time, and are providing a benefit that, based on real world experience, works about 98 percent of the time. From our perspective, it was a very good value. What happened was a failure to understand exactly how many people were direly ill and had to come into care. That is, there were hundreds of thousands of people who needed this immediately, whose doctors felt that they needed this immediately. The surge into the system was very large, and that created a lot of anxiety around the payers and of course created an outcry against us for having mispriced the product.”

As Milligan pointed out, no one questioned the value of the product. Not only are people cured of hepatitis C but an enormous saving is also accrued by the healthcare system down the line as Sovaldi^TM reduces the ultimate consequences of HCV: cirrhosis of the liver, liver failure, the need for liver transplants, liver cancer, and, ultimately, death. But despite the tremendous benefits of Sovaldi^TM, Milligan took a contrite tone:

“I think our failure, if I have to take a step backwards, was that we were unable to have a good enough conversation with the payers. Perhaps we were a little conservative about what we could have or should have said to them to allow them to prepare for the number of patients that came forward. Honestly, it was far more than we thought. We did not think the system could or would try to handle as many patients as it did. We essentially quadrupled the number of patients treated in a year. That surge really created a lot of pain.”

Milligan was being overly apologetic. Payers certainly know how many of the patients in their plans have HCV. Furthermore, the FDA approval of Sovaldi^TM was no surprise. The clinical trials for this drug were well publicized, as were the remarkable results. Payers often claim that they will pay for true value. Sovaldi^TM certainly demonstrated that both in terms of benefiting patients and offering reduced healthcare costs. This is a life‐saving, cost‐saving drug. Their outcry against Gilead’s list price went against the claims that this is the type of therapy they want the biopharmaceutical industry to produce.

But, again, the discussion focused on Sovaldi’s^TM list price. In fact, as other companies like Merck and AbbVie came up with their own cures, the price to the US payers dropped precipitously. Curing patients for $40 000 or less is a bargain compared to the cost of previous, less effective treatments.

Sovaldi^TM is a great example of the value that innovative drugs can bring to us all. Yes, there are examples of terrible gouging, such as irresponsible price hikes for generic drugs or wanton price increases that some companies make for their drugs two or three times a year. But Gilead did not do that. If a company is denied reasonable pricing for excellent new drugs, then the biopharmaceutical industry will likely stagnate and many new opportunities for drug R&D will go unfunded.

This was a great opportunity for Gilead’s CEO to voice these issues. It is too bad he did not.

The availability of HCV cures was especially timely for Vietnam War veterans. Many of these heroes contracted the disease as a result of battlefield injuries requiring blood transfusions. They were now suffering from the consequences of this largely silent menace – liver disease, cirrhosis, and liver cancer. Without these drugs, the sicker of these patients were facing certain death.

At the 24th Annual Wharton Health Care Business Conference, Dr. David J. Shulkin, the Secretary of the US Department of Veterans Affairs, announced that the VA was on track to eliminate hepatitis C infections for those willing and able to be treated. In October 2014, the VA had over 146 000 veterans afflicted with hepatitis C. Dr. Shulkin predicted this number would drop to 20 000 [4].

How did this happen? Here is the VA’s response as contained in their 2018 Budget in Brief:

“In 2014, VA began a ground‐breaking system of care for Veterans with the Hepatitis C Virus (HCV). The Food and Drug Administration approved two new, highly‐effective drugs – Sofosbuvir (Sovaldi^TM) and Simeprevir (Olysio^TM) – that work to change the lives of Veterans infected with hepatitis C. Prior to the introduction of the new high‐cost treatments therapies in the VA system in January 2014, treatments for hepatitis C were often ineffective and presented considerable side‐effects. By contrast, the new treatment options are considerably more effective than earlier options and are much easier to administer. Cure of HCV significantly decreases the risk of progression of the disease to cirrhosis, liver failure, liver cancer, and death. VA wants to ensure that all Veterans eligible for these new drugs, based on their clinician’s recommendation, receive the medication”

Source: [5] John LaMattina/Forbes Media LLC.

But what about the high cost of these drugs? While the retail price of Sovaldi^TM was $84 000 at launch, the VA is allowed by law to negotiate drug prices. In addition, as has been mentioned, other hepatitis C cures have been brought to market over the intervening years such as AbbVie’s Viekira Pak^TM and Merck’s Zepatier^TM, thus putting purchasers in a good negotiating position. Here is how the VA described drug costs in their 2018 Budget in Brief:

“VA successfully worked with the manufacturers of these drugs to receive a reduced price for their use to treat Veterans. VA estimates the drugs will cost $748.8 million and provide 31,200 treatments in 2017 and costs increasing to $751.2 million for 28,000 treatments in 2018”

Source: John LaMattina [5].

