No More NICE by 2013?

Any drug developer who showed up at the Royal Society of Medicine in London this morning could have been forgiven for thinking Christmas has come early. By 2013, nice probably won't be doing cost-effectiveness analyses of individual drugs anymore, according to Lord Howe, Parliamentary Under Secretary of State in the Department of Health.

Speaking at the joint ABPI/BIA conference entitled "Our Vision for a New Decade" (where a few other worthy initiatives were announced), Howe declared that those highly visible, and controversial, opinions delivered by NICE on whether a particular new medicine should be reimbursed by the UK National Health Service "will probably be somewhat redundant" in a few years' time.

Don't get too excited: it's not that cost-effectiveness assessments are going away. It's just that, according to Howe's plan, by then the UK will have a spanking new value-based pricing system which will see a drug's value assessed and quantified during pricing discussions. That system will replace the current PPRS (Pharmaceutical Price Regulation Scheme, which caps companies' profits rather than drug prices directly) which expires at the end of 2013.

According to Howe, the new set-up will see "the price of a drug reflecting everybody's agreed perspective on the value it provides". We were unable to establish exactly who 'everybody' is, and how they might 'agree' on such a matter. But despite scant details, it appears that companies may in future discuss value with pricing authorities directly rather than have nice--usually post hoc--impose its judgment on a drug's cost-effectiveness.

So it's not quite Christmas. But it seems the industry associations have done a good job lobbying for greater influence in pricing and value decisions, and for nice's teeth to be blunted somewhat. (Perhaps the writing was on the wall in 2009 after Sir Ian Kennedy published his report on NICE's methodologies.) Plus a system wherein value is discussed at the same time as pricing is, arguably, simpler, and "anything that's simpler is better," says Roch Doliveux, CEO of UCB and a significant investor in the UK (largely courtesy of the 2004 Celltech acquisition).

No-one will admit outright that nice is about to take a back-seat in cost-effectiveness decisions. Universities and Science Minister David Willetts was quick to refute that there will be a "lesser" role for NICE, saying instead it would be a "changing role". A more "advisory" role. NICE will move away from single technology assessments (drug assessments) towards setting quality standards more broadly for public health and for care within the NHS, including in social care.

Here's the Department of Health's summary of where NICE will fit in:

"We respect the expert independence of NICE, and believe that it must be allowed to continue to issue guidance free from political interference. However, we believe that there are fundamental failings within the wider system for drug pricing and access. We are determined to address this and are clear that nice plays a vital advisory role."

Vital its advisory role in establishing a new drug pricing system may be, but a NICE focused on setting quality standards for public health will certainly be less controversial than in its existing form. And less powerful. Today, a NICE decision can--and quite often does--shatter a drug's commercial prospects in the UK. That power looks uncertain post-2013.

While You Were Eating Beignets...

It's the first weekend in December and that means it's time once again for the American Society of Hematology meeting. This year, reps from biotech and pharma travel to N'awlins to make news--or at least issue press releases--before the last year of the first decade of the 21st century comes to a close.

And for the foodies/cultural mavens in the industry, how can you blame them? Where else can you indulge in chicory coffee, beignets (essentially fried dough, but the French makes it sounds waaaay better), and gumbo, while also soaking up the music scene?

If you weren't at ASH, you were likely debating the merits of football's popularity contest, aka the Bowl Championship Series, or Tim Tebow's oscar-winning performance after the Gators lost to Alabama. Or maybe you were engaged in that annual ritual now closely tied with propping up the national economy...filling recycled, reusable bags with unnecessary plastic items manufactured in China.

Away from food, footballs and rituals: this week's dealmaking got off to a healthy start, with Celgene announcing it was buying private firm Gloucester Pharmaceuticals for $340 million in cash, plus up to $300 million in future US and international regulatory milestones. The deal further strengthens Celgene's cancer franchise--more specifically, its blood cancer franchise--as Gloucester's romidepsin (Istodax), a histone deacetylase inhibitor, was approved by FDA in November for cutaneous T-cell lymphoma.

