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Alex Jung of EY-Parthenon, Ernst & Young LLP, explains why therapies in new era of drug treatment are so expensive and what can be done about it.
Drug treatment is entering a dazzling new era of increasingly precise, individualized “bespoke” medications that work in ways that were the stuff of science fiction just a few years ago: T cells modified to home in on cancer cells, antibody drug conjugates that recognize only the disease-causing cells, therapies that intervene in a disease process by cutting DNA and stifling gene expression.
The rub: Their high cost.
In her keynote address at the 4th Annual Pharmacy Benefit Management Institute Specialty Rx Forum today, Alex Jung described some reasons these medications are so costly but also offered hope and insight into how those costs will eventually come down. Jung, partner and managing director, EY-Parthenon, Ernst & Young LLP, also said there are good examples from the medical benefit side of healthcare payment that show how payment for high-cost medications can be managed.
A good deal of the high cost of these new medications can be explained by their novelty, complexity, sensitivity and the lack of economies of scale, Jung explained to the attendees of the forum, which was being held virtually like almost every other medical meeting this year because of COVID-19.
The way costs and prices will go down is through higher utilization and repetition.
“Repetition helps us uncover patterns and approaches that can be standardized or shifted to lower-cost resources,” said Jung, whose talk was sponsored by Managed Healthcare Executive.®
But Jung also went through the many factors that ratchet up the cost through the value chain. Hospitals may need to renovate their facilities to accommodate sterile lab requirements and patient infusion rooms. The drug development process needs to be tightly controlled to “zero-defect” standards, partly because the medications are so sensitive and made up of human cells. Conditions need to be more precisely and accurately diagnosed, often at the genetic level, and patients often need to be more closely monitored after they receive a treatment. “When you are putting modified genes into a human being, you have to monitor the person very carefully to ensure that you haven’t done something to alter gene expression in another part of the body,” said Jung, who also mentioned labor costs.“You have highly specialized labor that isn’t your typical provider, nurse or nurse assistant. You are talking about specialists who make hundreds of thousands of dollar a year who know how to manage these products.”
Regardless of the cost issues, and because of the promise of a potential cure, Jung said she expected high demand for these therapies from affected patients and that providers and payers will have to adapt.
Providers, she said, “can’t just write a prescription for a bunch of pills in a bottle going forward because patients are going to demand something a little bit more potent if they know there is a potential cure for them, especially if they have a high mortality or morbidity profile. They are going to have an opportunity to seek cures. So those of those of us who work in the payer community are going to have to figure out how to pay for these therapies because many of these drugs are expensive to produce, distribute and administer.”
Jung returned to her message about repetition and economies of scale when discussing what payers might do.
“Right now is there is a lot of hostility and animosity between payers and the drug companies around these therapies because the argument is always about the price. The argument here shouldn’t be about the price. The argument should be about the process. If we can get everyone to agree on a process that is consistent, agile and scalable — as I said before — we can start to see patterns and approaches that we can standardize to improve the value proposition then we can eventually bring the prices down.”
But that shift to process requires a “culture of innovation,” in Jung’s view, which she said is present in the drug companies because that is the nature of their business.
Jung gives PBMs a “needs improvement” grade in innovation.
“I have to honest. I have worked in PBMs my entire career. There is not a lot of innovation in the culture in a lot of these organizations that isn’t administrative in nature. I would love PBMs to have a culture of innovation when it comes to therapy and the solutions they bring to market around patient therapies.”
That’s the long game. In the near term, Jung said payers who managed pharmacy benefits need to look at high-cost medical events, such as treatment of severe trauma or caring for pre-mature infants, as models for how the cost of these new-priced therapies might be managed.
“That is a lot more work than that we are used to do doing when paying for a drug, but it is only the way for us to be able to pay for them in the long run” Jung said.