If you quickly do the math, 59 200 US veterans will be cured of hepatitis C for roughly $25 300 for each soldier treated.

This is a great story. Thanks to the VA’s commitment as well as the innovation on the part of the manufacturers, a major health issue for our veterans is being eliminated.

While the drop in the cost of hepatitis C drugs has benefited the VA in getting veterans these life‐saving medications, not all government agencies can take advantage of this situation. A case in point is the prison system. Kaiser Health News [6] reported that 144 000 inmates across 49 states had not been treated with any of the hepatitis C drugs. The reason is cost. Even at $25 000, the price is prohibitive for state prison budgets. The situation in Minnesota is pretty typical. Dr. David Paulson, medical director, was quoted saying: “If we treat everybody with hepatitis C, it would exceed the entire total pharmaceutical budget for everything else and there would not be enough budget left to treat patients with other diseases. We need to do what brings the greatest benefit for the greatest number of people.” It is estimated that in Minnesota alone there are 1500 inmates with hepatitis C.

Kaiser estimates that 75 000 hepatitis C patients are released back into the general population annually. As stated before, if not treated, many will progress to cirrhosis, liver cancer, or may even require a liver transplant, all of which would be far more expensive than curing the infection. Furthermore, they could be a source of infection in the community.

Interestingly, two professors, Dr. Anne Spaulding (Emory University) and Dr. Jagpreet Chhatwal (Harvard Medical School), have proposed a solution to this problem – “Nominal Pricing [7].”

“This pricing mechanism provides deep discounts of at least 90 percent on drugs to so‐called safety‐net facilities. (By law, the nominal price of a drug must be less than 10 percent of its average market price.) These include hospitals and clinics that treat many patients without insurance or who are homeless. Because of the high markup on hepatitis C drugs, a nominal price is still well above the cost to manufacture the pills.

Nominal pricing permits manufacturers to sell drugs to safety‐net facilities at a low price without disrupting the Medicaid market. Offering a discount to one customer usually triggers a similar discount on any drugs sold in the Medicaid program. Nominal pricing provides a way to prevent this from happening, and so can entice drug manufacturers into offering substantially lower prices to safety‐net facilities that otherwise may not be able to afford certain drugs”

Source: [7]/STAT.

Adoption of such a proposal has obvious benefits. Nominal pricing would bring the cost of treating hepatitis C in prisons to $2500 a patient – much cheaper than treating them after they are released, thus saving the healthcare system a significant sum by avoiding downstream costs. However, putting downstream costs aside, an inmate has a right to medical care. This is the right thing to do.

* * * * * * * * * * * * * *

There was a time when curing a disease like hepatitis C would have generated tremendous praise for the pharmaceutical industry. The innovator company would have been lauded for its creativity, insights, and diligence. Interviews would have been conducted with patients who were relieved and grateful that they would not have to endure the consequences of hepatitis C, quite possibly even death. But, the approval of Gilead’s Sovaldi^TM saw little of that. Instead, everyone focused on “The $1000 Pill.”

To a certain extent, that was not a surprise. The industry was getting battered on multiple fronts and this was another opportunity for critics, politicians, and insurance companies to weigh in and focus not on the benefits of the drug, not on the ultimate savings – even at the $84 000 price – that the healthcare system would gain. Rather, the focus was on the drug’s list price.

Yet, the cost of Sovaldi^TM ended up dropping dramatically. Competition with new hepatitis C drugs enabled payers to negotiate much lower prices, such that the United States was paying less than other nations for these drugs. This is amazing given that countries like the United Kingdom and Germany as single payer nations have remarkable bargaining power since they are buying for their entire populations. Furthermore, at some point, these prices will drop even more dramatically as the patents that currently protect these drugs will expire. Once generic manufacturers enter the picture, curing hepatitis C will likely cost a few thousand dollars a patient.

There are those who will say that, even at a cost of $25 000 per treatment, these drugs are overpriced and that pharmaceutical companies are gouging the public. Yet, there is no evidence of that. If you look at the industry’s return on investment or return on capital, this industry’s performance is about average across similar sectors. But there is nothing average about the benefits biopharma delivers. As will be seen in subsequent chapters, this is an industry capable of saving the lives of millions of people.