Mari Edlin

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In an interconnected world, epidemics of viral diseases are inevitable but unpredictable. When 2020 began, no one would have put a new coronavirus among the top pharma challenges of the year. But obviously the pandemic has become the most important healthcare story of the year. As we went to press, there were an estimated over 200,00 cases in the United States and about 900,000 worldwide. Gilead and other companies are scrambling to test antiviral medications in hopes of identifying effective treatments. Meanwhile, some of pharma’s biggest companies, including GlaxoSmithKline, Johnson & Johnson, Sanofi, and several smaller ones, such as Moderna Therapeutics and CureVac, are in the race to develop a vaccine. 

COVID-19 looks like it will eclipse most everything else in healthcare this year, although the issues of drug prices and affordability aren’t going away; they are just in the background for the time being. 

Specialty drugs, in particular, are a big portion of the price and affordability problem - and a much bigger bite than the average consumer can chew. They accounted for just 2.2% of prescription volume in 2018, but the number of specialty prescriptions grew twice as fast as the number of traditional medications, according to the IQVIA Institute for Human Data Science’s latest annual drug expenditure report. 

More important than the number of prescriptions is their cost, and the IQVIA report says the specialty drug share of net spending across institutional and retail settings rose from roughly a quarter of net spending in 2009 to just shy of half (49.5%) in 2018. 

Two drugs illustrate just how expensive specialty medications have become. Spinraza (nusinersen), a drug approved in 2016 for spinal muscular atrophy, costs $750,000 in the first year of treatment and about $375,000 the following year. Zolgensma (onasemnogene abeparvovec-xioi), a drug approved by the FDA in May 2019 for the same disease, costs more than $2.1 million, making it the most expensive drug to ever hit the market. Coinsurance for these drugs, in theory, could run as high as $420,000 a year. 

“While these drugs are very expensive, they are effective and are the only ones on the market to treat the condition,” notes Sharon Frazee, PhD, senior vice president of research and data innovation for the Pharmacy Benefit Management Institute (PBMI). 

Frazee says she realizes the financial burden that medications like these two could have on a small insurance plan or a small, self-insured employer. But she emphasizes the importance of weighing an effective drug and its high cost against the possibility of an alternate scenario of high healthcare costs for people with a condition that doesn’t have appropriate treatment. Frazee recommends that employers consider buying stop-loss insurance. Meanwhile, Cigna and Express Scripts have launched the Embarc Benefit Protection plan, which is designed to create a large risk pool for Zolgensma and Luxturna (voretigene neparvovec-rzyl), the new gene therapy for inherited retinal disease, and eliminate coinsurance for patients.

Steven Lucio, RPh, vice president of pharmacy solutions for Vizient, a healthcare services company headquartered in Irving, Texas, agrees with Frazee that affordability is a top concern. Lucio says he wonders how one can put a price on life-saving drugs for small populations. 

“It’s difficult for payers to figure out how to pay and deliver medications to their members and requires additional resources, such as people,” Lucio says. 

Affordability is not among the virtues of the current drug pipeline; it is full of specialty drugs and gene therapies. Lucio says he would like to have more biosimilars prescribed. As of December 2019, the FDA had approved 26 biosimilars. Far fewer are actually on the market because of patent challenges, rebate policies, and other impediments. 

A survey conducted in April 2019 by the Academy of Managed Care Pharmacy highlighted what members believed were the largest barriers to biosimilar uptake, as well as some strategies for remedying the situation. Rated as “extremely difficult” or “difficult to overcome” were the safety and efficacy of biosimilars (61%), pricing and contracting (57%), and state laws and regulations for substitutions and interchangeability (53%). 

The strategies that might be used to overcome this hurdle were prescriber education on switching studies (91%), clear FDA guidance on substitution (90%), and formulary policies for treatment-naÃ¯ve patients (87%). Affordability has risen to the top of Remedy Analytics’ list of pharmacy challenges for 2020. Although it is difficult to imagine footing the bill for treatments with million-

dollar (or more) price tags, the cost must follow the patients, says Steve Maike, RPh, chief pharmacy officer for the Milwaukee-based company that provides data analytics in the pharmacy space. 

Maike worries that paying for high-cost drugs might affect access to traditional drugs, leading to rationing. On the other hand, he suggests that squeezing out waste in the traditional drug market could free up resources that would help cover all costs. 

“It takes a lot of work to keep ahead of inflation and to stamp out waste,” he says. “Payers must find creative ways to manage the total cost of drugs because they are not saying, ‘I won’t cover high-cost specialty drugs.’” In his presentation at the PBMI national conference last month in Orlando, David Calabrese, senior vice president and chief pharmacy officer at OptumRx and a member of the 

 editorial advisory board, talked about how his company uses the Vigilant Drug List as a waste-
	reducing effort, because it keeps expensive or ineffective drugs off OptumRx’s formularies. 

Maike mentions a one-payer system as a potential solution or, for the Medicare population, moving some expensive drugs under Part B as a way to reduce costs. “Part of the conundrum is that list prices for drugs have increased, while managed healthcare plans say their cost trend has stabilized,” says Maike. 

