High costs of new drugs
Carin A. Uyl-de Groot, PhD
Professor of health technology assessment
iBMG/iMTA, Erasmus University Rotterdam
Uyl@bmg.eur.nl
Thanks to Maureen Rutten and Marc Koopmanschap
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Content
• Introduction
• Chronology of drug innovation
• The life cycle of a drug
• Pricing of new drugs
• Challenges facing several stakeholders
• Reimbursement
Cancer
http://www.youtube.com/watch?v=LEp
TTolebqo
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Examples prices of new drugs
Pompe disease: Myozyme:
- Cost: Euro 500,000
- Outcome: difficult to assess
- ICER: around 1 mln
Melanoma: Vemurafenib:
- Progression free survival: 5.3 vs 1.6 months mnt months
- Cost: 8.471 euro per month
Melanoma: Ipilimumab:
- 10-20% patients benefit
- Cost: € 84.000,- per patient
- Budget impact: €20-40 mln
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Policy goals in health care
Sustainability
System objectives
Equity
Goal:
Ensuring affordable and equitable
access for (all) patients to effective
medicinces in a sustainable manner
Quality of
care
Policy goals, criteria and HTA aligned?
Goal
Policy criterion
in HTA?
Quality of care
Health gain
Cure Yes (QALYs)
Care ???
Sustainability
Budget impact
Yes (cost/BI)
Equity
“disease severity”
(“need indicator”)
Yes, good enough?
Trade off Q vs S
Cost-effectiveness
Yes (ICER)
Cost-effectiveness vs drug reimbursement
• many EU countries: CE a formal reimbursement criterium,
BUT: no country (except UK) has strict & transparant threshold
(range) for acceptable cost per QALY
NL 2005-11: only 30% (=19/63) of drugs with positive 1B decisions
had pharmacoeconomic evidence!! (Franken et al 2012)
• Many exemptions: 24 orphan drugs, 7 HIV drugs
(Scotland stricter on PE evidence)
• 4 “insufficiently founded” evaluations got a positive decision
INTEREST
HOUSING
EDUCATION
EMPLOYMENT
ROADS
HEALTH CARE
ENVIRONMENT
DEFENSE
SECURITY
DEVELOPMENT AID
Development drug expenditure (in mln),
2002-2009
Expensive drugs
Other drugs
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Question: Why are the prices of new
drugs high?
•
•
•
•
Development process
Succes rate
Uptake of innovation
Reimbursement
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Development phase: a long and
winding road to registration
and Medical
Devices and
Technologies
Pfizer -- http://www.pfizer.co.uk/pfizer_uk/navigation/research_frame.htm
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Development phase
From discovery to patient
1 medicinal product
0
5 years
10 years
15 years
10 years of research
Source: “Recherche & Vie”, LIM (AGIM)
2 to 3 years of
administrative procedures
20 years
Patent expiry
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Life cycle of a drug
development
introduction
growth
maturity
↑
Sales
Time →
Ellery and Hansen, Pharmaceutical Lifecycle management, Wiley 2012
decline
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Development phase: clinical trials (phase 1 to
3) in humans
• First state of testing in humans
• Investigating safety
Phase 1 • 20-100 volunteers
Phase 2
• Investigating efficacy
• 100-500 patients
• Confirm efficacy results
• 1000-5000 patients
Phase 3 • Comparison with current gold standard
• FDA review/Phase 4 trials (post registration)
• Safety surveillance
Phase 4 • ‘real life’ patients
€
€€
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Development phase
Discovery and development of a successful drug
YEARS
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
0
INTRODUCTION
/REGISTRATION
POST-MARKETING SURVEILLANCE Phase IV
1
DEVELOPMENT
2
CLINICAL TEST (HUMANS) Phase I to III
2-5
5 - 10
BASIC
RESEARCH
PRECLINICAL TEST (ANIMALS)
3,000 – 10,000
QUANTITY OF SUBSTANCES
SYNTHESIS,
EXAMINATION &
SCREENING
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Costs of development new molecular
entity (NME)
• Estimation: 1 billion euros
Cost factor:
• R&D (including failures): 17%
• Manufacturing
• Marketing and promotion: 23%
• More is spent on marketing than on R&D
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Costs per clinical phase in percentage
of total R&D, period 2000-2007
Phase
Pre-clinical (incl. Basic research)
Percentage of total R&D
8%
Phase I
12%
Phase II
20%
Phase III
60%
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Declining number of NME approved by FDA
Source: www.fda.gov
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Introduction phase
Differences in the uptake of innovation
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Growth phase
• Slower rate of growth than typical industrial product
– Switching patients to other drugs may be risky
– Me-too’s or established drug classes are doing well
– Promotion limited
– Health authorities cautious about letting new drug be
introduced initially to a broad population because of
safety issues
– More and more biologics that target multiple smaller
indications, which are introduced successively over the
life of a drug
– Cost containment policies affecting supply, demand,
price
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Growth phase: International Reference Pricing
(IRP) is used in some form in most European
countries
IMS HEALTH Pharmaquery Sept 2012
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Growth in real per capita pharmaceutical expenditure, 2000-09
(or nearest year)
OECD (2011), “Pharmaceutical expenditure”, in Health at a Glance
2011: OECD Indicators, OECD Publishing.