Not that Celgene's early Monday morning shopping should overshadow our hand-picked selection of the weekend events that happened while you were searching in vain for a $10 Zhu Zhu hamster... (Fuhgedabout it!)

New Yorker's Atul Gawande analyzes the current health care reform bill under review in the Senate. The fact that there is no grand master plan for curbing costs is actually a good thing, he argues. (If you haven't read Gawande's latest, you should. He's required reading in the West Wing.)

The WSJ reports Obama went to the Hill to urge the Dems to stay united as the Senate debated a proposed compromise option to the public plan. Meanwhile NYT's Prescriptions Health Blog outlines the advantages of a hybrid plan, the Federal Employees Health benefits Program.

There's lots for Sharfstein and Hamburg, the FDA's dynamic duo, to keep an eye on as they promote their safety first agenda. This weekend news surfaced that a Fresno, CA-based company recalled 22,723 ounds of ground beef potentially linked to salmonellosis; and then there was the NYT article on the safety of plasma products.

Also in the NYT this weekend, a story on the outsized pricing of cancer med Folotyn. The article is sure to spark renewed debate from payers about reimbursement for high priced meds that add just a few months of life. That's bad news for pharmas looking to cash-in on this specialty market.

ASH-related headlines: Cell Therapeutic's pixantrone increases median survival by 3.3 months in patients with relapsed/refractory NHL; Onyx/Proteolix presented updated Phase IIb data from studies of their next-generation proteosome inhibitor, carflizomib; privately-held Gloucester Pharmaceuticals presents additional data on newly approved ISTODAX in cutaneous T-cell lymphoma.

It wasn't just cancer at ASH; new data about next-generation blood thinners from Johnson & Johnson and Boehringer Ingelheim were reported at the meeting in conjunction with an article in the NEJM.

(Image by flickrer and[w] used with permission through a creative commons license.)

Health Care Reform and Pharma: Keep Industry "Healthy Enough"

Last night, former President Bill Clinton was interviewed on CNN about health care reform. Health policy junkies should check out the whole thing. After all, we're the only ones who think "failed health care plan" as the main legacy of the Clinton era. (Watch the CNN video here; read the transcript here.)

For biopharma, companies, though, the interview underscores the sense that much has changed since 1993--when "pharmaceutical profiteers" were the all-purpose villain in the health care debate--and 2009, when Big Pharma quite literally has a seat at the table on reform. (Two, actually).

But it is also a reminder that this ain't the Bush years.

The interview was a reunion of sorts, with CNN's Sanjay Gupta posing the questions. Gupta began by noting his own background as an advisor to the health care reform task force, and adding that he withdrew his name as a candidate to be surgeon general under Obama. When Gupta asked about "drug costs" and how to bring them down, we sat forward in our seats.

Here is what Clinton said in response...

"There is a very simple answer to this, which is that we have made a bargain with our pharmaceutical companies. We've said to them for decades now, 'We love having you in America. We're proud of you. We know you have to spend a lot of money on research and then you market the drugs and all. So we will eat our research and development costs in American prices so that you can sell exactly the same drugs you sell to us for less money in Canada and Europe.

"For example, our AIDS clinic down the street here in Harlem, the taxpayers pay $10,000 a year to treat people with the big pharmaceutical companies' AIDS medicine. That medicine costs about $3,500 a year in Canada and Europe, countries with per capita incomes as high as America. Keep in mind, Europe has a lot of very successful drug companies and they don't do this.

"We need an honest, open, clear dialogue admitting that we're proud of these companies. They've got tens of thousands of employees. They've done a good job for America. They've saved countless lives. But we just can't go on subsidizing [more than] our other competitors can.

"So how can we reach a different arrangement so that we keep the drug companies healthy enough and we keep them developing new medicine?

"The system we've got is not working very well. They don't have a lot of new medicines in the pipeline, partly because so many new advances, particularly with the sequencing of the human genome, have led to patents on smaller and smaller and smaller components of what ultimately becomes a blockbuster drug. So a lot of new drugs are not coming because we haven't reexamined how the patent process and the research process are working together, or not working.