Maike also sees lack of affordability as an access problem and, ultimately, affecting adherence. He blames the access issue on his No. 1 pet peeve: vertically integrated hospital systems and horizontal integrations of insurers with PBMs. 

Maike is concerned that these types of mergers and partnerships are not only confusing but undermine the opportunity to reach unbiased medical opinions. “There are unbelievable levels of conflict of interest,” says Maike’s boss, Scott Martin, co-founder and CEO of Remedy Analytics. “It is difficult to make a reasonable decision when you are bombarded by players in the system pushing their products and by incentives that can lead to bias, such as rebate dollars.”

Maike sees consumerism as another problem, but he believes it is a knot that can be untied. “It’s a challenge to be a consumer and have to make value-based decisions with limited information,” Maike says. “How can we tell patients what their copay is and not let them know the cost for the medication? How can they take financial responsibility if they don’t know the cost? Vendors must be able to provide price transparency so that consumers can make a decision.”

Susan A. Cantrell, RPh, the CEO of Academy of Managed Care Pharmacy, also lends her voice to the affordability Greek chorus. “Affordability,” she says, “continues to be a challenge with the arrival of new treatments to address conditions that previously had no existing drug alternatives.”

In 2017, her organization established a three-part strategy for coping with high costs: 

Establishing value for outcomes through prior authorization and other technologies.

Fostering competition by making lower-cost alternatives available, such as biosimilars, when appropriate.

Cantrell would like to see more flexibility and improved efficiencies around prior authorization and step therapy, emphasizing their importance, disseminating best practices, and collecting real-world evidence. 

In December 2019, the academy hosted a forum on improving specialty drug benefit and reimbursement designs, with an eye on cutting drug prices, improving access, supporting incentives for innovation, and removing adverse reimbursement incentives.

Frazee looks at the cost challenge as the delicate balance between the pharmacy and medical benefit, because often specialty drugs are covered under both. It is second on her 2020 list of pharmacy challenges. One of the most important considerations, she says, is choosing the right location - an infusion or outpatient center or a physician’s office instead of a hospital, for instance - for dispensing services. “There needs to be parity across benefits so that patients face similar costs under each plan and no longer have to shop around for the best cost,” says Frazee. 

It is not unusual for the consequences of a medication under a pharmacy benefit to show up on the medical side. For instance, when patients pick up a prescription, they pay for it on the spot, but they might receive a medical bill later that is associated with a drug. “Insurers might be left holding the bag for these extra costs, or consumers might be forced to go bankrupt to pay for services,” she adds.

Cantrell says the key to balancing both pharmacy and medical benefits is integrating data from both areas. An AMCP Partnership Forum met recently to discuss how to bridge the divide between the pharmacy and medical benefit and place more emphasis on the total cost of care. Among the topics were using health IT to streamline access to data, cost transparency, and aligning incentives. 

Frazee says attention to the total cost of care is picking up steam. Insurers are realizing that a drug might be jarringly expensive at the outset but that it saves money on the medical side in the long run. Value-based contracts, which tie payment to patient outcomes, are also becoming more common.

The management of new drugs that come out of the pipeline and onto the market is an issue that keeps healthcare executives up at night, Frazee says. It can be an enormous problem for self-insured employers and nonprofit health plans who have no way of planning ahead for the sky-high cost of some specialty drugs. Frazee says smaller plans should turn to their risk management departments to develop different scenarios based on cost and prevalence. 

Lucio also agrees with Frazee that pipeline management is a formidable challenge, especially as it relates to the integrity of the supply chain that can cause drug shortages down the line.

Last October’s shortage of vincristine, a vital chemotherapy agent used to treat several pediatric cancers, is a good example of the fragility of the supply chain for some medications. Teva stopped making it, leaving Pfizer as the only supplier. The shortage could lead to rationing and a failure to provide appropriate treatment to a vulnerable population, Lucio says.

Lucio would like to see more transparency around the origin of drugs and more awareness of the supply chain. Vizient is studying ways to increase the awareness and communication necessary for a sustainable supply of drugs by planning in advance to ensure adequate supplies. 

Mari Edlin, contributor based in Sonoma, California

Articles

The opioid epidemic is far from over, but it may slip behind other challenges. COVID-19 obviously tops the list of new problems and drug pricing and affordability will continue to soak up time and attention.

What Are the Top Pharma Challenges Right Now? 

Although the burden of providing direct care and treatment of COVID-19 patients is falling on hospitals and other providers, payers will be bearing the costs of that care.

COVID-19 costs this year will almost certainly result in premiums increases in 2021. How much of an increase will depend on the number of COVID-19 cases and, more specifically, the number of Americans who will need expensive hospitalizations and the fraction of those who will need to be treated in the ICU. Researchers at the University of Washington published a model in late March showing the demand for ICU beds in April will exceed the supply by 17,000. In a policy brief published earlier in the month, Covered California said the 2021 premium increase for employers and Americans buying in the individual market could range from a modest 4% up to an astounding 41%. Covered California is the government organization that runs the ACA exchange in California.

