reimbursement strategy has essentially gone from being a secondary consideration to a primary consideration.
“Reimbursement (which integrates the cost effective issue) is a key issue for us investing in any company, at any stage,” Powell says. “In the distant past, we had this as a ‘secondary diligence item’ for the Sofinnova investment process, but recently it has become one of those ‘front and center’ issues. Which, I must say, is frustrating sometimes, because getting real data on future reimbursement levels is a best-guess prediction for most drugs. Often we are trying to guesstimate reimbursement for a drug that is treating an unmet medical need today—and so there is little guidance as to accurately predict reimbursement levels.”
It’s interesting to see people forced to think about reimbursement this early in the development process, years before companies even think about filing an application to the FDA. Decisions about pricing and health economic pitches to insurers used to be considered only after companies completed the third and final phase of clinical trials, or got ready to submit new drug applications to the FDA, says Chris Rivera, the president of the Washington Biotechnology & Biomedical Association, and a former senior vice president at Genzyme.
Cost-effectiveness and reimbursement have become such important factors that Rivera says he counsels entrepreneurs to consider it from their earliest days in business and to seek out experts on the subject at the University of Washington, Fred Hutchinson Cancer Research Center, and Group Health.
“If I were starting a company today, whether I had a novel compound or was licensing it in, one of the first things I’d look at is whether there is an unmet need, and next would be whether there is a reimbursement strategy,” Rivera says.
There are a number of ideas percolating out there about how the pharma industry can deliver better value for the money. Sam Waksal, the former CEO of ImClone Systems, recently wrote a New York Times op-ed about offering refunds to patients when drugs don’t work—an idea that has been tested in the U.K. and proposed by many others in the U.S. before. This idea is about neutralizing some of frustration patients have about cancer drugs that sometimes cost around $100,000 per patient while offering a few months of extra survival time on average.
While those stories get a lot of attention—ask Dendreon—there are still quite a few companies charging high prices with less resistance. Some of the new personalized medicines—Roche’s vemurafenib (Zelboraf), Pfizer’s crizotinib (Xalkori) and Seattle Genetics’ brentuximab vedotin (Adcetris) for example—have proven they can charge very high prices for their cancer drugs with little pushback from insurers because their drugs are so effective for a well-defined genetic subgroup of patients. Essentially, if you are UnitedHealth, Aetna, or WellPoint, you know that if you pay for one of these drugs, you won’t be flushing three-quarters of the money down the toilet on patients who won’t benefit. Put another way, society is still willing to pay very high drug prices on occasion, but only when we’re really confident it will be money well spent.
As a citizen who pays taxes and health insurance premiums, I dislike waste. I like to see people come up with innovations that save the healthcare system money rather than just add more cost. Healthcare costs are unsustainable at the current rate, but most people would also agree that we as a society want to keep developing new drugs to help us live longer and better lives. The burden is on the biotech and pharmaceutical community to prove that these innovations can do great things both for our health, and for our budgets.