"Meanwhile, we keep eating all these costs, and countries just as wealthy as we are are getting the same drugs made by the same people for less money, which is why there was so much [discussion of] allowing re-importation from Canada.

"What I recommend is, let's don't pretend these drug companies are bad people. They've done a lot of good for us. But let's be honest that America is no longer so dominant over Canada and Europe and Japan that we can afford the whole subsidy.

"One good place to start is what President Obama has proposed, letting the federal government do what I do for AIDS drugs, letting them bargain for lower prices for well-established medicines bought in bulk for the benefit of our seniors. That's a good place to start. And we just need to work out a new deal with them so they can do well.

"But, you know, for most of the 1990s and the early part of this decade, they earned 18 percent, which is a huge return. You know, Wal- Mart is, what, 5 or 6 percent. And it is fascinating to see that at the same time, because of a lot of these factors relating to patenting and scientific advances, the number of new drugs in the pipeline seems to be slowing down.

"So we need to examine both how we can both get the benefits of genomic advances and how we can lower the cost to the consumers."

How Much Reform, How Fast? What to Listen For Tonight

Do we have to pay for health care reform?

That is probably the single, critical question all stakeholders in the health care system will be listening for when President Obama addresses a joint session of Congress Tuesday night.

No one expects Obama to back down from his campaign promises to push for universal coverage in his first term. Indeed, Office of Management & Budget Director Peter Orszag affirmed that health care reform will be “the next priority up for the Obama administration” during a closed door meeting with the National Governors’ Association, Michigan Democrat Jennifer Granholm said Feb. 22.

However, the economic crisis and the withdrawal of Tom Daschle from his expected role as health care reform general raise significant questions about the direction of and prospects for reform in the near term.

In the context of the presidential address and upcoming budget proposal, those questions essentially focus on how reform will be framed.

For the biopharma industry, the hope is that Obama will define health care reform as, in essence, a continuation of economic stimulus, pressing the urgency of change without insisting on offsetting cuts to pay for expanded coverage.

Pharmaceutical Research & Manufacturers of America CEO Billy Tauzin suggested that policymakers should learn a lesson for Japan’s economic struggles in the 1990s. That experience, he said during a webcast sponsored by Ernst & Young on Feb. 20, shows what happens when “stimulating the economy helps turn things around and then fiscal restraint comes in too soon and then blocks the good effect of the stimulus.”

“The budget is going to be facing some very ugly deficit numbers,” Tauzin noted. However, he predicted, “the trend is going to be let the stimulus work before we start to focus on these ugly deficits.”

Nevertheless, all indications are that the President instead will call for a specific sum of money to be reserved for health care reform—and pledge to find offsets to pay for it upon enactment.

That may not sound like a significant difference since, after all, health care reform will have to be paid for one way or the other. For biopharma companies, however, the difference could be quite significant: many of the most obvious targets for savings involve cuts to drug pricing or other measures to control spending on pharmaceuticals.

It is almost impossible, for example, to imagine a package of health care spending cuts that does not address the prices of drugs under the Medicare Part D prescription drug program. Or that excludes a follow-on biologics provision, which would presumably be scored as reducing federal spending by billions of dollars.

Both measures may be inevitable anyway, but enactment in the context of finding a fixed savings target to pay for broad expansion of health coverage means a much higher chance that cuts to Part D pricing will be deeper, and that exclusivity to innovators under FOB legislation may be shorter, than would otherwise emerge from the legislative process.

The framing of health care reform is just one of many topics industry will be eagerly listening for in Obama’s “unofficial” state-of the-union address. Here are some key themes:

Bragging Rights: “I think the first thing he will do is talk about what he has already done,” BIO CEO Jim Greenwood said during the Ernst & Young webinar, highlighting expansion of the Children’s Health Insurance Program and several elements of the stimulus bill, including funding for health care IT, comparative effectiveness research, and new spending for the National Institutes of Health.

“I think he starts off with bragging rights and then promises in more general terms that there is much more to be done,” Greenwood said.

Still, even a recap of the first month could contain important indications of policy directions, especially when it comes to the comparative research funding included in the stimulus. That relatively small ($1.1 billion) line item generated a lot of political attention, and it will be interesting to see whether Obama devotes time to it.