How Health Execs and Employees Are Responding to COVID-19

The American Academy of Actuaries noted in a FAQ this year’s premiums are locked in, so the insurers without large reserves could have solvency problems because of expenses related to COVID-19 care and the widespread waiving of cost sharing, including for treatment. Large insurers like Cigna, Humana, and Aetna, which is now part of CVS, made splashy announcements in March that their members with COVID-19 don’t need to be worried about medical bills.

But an increasing number of employers, including relatively small ones, have elected to self-insure, and they may not have the same amount of reserves on hand as the major insurers. Some self-insured plans have stop-loss coverage, but the academy said the majority of COVID-19 claims will fall below the large claim threshold, so the stop-loss may not help with the surge of COVID-19-related expenses as much as one might think.

A great deal of evidence shows older people and people with co-morbidities are far more vulnerable to becoming seriously ill from an infection with the SARS-CoV-2 virus that causes COVID-19 than younger, healthier people. That pattern could mean that cost burden of COVID-19 falls disproportionately on public payers, especially Medicare. As a result, Medicare Advantage (MA) plans and Medicaid managed care plans could be facing much higher medical costs this year than they had anticipated. Seniors who have flocked to MA plans in recent years may find the plans are not quite as attractive as they used to be if they wind up shouldering large COVID-19 costs. And governors and state legislatures may see some pressure on their Medicaid budgets if the Medicaid care plans take on huge new costs this year.

There may be offsetting factors for insurers. COVID-19 has meant widespread cancellation of elective surgeries - and those are procedures insurers would have otherwise covered. In fact, use of many kinds of medical services may tail off as American hospitals and clinicians grapple with the outbreak. New, expensive drugs may come on to the market at a slower pace this year both because the FDA is preoccupied with COVID-19 and the reluctance of pharma to launch product during such uncertain times. It is a complex situation, however. There may very well be some upward pressure on medical spending if the management of conditions like diabetes and hypertension suffers and people with those conditions develop complications.

As we went to press, the course of the outbreak was nothing if not uncertain, which makes projections of the costs and therefore the effect on insurers equally subject to uncertainty. Covered California’s estimate of COVID-19 costs for commercial insurers ranged from $31 billion to more than seven times that amount-$237.6 billion-with a “medium” estimate of $94.6 billion. One key factor in Covered California’s calculation is an estimate that COVID-19 hospitalizations will cost $72,000. That was far higher than the $20,000 figure that the Kaiser Family Foundation put out in mid-March, although the Kaiser figure was an estimate based on past experience with inpatient pneumonia admissions.

The classic insurance function is to buffer the shock of large, unexpected expenses, and Gary Shaw of Deloitte wrote in mid-March that “insurers are expected to continue to serve as shock absorbers for the economy and society.”

In the early days of the outbreak in early and mid-March, insurers moved quickly to waive the cost of COVID-19 tests. Waiving out-of-pocket costs for treatment came later. Here are some other steps that insurers have taken:

Telehealth services are being used at a pace never seen before and without a copayment attached.

Some plans have waived prior authorizations for COVID-19 diagnostic tests and for services that are consistent with CDC guidance, along with referrals and step therapy.

Plan members are being encouraged to turn their 30-day maintenance prescriptions into 90-day mail order delivery at the same cost. Some plans are waiving early refill limits on 30-day maintenance medications.

Some plans have made a point of announcing they will cover the cost of a COVID-19 vaccine when it is available.

Blue Cross Blue Shield of Arizona announced it will eliminate cost sharing for nonpreferred medications if a preferred drug is unavailable because of a shortage or other access issues.

Mari Edlin is a regular contributor based in Sonoma, California. Peter Wehrwein is senior editor of Managed Healthcare Executive.®

They are waiving cost sharing for COVID-19 treatment. How large will premium increases be next year?

COVID-19 Costs Hit Insurers

New point-of-care (POC) tools that promote communication between providers and patients are establishing themselves as next generation shared decision-making solutions, especially when it comes to medications and issues of insurance coverage, price, and out-of-pocket costs. 

“When compared to traditional shared decision-making tools, there’s an increased emphasis not just on improving measures such as medication adherence by involving the patient in his or her own care but also on using this education and engagement to improve patient satisfaction,” says Chuck Lee, MD, senior director of clinical knowledge and Meducation at First Databank, a San Francisco company medical data company. 

Meducation, which uses research-based health literacy approaches to simplify medication instructions, was focused solely on providing key instructional and adherence tools related to medications self-administered at home. Now its new content is designed to directly address Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) patient satisfaction questions on newly administered inpatient medications, including 200 new intravenous drug forms and hospital-administered medications. 

Lee says that access to these point-of-care tools has been enhanced. With Meducation, all patient education materials are automatically made available through the patient portal or via a standalone portal. It’s a brand new, patient-facing world for these POC tools.

“Many of the older shared decision-making tools were designed to be used exclusively by providers of care and not to interact with patients,” notes Heidi Polek, RPh, senior manager, independent pharmacy solutions for DrFirst, an e-prescribing and patient medication management company in Rockville, Maryland. 