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Challenges
1. Pipeline NME drying
2. Cancer: need for more therapeutic value (not only end of
life drugs)
3. Higher development costs
4. Increased regulatory requirements because of safety
concerns
5. Tougher environment for pricing, reimbursement, listing
6. Increased competition
7. Earlier generic drugs
8. Poor image
Tougher environment for pricing,
reimbursement, listing
Regulatory
Quality
Efficacy
Safety
Pricing,
Reimbursement
Comparative
effectiveness in real
world
Cost-effectiveness
(trial-based and
model-based)
Purchase, listing
Budget impact
analyses
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What is our “Product”? - Product Positioning
• A molecule is not a product…..for price estimation
purposes we must define its “positioning”
• “Positioning” (here) = place in the treatment regimen
Positioning variables
…different implications for…..
Line of therapy?
Target Patients?
Prevention or treatment?
Monotherapy or combination?
Negative
Differentiation
Value
D
R
Positive
Differentiation
Value
Reference
Price
V
Perceived
Value
Price Optimization across countries
1. Assess individual
market
price/demand
dynamics
US
France
2. Overlay global
context and
optimize
Optimization Modeling
Individual
Demand
curves
Cohesive
Global Strategy
Germany
UK
Canada
etc
3. Implement and
maintain a Global
Pricing Strategy
Cross Market
Interactions
 Global floor or
corridor
 Launch sequence
 Price targets
Recent turbulence, turning point in NL?
“CvZ to delist 2 expensive ultra-orphan drugs”
(Pompe/Fabry, after 5 yrs conditional reimbursement)
Fueled discussion (“finally….”) =>
• Ethical to stop treatment?
• Ethical to value health monetarily?
• Ethical to deny the scarcity of resources?
• Better options to limit cost explosion?
• Why are these orphan drugs so expensive?
• Negotiate on prices with industry?
9/2012 CvZ, struggle-> advise “reimburse”,
but not in regular benefit package…………
Recent turbulence ultra orphans in NL
Argument contra reimbursement:
• Cost per QALY too high (up to 1 mln €
per QALY)
Argument pro:
• For subgroup that benefits it is
established treatment for several years
(“acquired right on care”)
Lesson: maybe conditional reimbursement
of these orphan drugs 5 years ago was
unwise?
A proposal for ultra orphans in NL
Say: WTP/QALY for normal drugs up to 80,000 € per QALY,
Say: for ultra orphan drugs WTP 300,000 € per QALY
For sub group that really benefits say a gain of 0.75 QALY per year
Given max WTP/QALY -> max drug costs per year:
= 225,000 € (as 225,000/0.75= 300,000).
Message of reimbursement authorities to producers:
“Don’t develop drugs with annual treatment costs of
more than 225,000 €, we will not even allow conditional
reimbursement”.
Reimbursement (1)
Coverage with evidence NL: final reimbursement
decision after 4 years, based on cost-effectiveness
in daily practice and appropriate drug use (extended
in 2013);
• Quite comfortable arrangement for producers:
4 years a high price (t=0-4, risk for payer);
Reimbursement (2)
• Volume-price agreements (France ea)
• sales < Y price P1; sales > Y lower price P2
Advantages:
• less uncertainty on budget impact
• industry can cover R & D costs (Price1*Volume1)
Disadvantages:
• does not address value for money
• negotiations not transparant
Reimbursement (3)
• Contract : reimbursement depend on treatment
success (outcomes based risk sharing,
Pay for performance)
• August 2012 CVZ omalizumab (severe asthma)
• Advantages:
– “no cure, no pay” => value for money
– application on best patient sub groups
– after contract new decision possible
• Disadvantages:
– transaction costs contract
– clear outcome indicator crucial
– cost of monitoring/registration
Equal access: dynamics in treatments multiple myeloma (I)
Equal access: non small cell lung cancer patients receiving 1st line
Iressa or Tarceva (II)
<25%
25% - 50%
50% - 75%
>75%
Thank you!