Value-Based Drug Pricing
Value-Based Drug Pricing
Steven D. Pearson, MD, MSc
The Increasing Costs of Health Care Squeeze Out
Other Public Spending Priorities, Too
2
STATE BUDGET, FY2001 VS. FY2011 (BILLIONS OF DOLLARS)
NOTE:
Dollar figures are inflation adjusted using a measure specific to government spending as developed by the U.S. Bureau of Labor and Statistics.
SOURCE
:
Massachusetts Budget and Policy Center
Budget Browser
.
+$5.1 B
(+59%)
-$4.0 B
(-20%)
Health Coverage
(State Employees/GIC;
Medicaid/Health Reform)
Public
Health
Mental
Health
Education
Infrastructure/
Housing
Human
Services
Local
Aid
Public
Safety
Conceptual Approaches to
“Fair” Pricing
•
“Free market”/supply and demand
•
Costs of development and production plus
“reasonable” profit
•
Added “value” to patients and health systems
ICER
Value-Based Price Benchmark
•
Step 1: Long-term cost-effectiveness
–
Price at which the cost per quality-adjusted life year gained =
$100,000-$150,000
–
Range leaves room for the role of other factors
•
Step 2: Potential short-term budget impact
–
Cost impact > anticipated growth in GDP + 1%
–
Based on state (Mass/Maryland) and the ACA legislation
–
The math
•
5-year potential uptake if not strictly controlled
•
Annualized NET potential budget impact
•
Anticipated number of new FDA drugs
•
$904 million NET
per year
per new drug = affordability “alarm bell”
From Value Assessment to
“Value-Based Price Benchmarks”
46%-62%
2-3x higher!
9%
Policy Prescriptions to
Address
Initial
Drug Prices
•
Changing physician payment for Part B drugs
•
Mandates for R&D transparency
–
Medical Loss Ratio (MLR) equivalent
•
Direct Medicare negotiation
•
Benchmarking to VA prices
•
New or increased use of market incentives
Policy Prescriptions to
Reward Value-Based Pricing
P
R
I
C
E
M
E
E
T
S
B
E
N
C
H
M
A
R
K
•
Mandatory inclusion in formulary
•
First tier with zero or low co-pay
•
Default “gold card” with providers
•
Include entire price in new
technology add-on payments
•
Set Part B coinsurance to low level
•
Exclude from 340B discount
program
•
Increase FDA exclusivity period
P
R
I
C
E
E
X
C
E
E
D
S
B
E
N
C
H
M
A
R
K
•
Lower tier or allow exclusion
•
Full exercise of step therapy, etc.
•
Reimburse up to value-based price
•
Include only value-based price
in bundles
•
Increase transparency to justify
prices over value-based price
•
Include in 340B program discounts
•
Decrease FDA exclusivity period
Moving Forward
•
Profits, access, and affordability exist in
ethical tension within any insurance system
–
Profits supporting future innovation is a good thing
–
Prices that are scaled to reflect added value to
patients and consideration of health system
affordability will not kill innovation or the drug
industry
–
Keeping
the patient
at the center…
Dive into the concepts of value-based drug pricing with Steven D. Pearson, MD, MSc. Gain insights into the evolving landscape of pharmaceutical pricing strategies and their impact on healthcare economics and patient access.
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Presentation Transcript
Value-Based Drug Pricing Steven D. Pearson, MD, MSc
THE IMPACT OF RISING HEALTH CARE COSTS IN MASSACHUSETTS WHERE HEALTH CARE DOLLARS GO DRIVERS OF SPENDING GROWTH VARIATIONS IN SPENDING The Increasing Costs of Health Care Squeeze Out Other Public Spending Priorities, Too STATE BUDGET, FY2001 VS. FY2011 (BILLIONS OF DOLLARS) FY2001 FY2011 $16 $14 +$5.1 B (+59%) -$4.0 B (-20%) $12 $10 -15% $8 $6 -13% $4 -11% -23% -50% -33% -38% $2 $0 Health Coverage (State Employees/GIC; Medicaid/Health Reform) Public Health Mental Health Education Infrastructure/ Housing Human Services Local Aid Public Safety NOTE: Dollar figures are inflation adjusted using a measure specific to government spending as developed by the U.S. Bureau of Labor and Statistics. SOURCE: Massachusetts Budget and Policy Center Budget Browser. 2 MARCH 2013 BLUE CROSS BLUE SHIELD OF MASSACHUSETTS FOUNDATION
Conceptual Approaches to Fair Pricing Free market /supply and demand Costs of development and production plus reasonable profit Added value to patients and health systems
ICER Value-Based Price Benchmark Step 1: Long-term cost-effectiveness Price at which the cost per quality-adjusted life year gained = $100,000-$150,000 Range leaves room for the role of other factors Step 2: Potential short-term budget impact Cost impact > anticipated growth in GDP + 1% Based on state (Mass/Maryland) and the ACA legislation The math 5-year potential uptake if not strictly controlled Annualized NET potential budget impact Anticipated number of new FDA drugs $904 million NET per year per new drug = affordability alarm bell
From Value Assessment to Value-Based Price Benchmarks Price to Achieve $100K/QALY Price to Achieve $150K/QALY Max Price at Affordability Threshold PCSK9 Drugs List price $14,350 (n=2,636,179) $5,404 $7,735 $2,177 46%-62% Max Price at Affordability Threshold Price to Achieve $100K/QALY Price to Achieve $150K/QALY Entresto List price $4,560 (n=1,949,400) $9,480 $14,472 $4,168 2-3x higher! 9%
Policy Prescriptions to Address Initial Drug Prices Changing physician payment for Part B drugs Mandates for R&D transparency Medical Loss Ratio (MLR) equivalent Direct Medicare negotiation Benchmarking to VA prices New or increased use of market incentives
Policy Prescriptions to Reward Value-Based Pricing PRICE MEETS BENCHMARK Mandatory inclusion in formulary First tier with zero or low co-pay Default gold card with providers Include entire price in new technology add-on payments Set Part B coinsurance to low level Exclude from 340B discount program Increase FDA exclusivity period PRICE EXCEEDS BENCHMARK Lower tier or allow exclusion Full exercise of step therapy, etc. Reimburse up to value-based price Include only value-based price in bundles Increase transparency to justify prices over value-based price Include in 340B program discounts Decrease FDA exclusivity period
Moving Forward Profits, access, and affordability exist in ethical tension within any insurance system Profits supporting future innovation is a good thing Prices that are scaled to reflect added value to patients and consideration of health system affordability will not kill innovation or the drug industry Keeping the patient at the center