Joel Jones, PharmD, director, population health informatics for Epic, says the new tools are being embedded directly into physicians’ workflows with built-in next steps that allow them to easily and efficiently swap in a more cost-effective drug. Alan Wheatley, president of Humana’s retail segment, agrees that one of the primary old vs. new differences in decision-making tools is that the new ones can be integrated into a physician’s workflow. There’s also added interoperability. 

Humana has partnered with Epic to integrate IntelligentRX, its real-time benefits check tool, into Epic’s e-prescribing workflow. The result is real-time access to a patient’s medical history, health insights, and treatment options. 

Preparing Pharmacy for Performance-Based Reimbursement

The EHR software enables clinicians to immediately estimate the cost of a medication and share it with a patient by factoring in copayments, deductibles, and a need for prior authorization. The application sends an alert about less expensive options. The software also helps physicians to avoid gaps in care by, for example, reminding a patient that she is due to have a mammogram soon. 

“Our relationship with Humana is an opportunity to help patients and prescribers work more collaboratively with payers, streamline procedures, and integrate information into a doctor’s workflow,” says Jones.  

One of the benefits, Jones continues, is limiting prescribing fatigue on the part of providers because they are dealing with information that is accurate and can be acted upon, based on a patient’s coverage. It also promotes communication among payers, clinicians, and patients and puts data on a common platform, he says.

Humana’s Retail Segment President, Alan Wheatley, says there is more interest in the tool than expected, and he anticipates it will improve quality and positively play out in CMS’ Star Rating system.

Other companies are also folding insurance coverage information into workflows and platforms. Allscript, a Chicago EHR technology company, offers a transparency feature from Veradigm, a health information technology company, called TruePriceRx accessed through its electronic prescribing platform to improve adherence and reduce the need to change a patient’s therapy because of unexpected cost or prior authorization. TruePriceRx offers real-time prescription pricing information within the prescribing workflow-all at the point of care. Providers can use the information to discuss pricing options with their patients, increasing consumer empowerment and satisfaction, and when that happens, the likelihood of medication adherence increases.

“The tool helps get patients on the right therapy and improves patient-physician dialogue because a clinician receives the price of a drug in the EHR to pass along to patients -before they go to a pharmacy,” says Jill Helm, vice president, product management, Allscripts. Then, says Helm, the physician may have the opportunity to recommend an alternative medication that is less expensive or one that might be ordered for 90 days instead of 30.

“It is difficult for patients to admit they cannot afford a drug and force them to ration it-or not take it at all,” says Helm.

Transparency tools are gaining traction and it's anticipated that when the regulation requiring Part D sponsors to adopt one or more real-time benefit tools that are capable of integrating with at least one prescriber’s e-prescribing system or EHR goes into effect next year, adoption will really pick up steam, she says. Helm also attributes the growing interest and adoption to the complexity of benefits and to the trend away from simple copays toward high deductible coverage and high out-of-pocket costs. An Allscripts’ survey found that 60% of participants said adherence improved when patients received pricing information.

Helm says the price transparency tool also helps patients choose the best pricing model through their insurance plan or whether to pay cash. It can also help select a pharmacy that will support the best adherence to prescription therapy.

Polek says that DrFirst offers a patient engagement tool called RxNotification, a single secure message from a participating prescriber or pharmacy to a patient, with information on pricing and affordability; why the drug has been prescribed; clinical information; how to take the drug; and cost savings.

“RxNotification helps reduce adherence barriers and alleviate cost issues,” Polek says. “It also combats issues of price transparency because patients can see prices before a prescription is complete and decide if they can afford it, thus reducing drug abandonment.” The  tool has proved to reduce drug abandonment by 6%, according to Polek.

Another tool, Backline, is a web-based, HIPAA-secure service environment in which all shareholders-providers, hospitals, long-term care facilities and pharmacies-ask questions and share patient data via encrypted, text-style messaging, replacing phone calls, texts, faxes and emails. Polek says Backline sold to hospital and physician practices and later to insurers, enables participants to exchange messages about whether a drug is covered under a patient’s plan.

RxAdvance, a national, full-service PBM, leverages its Collaborative PBM cloud platform to provide all stakeholders with a comprehensive view of a patient’s health and medication regimen. The platform allows review and optimization of a member’s prescription regimen to proactively prevent adverse drug events and eliminates duplicate therapies.

“The cloud model reduces costs and allows for more efficient and streamlined communication amongst stakeholders in the field of care,” says John Sculley, former CEO of Apple and co-founder of RxAdvance.

Sculley attributes the rise of pharmacy tools to a higher demand for a streamlined and data-driven process as more patients receive care at home. He says the egregious cost of drugs is another factor. RxAdvance has enabled a 10% to 12% reduction in overall pharmacy costs; a 10% to 15% reduction in specialty pharmacy costs; and a 20% to 25% reduction in avoidable drug-impacted medical costs.

“Using RxAdvance’s collaborative PBM cloud can empower pharmacists to make critical decisions at the point of sale to help improve adherence and also to reduce avoidable medical costs,” Sculley says.   

Mari Edlin, contributor based in Sonoma, California.

New point-of-care tools offer greater transparency.