Universal Coverage: Obama “is very interested in moving aggressively to expand insurance coverage,” Tauzin noted. But how prominent and how persuasive will discussion of that issue be? Tauzin clearly doesn’t expect much, predicting on the Ernst & Young call that reform will move “piecemeal” rather than in a comprehensive fashion in the months ahead.

Fiscal Responsibility: The President hosted a “fiscal responsibility” summit Feb. 23 and plans to release a 2010 Budget outline on Feb. 26. During his weekly web address Feb. 21, Obama pledged to “release a budget that's sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don't, and restoring fiscal discipline.” That sounds like a recipe for pay-as-you-go health reform.

Wellness/Prevention: Many politicians now display “an emphasis on prevention and dealing with chronic diseases in the early stages instead of literally waiting to treat all the damage done,” Tauzin noted. “You see that theme expressed in the politics everywhere and I expect you will see it expressed somewhere” in the Presidential address.

FDA: A month ago, the peanut butter recall made FDA the subject of discussion during White House press briefings and a pledge to name a new commissioner shortly. Daschle’s departure delayed that plan. Obviously any reference to FDA will be important for industry to analyze—all the more so if it suggests an emphasis on the food side of the agency’s mission (and hence a tilt towards an expert in that field to run the agency) and/or a commitment to zealous enforcement by regulators.

Tobacco regulation: All indications are that the White House and Congress are committed to expanding FDA’s mission to include regulation of tobacco products (a theme that ties together both prevention and FDA regulation). A discussion of tobacco could signal a further layer of distraction for the agency from the product review issues central to industry—but perhaps also an enforcement agenda that spares biopharma firms from the toughest scrutiny.

Stem cell research: Overturning the Bush Administration policy on stem cell research is an important priority for BIO, but also one that may have been delayed by the wait for an HHS nominee. Biotech companies would welcome a public commitment to reverse that policy.

Personalized medicine: Obama sponsored legislation in the Senate to create regulatory systems and incentives for personalized medicine. Any discussion of science and medicine from the podium could be a call to move forward in that area.

Generic drugs: Former President Bush often highlighted the cost saving impact of generics. Will Obama do the same?

Medicare managed care: The private sector has a big role in Medicare, both via fully integrated Medicare Advantage plans and as the providers of the Part D prescription drug insurance. The biopharma industry would love to see Part D serve as the template for broader health reform—but it is so closely tied to the Bush Administration that it may be difficult for Obama to embrace the program. Tonight is the first chance.

The Other Surge

If there is one thing the Democrats can’t stand, it’s a Bush Administration sponsored surge, one that they feel reflects ideology triumphing over common sense. No, I’m not talking about Iraq. I’m talking about the recent spike in enrollment in the Medicare Advantage program, under which senior citizens and the disabled can opt out of the government run Medicare program to join a private sector managed care plan.

Okay, I know I know. There is no comparison between the Iraq war and the Medicare Advantage program.

But they do have some things in common. After all, they are both a matter of life and death. That may be more obvious in the case of the Iraq war, where soldiers are putting their lives on the line every day. But it is no less true of the Medicare program, which by its very nature is the health care plan most Americans will rely on to care for them at the end of their lives.

Both are costing the Treasury billions of dollars a year. Everyone knows the Iraq war is expensive. (The Defense legislation pending in Congress would set aside $140 billion to fund operations in Iraq and Afghanistan for fiscal 2008). But did you know that Medicare Advantage plans will collect about $95 billion from the Treasury the same year?

And the long term costs are staggering. CBO says that the Medicare Advantage side of Medicare will consume well over $1 trillion in federal spending over the next 10 years.

But what really sets the Democrats off is the feeling that the money is being wasted. The wisdom of the surge in Iraq is a debate I’m happy to leave to the politicians. But in Medicare Advantage, there is no real debate over one fact: the per capita cost for a Medicare Advantage enrollee is higher—by 10% or more—than the cost of covering the same person in the traditional Medicare program.

