Executives from ALK, Sanofi Genzyme and Novartis discuss how they are navigating pricing and reimbursement issues in the USA, home to the world’s largest – but perhaps most complex – pharmaceutical market.
While the sheer dominance of the US market – the largest in the world, accounting for around 45 percent of the global market – attracts the attention of international players of all shapes and sizes, the convoluted complexity of the market cannot be overstated. In a recent PharmaBoardroom interview, Jorge Alderete, president of the Americas & SVP commercial operations for Danish midcap ALK provided a reality check. “The US is the biggest market in the world with many opportunities, but the environment is also a little more difficult than before. Gone are the days that you can launch a new product and it becomes a blockbuster with USD one billion sales almost immediately.”
Gone are the days that you can launch a new product and it becomes a blockbuster with USD one billion sales almost immediately
He attributes this to the almost overwhelming diversity of players, laughing ruefully, “when I speak to my colleagues in Europe, I love to show a slide summarizing all the actors in the US healthcare system, including pharma benefit managers (PBMs), private insurance players, wholesalers and so on. Invariably the Europeans are shocked at the complexity. All these actors take a cut, which is why drug prices in the US are so high compared to other developed countries.”
Pricing and reimbursement are hot, even contentious, topics in many countries but the US consistently ranks at the top when it comes to prescription drug prices. Whereas in most other developed markets, pharma companies have to sit down with government agencies and entities to negotiate the prices of approved drugs, pharma companies are ostensibly allowed to set their own prices in the US, or what is known as the ‘list price’. However, most pharma leaders would be quick to point out that the list price does not tell the whole story.
Bill Sibold, EVP of Sanofi Genzyme, illustrates, “in 2019, the average aggregate list price for all our products in the US increased by 2.9 percent. But the average net price – what we receive after discounts, rebates and fees paid to other actors within the system – actually fell by 11.1 percent. Those savings are going somewhere but if they do not reach patients, they are not serving their purpose.” Echoing Alderete’s thoughts, Sibold laments, “the US is a highly fragmented, complicated and ultimately rather opaque market. There is a lot of misinformation out there, as well as a lot of confusion in general over how the system functions.”
The US is a highly fragmented, complicated and ultimately rather opaque market. There is a lot of misinformation out there, as well as a lot of confusion in general over how the system functions
Partly in an effort to remedy this, Sanofi announced a number of pricing principles in 2017 geared towards supporting the long-term sustainability of the US healthcare system. Sibold enumerates, “first, we would provide a clear rationale for pricing at the time of launch of a new medicine (i.e. taking into account unmet medical needs, clinical trial outcomes, market activity, etc.). Second, we committed to not increasing prices for existing drugs above the projected growth rate of US National Health Expenditures. Third, we committed to disclosing annually the average list and net price changes across our portfolio of products.”
Pricing and reimbursement ultimately impact patient access to medicines, and a lot of the complexity stems from the highly elaborate, even labyrinthine processes drugs are reimbursed by both private and public insurers. Peter L. Saltonstall, president and CEO of the US National Organization for Rare Disorders (NORD), emphasizes, “we are very concerned about access. It is not about price alone, there are many other aspects complicating the situation. For instance, a few years ago, we did not require prior authorization from insurers for many rare disease therapies. Today, of the nearly 50 therapies we support through our Patient Assistance Program, 100 percent of them require prior authorization. This brings insurance companies into the fray and it means they are influencing the decision of whether patients receive access to these therapies.”
For this reason, ALK established a specialty pharmacy network for their own portfolio recently. Alderete shares, “specialty pharmacists work with doctor offices to ensure that these prior authorization forms are done so patients can access their drugs. They also have CRM systems to let patients know about any relevant coupons that exist to reduce their co-pays.”
He cites the company’s tablet-based sublingual allergy immunotherapy portfolio (SLIT-tablets) as a case in point when it comes to the challenge of navigating the US healthcare system. “There is an economic incentive for doctors to continue prescribing allergy shots instead of tablets despite the fact that the tablets are better for most patients, since home administration makes it convenient, safer, and clinically more efficacious. In the US, doctors buy these biologic drugs and mix them in their own offices before billing insurance, which is marked as a procedural code and medical benefit, for the final treatment set and subsequent injections, whereas they simply administer the tablets as a pharmacy benefit.”
Companies also have to be patient when it comes to receiving public coverage across all 50 US states. Over two years on from the landmark approval of the first gene therapy in the US, Novartis’ Kymriah® is still not fully covered by Medicaid in every state. EVP and Head of US for Novartis Oncology Ameet Mallik sheds some light on the situation: “when it comes to reimbursement, Kymriah® is in a rather unique position. First of all, it is a therapeutic that can be given inpatient – thereby falling under Medicare Part A with the Diagnosis-related group (DRG) system – or outpatient – thereby falling under Medicare Part B. While Kymriah® is moving towards outpatient use, today most of the usage is inpatient – unlike most cancer drugs. In general, inpatient reimbursement takes a long time because it takes time for CMS to update the DRGs. The existing DRGs were not adequately set up to reflect the breakthrough innovation in this product. Currently, CAR-T therapies still fall under DRG 016 in the same category as bone marrow transplants with complications. While there was rapid commercial access to Kymriah®, the reimbursement under Medicare and Medicaid was insufficient even with a new technology add-on payment (NTAP) measure, which did affect access.”
Oncology is still a space where you can receive pretty favorable access and reimbursement in a relatively short amount of time, in comparison to other therapeutic areas
However, in May earlier this year, CMS proposed the creation of a new hospital payment category for CAR-T therapies, which would price these treatments more sustainably for providers. Kymriah® has a price tag of USD 475,000 for leukemia and USD 373,000 for lymphoma. Previously, it had been reported that hospitals were losing as much as USD 200,000 per patient treated.
It is far from gloom and doom in the US market, however. Sanofi Genzyme’s Sibold emphasizes, “the US will remain a critical and also an incredibly attractive market for us. It is a market that rewards innovation. Sanofi Genzyme is the only Sanofi business unit that is headquartered in the US and we have deeply rooted expertise and experience within this market. Looking at our Q1 2020 figures, the US market represented 60 percent of our revenues.”
ALK’s Alderete adds. “while most drugs are more expensive in the US, it is these profits that fund the innovation for new medications through research and development. Without the higher prices in the US, innovation would be reduced significantly.”
“Nevertheless, looking across Novartis’ portfolio and launches, I would say oncology is still a space where you can receive pretty favorable access and reimbursement in a relatively short amount of time, in comparison to other therapeutic areas. I do not see this as a major barrier. Our RLT therapy, Lutathera®, quickly received reimbursement across all sites, commercial and government, with 96 percent of lives covered within the first year. “