Point-of-Care Tools in Pharmacy Take Off

The race to decrease drug costs is heating up across America. The Trump Administration has one idea, House Majority Leader Nancy Pelosi has her solution and Big Pharma has prosed a resolution to the problem. But some insurers are now rising to the occasion and finding ways for members to afford expensive specialty drug treatments, such as gene therapy.

The cost of gene therapies is expected to reach 

 in the United States by 2024. While only two therapies have yet to be approved, they are indicative of the high price tag.

Luxturna (voretigene neparvovec-rzyl), the first FDA-approved prescription gene therapy for people with inherited retinal disease leading to blindness, costs $415,000 per eye. Zolgensma (onasemnogene abeparvovec-xioi) for children under two years old with spinal muscular atrophy is set at $2.1 million.

These potentially life-saving medications would undoubtedly break the bank and prevent coverage and access by patients.

Cigna has developed a coverage program, Embarc Benefit Protection, for the two therapies that don’t require any out-of-pocket payments related to the cost of the medicine. It is expected to go live by January 2020.

Payers pay a per-member per-month (PMPM) fee to access Embarc’s gene therapy network. Physicians are required to submit prior authorization requests for patient eligibility. Steve Miller, MD, chief medical clinical officer for Cigna, hopes that PMPM will reach $1.

Miller says that Cigna chose gene therapy because of the integral part it will play in overall healthcare. He also is concerned by the history of gene therapies, two of which were approved in Europe and have since been taken off the market because they are cost prohibitive.

“Without patient access, a product can become a tremendous market failure,” Miller says. “Some plans are writing policies to exclude gene therapy, while stop-loss insurers are capping their exposure. Although gene therapy is not yet urgent or presenting any threat, we want to capture the market before insurers decide to exclude these treatments from their benefits.”

He wants to eliminate all barriers to joining the Embarc coalition of subsidiaries and affiliates so that patients are not forced into government insurance. The program initially will target Cigna members followed by Express Scripts’ book of business, then EviCor and finally non-affiliated health plans. 

Brian Duffant, vice president at BluePath Solutions, a market access and health economics/outcomes research consulting firm based in Los Angeles, says payers are developing new payment programs to address the projected future increase in demand for gene therapies based on the burgeoning gene therapy pipeline.

The addressable market for gene therapies could grow as large as 2.4 billion patients worldwide, according to Guggenheim Securities.

Miller says Embarc will combine Cigna’s innovative payment with the health services, medical benefit management, and specialty pharmacy expertise of Express Scripts, a pharmacy benefits manager; eviCore, a healthcare management company; Accredo specialty pharmacy; and Curascript SD, a specialty pharmaceutical dispensing and distribution company.

AveXis, a subsidiary of Novartis Corp. that developed Zolgensma, also is partnering with Cigna’s coalition members offering payers pay-over-time options up to five years and outcomes-based agreements up to five years for the drug. In the same vein, the Cigna partnership will envelop Spark Therapeutics, the producer of Luxturna.

Increasing Access to Gene Therapies Requires Innovative Payment Approaches

“There wasn’t a paradigm in the private sector for this kind of coverage, but we wanted to get something out there,” Miller says.

Cigna chose an approach that considers the impact Embarc will have on all stakeholders, including manufacturers, providers, payers, and patients.

Limits on barriers to access, eliminating the need for copayments

Patient encouragement to make the best choice without financial support playing a role

Cigna anticipates providing best prices and value-based pricing, keeping the price of Zolgensma for example, within the range of traditional cost-effectiveness thresholds used by the Institute for Clinical and Economic Review (ICER)-not just what the market will bear, Miller says. ICER produces cost-effectiveness analyses.

For payers-employers, insurers, and unions-Embarc expects to provide low prices with pass-through and transparency; spread overhead among as many patients as possible; use uniform utilization management criteria so there is no adverse selection, which gives payers 100% predictability; and establish a flat PMPM not based on usage.

Cigna will enable payers to use Embarc as a white label, payment product to build Cigna’s coalition, Miller says.

Patients should receive speedy treatment without any copayments, while providers are expected to be part of centers of excellence to keep costs down.

Miller says patients will pay little-perhaps an administrative fee-to nothing for the new available gene therapies. By negotiating best prices with manufacturers, he anticipates it will be possible to buy down copayments.

“What is clear is that payers will likely use a combined approach to manage gene therapy utilization, including use of centers of excellence; population risk-pooling; and short- and long-term, outcomes- based contracts with manufacturers, reinsurance, and programs intended to pay for gene therapy over time as opposed to one up-front payment,” Duffant explains.

 developed by the PwC Health Research Institute (HRI) outlines a menu of contracting and price-assistance models that could make gene therapy more accessible and affordable.

HRI, however, found in a survey that just 56% of pharmaceutical executives reported using at least one value-based drug contract, while only 14% of payers said they engaged in outcomes-based agreements with biopharmaceutical companies.

Cigna is working on version two of Embarc that will target patients most likely to benefit from gene therapy to limit adverse risk. “The product will begin to look more traditional as more patients are involved and prices decrease,” Miller says.