That certainly seems to fly in the face of the logic of privatizing Medicare. After all, private plans are supposed to be cheaper and more efficient than big government right?

The two surges have something else in common: however easy it may be to argue that the money is being wasted, it is very difficult politically to do anything about it. No one wants to be accused of failing to support the troops in battle. And no one wants to be accused of penny pinching when it comes to health care for America’s senior citizens. The fact is that Medicare Advantage plans spend a lot of money on better benefits for seniors, so any cuts are likely to be very unpopular with voters.

But the Democrats aren’t giving up. In May, there were no fewer than 9 hearings on ideas to improve the Medicare program. They topics covered ran the gamut, but shared a common theme: all would in some way or the other put the brakes on the growth in the Medicare Advantage program.

Okay, so why should pharmaceutical companies care? In the June issue of The RPM Report, we tease out the implications of the Democratic attack on the Medicare Advantage surge. (You can read the story for free by clicking here.)

If the new leaders in Congress are successful, it means tougher times ahead for pharma companies. Why? Managed care plans will have no choice but to squeeze drug prices even more—or get out of the Medicare business altogether. That, frankly, is what a lot of Democrats probably want. Because that means they get to design the Medicare drug benefit they always wanted—one that you can be sure will include much tougher control of drug pricing.

No Cure, No Pay

For most other consumer goods, you’d expect to get your money back if the product didn’t work. Not so for drugs, where many treatments don’t work in at least a significant minority of patients—but payors and governments can’t claim a refund.

That may be about to change. Today Johnson & Johnson’s Janssen-Cilag subsidiary offered to pay back the UK’s National Health Service if their blood cancer drug Velcade fails to help improve patients’ condition.

It’s not a done deal—the Department of Health will now consider the proposal. And there are still plenty of creases to iron out, such as what levels of improvement the drug would need to show in order to trigger payment. But the proposal has the backing of the UK’s cost-effectiveness body, the National Institute of Clinical Excellence, which means it’s likely to be accepted in some form or another.

Janssen isn’t doing this just to look good: for them, this scheme is the only way it will see any reimbursement for the £25,000-per-cycle drug, which NICE initially deemed too expensive to be cost-effective. This risk-sharing agreement is part of Janssen’s appeal against that decision, and the trend will probably catch on as other firms seek to overturn negative reimbursement outcomes. Some are already talking to NICE about similar schemes.

And small wonder: no cure, no pay makes absolute sense. It renders the cost of treatment economically feasible for payors, and it may help manufacturers, too, by forcing them to identify patients that will respond best to their treatment, and to find ways to improve compliance if a drug does not appear to have the same effect in daily use as it does in controlled trials. That will facilitate more widespread reimbursement and sales.

So why hasn’t 'no cure, no pay' caught on? It’s not as if Janssen is the first mover here. Novartis in 2004 tried it with hypertension treatment Diovan, to try to boost flagging sales in the US; the company claims it worked. In 2005, Bayer did the same with erectile dysfunction drug Levitra in Denmark, offering patients a refund if they were not satisfied. There are plenty of other even earlier examples, according to a paper in the British Medical Journal by Claus Møldrup, Associate Professor in the Department of Social Pharmacy at the Danish University of Pharmaceutical Science in Copenhagen. (See Box.) No cure, no pay hasn't caught on because it hasn't had to: traditional marketing techniques have worked fine.

Until now, that is. From here on, we'll see more money-back guarantees, and we’ll also see other schemes linking price to performance. GSK in September 2006 announced that it had persuaded two European governments to allow the price of pharmaceuticals to vary, in either direction, according to real-life data that emerge on the drug's effectiveness. (See February's IN VIVO article for a discussion of this and other price-discounting schemes underway in the UK.)


So governments and payors had better get cracking and set up their systems to receive funds, rather than simply pay them out—this was just one of the challenges that helped snuff out the Danish no-cure, no pay arrangements.

In the latest Velcade proposal, the NHS will be refunded in the form of a credit note from Janssen, according to the BBC. It’s not quite your money back, then—but at least you can try a new product for free.


SOURCE: BMJ 2005;330:1262-1264 (28 May)