The transition to a value-based reimbursement system has put pressure on all sectors of the healthcare industry to justify the prices they charge their customers.
The biopharmaceutical industry, which has long been under the spotlight for the six-figure price tags on their newest products, dedicated significant time at the annual Biotechnology Industry Organization meeting this week discussing their own transition from volume to value.
High-cost biologics have been grabbing headlines for decades, but the issue has come to a head in recent years as the Affordable Care Act has placed increased pressure on government and private insurers to hold down costs. Many providers, in the thick of trying to reform their own business models under a value-based reimbursement system, similarly have seen high-price specialty drugs strain their balance sheets.
“The topic of pricing has been brought to the forefront given the debate in the public channels,” said Ralph Marcello, national biopharma leader at Deloitte Consulting. “There's a whole efficacy and value discussion that needs to take place.”
A number of new high-priced specialty drugs have entered the market in recent years and broken previous price records. Those include products for rare diseases as well as for larger-market conditions. Gilead's Sovaldi and Harvoni both carry price tags of at least $1,000 a day, which the company says is reasonable because of the medications' efficacy in curing hepatitis C can eliminate decades of costs for treating chronic illness.
In addition, a flurry of consolidation in the insurance and hospital industries has led to greater pushback from drug purchasers, Marcello said. They're looking for products that can demonstrate strong value relative to alternative therapies.
“If you have a me-too product that provides no incremental benefit or a superior label, you're in trouble,” said Luke Duster, managing director at CRG, a healthcare investor watching the space.
Patients too are taking on responsibility for a greater share of their healthcare costs under high-deductible plans, which is requiring more patient-facing engagement, said John Glasspool, who heads corporate strategy and customer operations at pharmaceutical company Baxalta, which is part of Shire. Glasspool spoke at one of BIO's “super sessions” on moving toward value-driven biopharma.
Bio-pharmaceutical companies, therefore, must show where their products fit into the larger healthcare system, he said, whether that's allowing patients to be treated in their homes or increasing compliance with a therapy. Shire, for instance, has unveiled an app for hemophilia patients called MyPKFiT which is designed to help patients who take its Advate drug determine the most appropriate dose.
Drugmakers are using technology to gather more information on how patients are using and responding to their products in the real world in order to make a comparative effectiveness argument.
“I think what we're going to see is there's going to be a whole system behind the physician that's going to support them in making a decision,” said Mike Nohaile, vice president strategy and innovation at Amgen. “You want the physician to be looking at the patient as a whole, saying, we have all this data, we have all this stuff.”
Medical device companies have moved very quickly from single-product offerings to comprehensive care management platforms. Medtronic, for instance, recently partnered with IBM to develop a sensor that can predict when diabetes patients are at risk for hypoglycemia.
Some medical device companies have even started taking responsibility for managing patients after their devices are inserted, and have negotiated a per-patient-per-month payment for keeping people out of the hospital, said Anne O'Riordan, senior managing director at Accenture. “We're seeing that sort of partnership evolve quite quickly at the moment,” she said.
California state Assembly member Kevin Mullin, whose district includes the biotech hub of South San Francisco, introduced the “super session” on value-driven biopharma.
The need to demonstrate value is shaping how drugmakers make portfolio decisions, such as whether they invest in companion diagnostics to allow them to target their products to specific populations.
“There's an opportunity for them to do more in the healthcare ecosystem beyond just providing a product,” Deloitte's Marcello said. “There's more openness to being part of a dialogue to make sure the right products are coming together.”