Duffant is concerned that if a small employer has even one patient who needs gene therapy, this could have a catastrophic impact on employers’ overall healthcare spend. “Payers need a way to manage a new paradigm of gene therapies with a high one-time upfront cost and uncertain clinical benefits over the long-term,” he says.

“While some of the populations eligible for gene therapies may be relatively small compared to other therapeutic areas, gene therapies generally address clear areas of unmet medical need and have short-term data as proof of evidence in select patient populations,” Duffant says. “The key question is whether gene therapies can deliver the promise of long-term health benefits for patients, and we are simply too early in the game to see if this will be true.”

Steve Wojcik, vice president, public policy, National Business Group on Health, believes that programs like Embarc sound like an installment finance option versus a one-time expense to cover gene therapies. “They should provide more predictability for employers and can spread payment over a period of time,” he says.

He recommends using clinical management tools to target the right persons with the right therapies.

Although it is a new way of financing specialty pharmacy and gene therapy, it doesn't get to the challenge posed by these expensive drugs; it doesn't address long-term sustainability and is out of line with economic and wage growth,” Wojcik says. “It is similar to covering college expenses while not addressing inflation.”

He concedes that patients are shielded from cost sharing, but acknowledges an underlying payment exists. He is concerned that smaller employers are apt to face higher premiums to offset the pricing arrangement. “There are already limits on OOP payments,” Wojcik says.

While he doesn’t expect a big impact initially with these payment programs, he believes that as more gene therapies hit the marketplace and affect a wider population, the result could have more significance and provide affordable healthcare.

Other insurers to jump on coverage bandwagon

Ethan Slavin, spokesperson for Aetna, says the insurer is working hard to effectively manage the cost of these therapies for its clients and members. For example, Aetna is currently developing:

Refined pharmacy benefit management strategies, including formulary and utilization management programs, for therapy classes with high-cost entrants that have available alternatives.

Stop-loss products for clients looking to better control medical costs, including an innovative reinsurance instrument specifically designed for gene therapies.

Alternative payment models, including annuity payments that spread the cost of ultra-high cost drugs over a period of time, and may provide some clients with options to control spending in a single year.

The heath plan also is exploring outcomes-based contracts with manufacturers to ensure patients and customers derive clinical benefit and value from gene therapy products. In addition, Aetna is advancing a network strategy that ensures patients receive treatment at high-value sites of care in terms of both clinical quality and cost.

 published by the Advisory Board, Anthem has a product under consideration that includes reimbursement or stop-loss options that would protect employers from the negative financial repercussions of gene therapies.

Payers are finding ways for members to afford expensive specialty drug treatments.

Accessibility and Affordability of Gene Therapy

Authorized generics might just be the answer for drug manufacturers whose patents for their branded drugs have expired. Instead of risking the loss of market share when other drug companies enter the generics marketplace, the brand name manufacturers could develop their own generics.

An authorized generic is exactly the same product as an approved branded drug, but is marketed without the brand name on the label. Usually sold at a lower price, it can be marketed by a branded drug company or by another company with the brand company’s permission.

“By making an authorized generic, a brand manufacturer gets a jump start on the competition as generics start to appear,” says Karen Berger, PharmD, a staff pharmacist at Plymouth Park Pharmacy in Fair Lawn, NJ.

“Authorized generics, which are identical to the brand, should not be confused with a branded generic that has gone through the abbreviated new drug application (ANDA) process and is assigned a name other than its chemical name,” she says.

“While a separate NDA is not required for marketing an authorized generic, FDA requires that the NDA holder notify the FDA if it markets an authorized generic. The NDA holder may market both an authorized generic and its brand name product at the same time,” says Charlie Kohler, spokesperson for the FDA.

That’s exactly what PDL BioPharma did this year to protect its expensive blood pressure medicine Tekturna (aliskiren tablets) under threat of a generic competitor and the end of its patent last year. It produced its own authorized generic of the drug that sells for less than its branded version but more than competing generics.

In essence, PDL is competing against itself and maximizing profits, suggests an article in 

. According to the Pharmaceutical Research and Manufacturers of America (PhRMA), authorized generics increase competition through lower prices and cost savings.

Eli Lilly used a similar strategy, making authorized generics before its patents for Humalog (insulin lispro) expired. Eli Lilly recently made its authorized generic of insulin lispro injection available at half the cost.

Mylan did the same for its EpiPen, and anticipates that 85% of prescriptions will shift to its new authorized EpiPen generic.

Those are just a few examples of the nearly 1,200 authorized generics tracked by the FDA.

One of the primary goals for pharmaceutical brand teams that undertake an authorized generics strategy is to slow the pace of market share decline after market exclusivity loss, according to a 2015 

“While brand name manufacturers want patients to receive authorized generics, I believe there is absolutely no need to specifically request an authorized generic once there are various generic companies offering a medication. A regular generic should do just fine as well as save money,” Berger says.

David Lassen, PharmD, chief clinical officer, Prime Therapeutics, has seen an increased trend in manufacturers releasing authorized generics, primarily for two reasons:

Recent market pressures around high drug costs have prompted them to provide cost relief, and

manufacturers can maintain market share of product through authorized generics.

