How Does Drug Pricing Drive Therapeutic Choice?

An expert panel convened in Atlanta, Georgia, December 9th during the 49th annual meeting of the American Society of Hematology. The Biogen Idec-sponsored symposia, titled, “How does drug pricing drive therapeutic choice?” featured presentations from Frank Lichtenberg, PhD, Professor of Business at the Columbia University Graduate School of Business, New York, NY; Sir Michael Rawlins, MD, Chairman of the National Institute of Health and Clinical Excellence, London, United Kingdom; and Peter Bach, MD, Memorial Sloan-Kettering Cancer Center, New York, NY. Linda Bosserman, MD, FACP, President, Wilshire Oncology, Los Angeles, Calif. moderated the panel discussion on the issue of drug pricing.

Pharmaceutical Innovation and Cancer Survival
According to Dr. Lichtenberg, cancer survival rates have increased substantially in the last 50 years. He hypothesized that the development and use of new cancer drugs has made an important contribution to the increase in cancer survival. He tested this hypothesis by examining the relationship between drug vintage (approval year) and cancer survival in four methods of analysis, using four different sets of data.

His analysis revealed that the cancer sites whose drug vintage (measured by the share of post-1990 treatments) increased the most during the 1990s (indicating use of newer drugs) tended to have larger increases in observed survival rates, controlling for other factors…that drug vintage (the share of post-1985 treatments) had a positive and statistically significant effect on both 1-year and 5-year survival rates…that, typically, countries that adopted new cancer agents more rapidly experienced larger declines in their age-adjusted cancer mortality rate…that state reimbursement policies may play a part in cancer survival rates.

The NICE Experience: A total cost of care approach
Sir Michael Rawlins acknowledged Dr. Lichtenberg’s research that 5-year survival rates appeared lower in the UK than in other European countries; however, he emphasized that the UK has recently doubled its investment in healthcare—and these results have intrigued US payers.

Faced with half of the US’s per capita healthcare investment, the UK has chosen to establish a rationing system for allocating healthcare resources. To set limits, NICE weighs a drug’s cost-effectiveness in its coverage decisions and in some cases has said no to paying for certain treatments.

“Sometimes we need to show selective use of a drug, because we’ve felt it’s not cost effective for certain uses,” said Sir Michael.

Of the five oncology treatment-condition pairs NICE has rejected for use since 1999, three were cost-ineffective. “In Britain, the truth is the population doesn’t like the idea of cost coming into the decision, [but] it’s clear we have to do it,” concluded Sir Michael.

How to Pay for Cancer Drugs
Peter Bach, MD, acknowledged that drug prices can be perceived as too high. He offered a mix of regulatory and policy solutions to control prices, while maintaining choice, including:

• Create a forum similar to NICE’s approach to value-based payment.
• Give patients more of an incentive to spend healthcare dollars efficiently.
• Regulators could set prices and pay a fixed amount per healthcare gain.
• Change the sole-source definition for Medicare’s average sales price purposes.

Note: A full length version of this article was published in the January issue of OBR.

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