What Are the Top Pharma Challenges Right Now?

April 11, 2020

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.

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. 

Related: Point-Of-Care Tools In Pharmacy Take Off

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-naïve 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 Managed Healthcare Executive® 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. 

Lack of transparency

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.

  • Paying for value.

  • 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.

Pharmacy vs. the medical benefit

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.

Pipeline management

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

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