“Prime takes a ‘lowest net cost’ approach to managing drugs with our clients, which in some cases means encouraging the use of originator brands over authorized generics when the net cost (with rebate) is lower than the authorized generic price,” he says.  

“In doing so, the objective is to help ensure members aren't penalized by higher out-of-pocket costs. For those members with coinsurance and high-deductible plans, we override benefits to help ensure the member isn't penalized,” Lassen says.

Pfizer, which has the broadest portfolio of authorized generics in the United States, stated its position on authorized generics in an 

. The company believes that authorized generics “help advance public health and the broader healthcare system by increasing competition, improving access, and helping patients adhere to high quality, affordable medicines.”

Pfizer attributes increased adherence to more ease in switching from a branded product to an authorized generic that looks similar to the original drug: As reported in a 2018 

, in an FDA-sponsored study of 210,000 patients, switching from a brand to an authorized generic was associated with lower “switchback” rates compared to switching from a brand to a regular generic.

“For generic drug companies, there is a strong incentive to be the first to file a Paragraph IV certification under Hatch-Waxman and market their products during the 180-day exclusivity period, even if there is shared generic exclusivity, because competition with other generic products is more limited during that period,” says Andrew Powaleny, director, public affairs, PhRMA.

The Hatch Waxman Act of 1984 allows the first manufacturer that comes out with an ANDA to have 180 days of exclusivity, at which time the FDA can’t approve another generic, often resulting in lawsuits and counter suits. However, if an authorized generic avoids a lawsuit while holding tight in its 180-day exclusivity period, the manufacturer will make money on both the brand and authorized generic, Berger says.

After the 180-day period, other generics might start to hit the market at a lower price, urging large chains and buying groups to send these to their stores from wholesalers.

How New Initiatives Could Affect Generic Drug Costs

, consumers and the healthcare system could benefit from an authorized generic on the market during an 180-day exclusivity period because of increased competition that reduces generic prices and results in significant cost savings.

 notes that “competition from an authorized generic during the 180-day exclusivity period is associated with retail generic prices that are 4% to 8% lower and wholesale generic prices that are 7% to 14% lower than prices without authorized generic competition.”

In addition, the FTC found that, following the 180-day exclusivity period, the presence of an authorized generic “tended to be associated with lower prices in markets where an exclusivity period had expired” as retail prices post-exclusivity were found to be 10% to 11% lower and wholesale prices were 6% to 13% less. 

“As such, Congress should reject attempts to delay, restrict or prohibit authorized generics,” Powaleny says.

Berger says a patient’s insurance determines if authorized generics could save money. “Usually generics should have a lower copay so technically an authorized generic should have a lower copay for the patient than a brand would. Because every insurance has different structures and rebates and different technicalities, it is hard to generalize, but I would venture to say that most generics-whether it is a regular old generic, branded generic, or authorized one-should be less expensive than a brand,” she says.

Both Berger and Powaleny agree that drug rebates could influence the true cost of a drug. Berger says rebates play a role in price savings from authorized generics that can be more profitable than a brand name drug because they usually aren’t subject to rebates that flow from a drugmaker to PBMs and lower a brand’s revenue.

“If an authorized generic is not more cost effective than a brand discount (cost) minus the rebate, the plan (employer) may be better off with the brand; however, the member would likely pay less with the authorized generic as it has a deeper discount (cost), and the member pays a generic copayment or a lower cost in the deductible phase,” she says.

Medicaid, however, requires manufacturers to calculate and pay mandatory Medicaid rebates on AGs taken by Medicaid patients, Powaleny says.

Berger and Lassen agree that authorized generics have not filled the void during drug shortages. “It seems that when a drug is unavailable, it’s unavailable from every manufacturer whether it is a regular generic, authorized, or branded,” Berger says.

“To date, we have not seen the use of authorized generics play a significant role in helping to eliminate drug shortages,” Lassen says.

Sanofi, however, says that in 2015, it developed an authorized generic version of leflunomide for rheumatoid arthritis–17 years after the launch of Arava, its branded version-to meet demand left by a drug shortage from generic makers of leflunomide.

Berger predicts that the next big step for authorized generics will occur when companies that make biologics, such as AbbVie’s Humira (adalimumab), try to extend their profitability by making an authorized generic when their patents expire.

Drug Shortages Continue to Burden Healthcare

Authorized generics have been gaining popularity with pharmaceutical manufacturers, but just how do they impact pharmacies?

What Are Authorized Generics?

Although the number of new drug shortages in the United States has declined to 186 in 2018 since a high of 267 in 2011, there have been 80 for the first half of 2019, according to the 

University of Utah Drug Information service

“Shortages continue to be on the rise and in talking with our customers, we’ve discovered the problem continues to get worse. More medications are going on allocation or unavailable and what used to be short, periodic shortages have become long and drawn out, making it a continuous challenge for clinical leaders,” says Patrick Yoder, PharmD, CEO, 

, a Minneapolis-based clinical process improvement and control software provider.

“Some medication shortages have been going on for years with no real sign of recovery,” he says.

“While the number of drug shortages has declined substantially in recent years, any drug shortage places substantial burdens on healthcare, providers who may have to ration medicines or identify alternative treatments,” says Andrew Powaleny, director, public affairs for Pharmaceutical Research and Manufacturers of America (PhRMA).

Four Ways Hospitals Can Deal with Rising Drug Costs

“The issue of drug shortages demands attention and collaboration from all stakeholders involved in providing life-saving medicines to patients. This includes the biopharmaceutical companies producing brand-name medications, as well as generic drug and biosimilar manufacturers, wholesalers, distributors, pharmacies, and healthcare providers,” he says.

 conducted between March 6 and April 4, 2019 of 365 acute and non-acute care facilities across the country-members of Vizient, a healthcare performance improvement company headquartered in Irving, Texas-confirms the ever-present problem of drug shortages and their ramifications.

Nearly two-thirds of respondents report they managed at least 20 shortages from July through December 2018; 64%, more than 21; 33%, six to 20; and 3%, up to five. Thirty- eight percent report one or more medication errors directly related to a drug shortage in that same time period.

The most commonly reported items facing shortages, according to the survey, are controlled substances, local anesthetics, antibiotics, electrolytes, and emergency injectables such as “crash cart” drugs, many of which are low-cost generics.

Injectables comprise 39% of drug shortages in 2019, according to the University of Utah Drug Information Service.

The FDA primarily attributes shortages to quality/manufacturing issues but also points to production delays, some caused by not receiving raw materials and components from suppliers, and drug discontinuations. An estimated 70% of shortages are caused by manufacturing and quality problems, according to the Healthcare Supply Chain Association.

“The FDA can't require a firm to keep making a drug it wants to discontinue. Sometimes these older drugs are discontinued by companies in favor of newer, more profitable drugs,” says Charlie Kohler, spokesperson for the FDA. “With fewer firms making older, sterile injectable drugs, there is a limited number of production lines that can make these drugs. Raw material suppliers also are limited in the amount they can make due to capacity issues at their facilities.”

Kohler says that these limitations, along with long lead times and the complexity of the manufacturing process for injectable drugs, result in shortage vulnerabilities. “When one company has a problem or discontinues, it is difficult for remaining manufacturers to increase production quickly, and a shortage occurs,” he says.

Dan Kistner, PharmD, senior vice president, pharmacy solutions for 

Too many lines offered, making it difficult to maintain capacity.

Aggregate product quota preventing other manufacturers who might enter the space from making more product.

Low ROI. If a product is not profitable, manufacturers might switch to other drugs.

Powaleny attributes drug shortages to shifts in clinical practices; wholesaler and pharmacy inventory operations; changes in hospital and pharmacy contractual relationships with suppliers and wholesalers; and manufacturing issues, such as an unforeseen breakdown in manufacturing equipment that disrupts production.

“The difficulty is identifying what medications will be impacted by any of these things and how that will affect care delivery and patient safety, along with understanding when any particular shortage will occur,” Yoder says.

“The biggest risk is patient safety and potential harm to patients when clinicians cannot deliver appropriate care because of a medication shortage. Deferring procedures, adverse drug events, medication errors, cost of alternatives, and the time clinical teams spend managing shortages are all results of shortages,” Yoder says.

The Vizient survey focuses on the impact of drug shortages on U.S. hospital labor forces. Responses indicate that shortages are costing these institutions $359 million a year in labor expenses, or about 8.6 million hours of additional labor, to seek supply, update technology, and implement mitigation strategies that enable continuity of care. Survey participants attributed labor costs to triaging patients and making changes in the ordering system.

The repercussions of drug shortages not only impinge on financial resources but also on patient care, from delay or cancellation of a medication or treatment to medication errors. The Institute for Safe Medication Practices conducted a 

 primarily of hospital-based pharmacy directors and managers, purchasing agents, and technicians from August through October 2017. It found that the majority (71%) were unable to provide patients with a recommended drug or treatment, and 47% thought this resulted in patients receiving a less effective drug. In addition, 75% stated that patient treatments had been delayed because of drug shortages. 

Kistner recommends some strategies for mitigating drug shortages: increase competition; ramp up supply and capacity; reward quality in generics; expedite manufacturer approval processes; provide real-time analytics about what is purchased and which supplies are dwindling; and apprise hospitals of potential drug shortages so that they do not become a repeat problem.

Among Vizient’s solutions are Novaplus, which provides access to 15,000 individual, high-demand line items encompassing a broad range of categories.

Respondents to the Vizient survey had a say in what they believe to be effective solutions to the drug shortage problem: implementing processes to restrict duration of therapy; increasing stock of medications that were anticipated to be limited in supply; utilizing unit dosing to prevent waste; using alternative ways of administering a drug; and implementing one or more taskforces or committees dedicated to addressing drug shortages and allocations.

LogicStream has introduced the Drug Shortage App that identifies shortages and their impact on hospitals and automates the entire life cycle of managing a shortage. It provides clinical information that allows teams to understand and mitigate the ramifications for shorted medications. Yoder says that although most hospitals have a drug shortage management process, they tend to be manual, time-consuming, and costly.

Drug shortages might be decreasing, but their continued existence is urging the pharmacy industry to maintain its vigilance.