In US Drug Pricing Debate, ICER’s Voice Gets Louder
The Biggest Mistake For Pharma Is Failing To Engage With ICER
Executive Summary
ICER’s influence on drug pricing, and policy, is growing. Spotlighting the worst drug price rises is one recent example.
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The Institute for Clinical and Economic Review has steadily expanded its influence among healthcare stakeholders.
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"ICER prices" – the benchmark value-based net price range ICER provides for some new drugs – now feature in many pharma-payer pricing negotiations.
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A recent report highlighting 'unsupported price increases' got lots of attention – and some criticism. Calculating net prices in the US is fiendishly complex. Yet this opacity is part of the problem.
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Meanwhile, ICER is seeking to shape more than just drug prices. It is weighing in on biosimilars and real-world evidence, too.
Ten years ago, it would have seemed unthinkable that an independent, non-profit organization with no statutory power whatsoever could influence the pricing behavior of the multi-billion-dollar US pharmaceutical sector. Yet that is what the Institute for Clinical and Economic Review has achieved. Since its foundation in 2006, the organization has steadily expanded its authority and credibility among health care stakeholders. And now that it has industry’s ear, it is seeking to shape more than just drug prices.
“Absolutely, we want to influence policy” around drug pricing and access, said Steven Pearson, ICER’s founder and president and the driving force behind the organization’s rising profile. One particularly effective attention-grabber appeared on October 8, 2019. ICER published a list of the top seven prescription drugs whose net price increases over 2017 and 2018 – as calculated by ICER – had the greatest impact on US drug spending, and which were, according to ICER’s analysis, entirely unsupported by additional evidence. Top of the list: AbbVie’s Humira (adalimumab). Humira is already the world’s top-selling drug, with 2018 sales of nearly $20bn. Its estimated average net price increase of almost 16% over the period cost US payers a cool $1.8bn. The largest percentage price rise – over 32% – was for Eli Lilly’s erectile dysfunction drug Cialis (tadalafil; see Exhibit 1).
|
Drug (Maker) |
Estimated Average Net Price Increase |
Spending Impact ($m) |
Year First Approved |
|
Humira (AbbVie) |
15.9% |
1,857 |
2002 |
|
Rituxan (Genentech)* |
23.6% |
806 |
1997 |
|
Lyrica (Pfizer) |
22.2% |
688 |
2004 |
|
Truvada (Gilead) |
23.1% |
550 |
2004 |
|
Neulasta (Amgen) |
13.4% |
489 |
2002 |
|
Cialis (Lilly) |
32.5% |
403 |
2003 |
|
Tecfidera (Biogen) |
9.8% |
313 |
2013 |
The “unsupported price increases” (UPI) report made a splash among many health care stakeholders and the media. Few payers learnt anything new. “I have already felt the pain of Humira price increases,” said one, who manages $3bn worth of drugs. But they nevertheless welcomed what they perceived as a systematic, objective analysis from an independent third party. “It puts the spotlight on issues that we are trying to bring forward,” said Chronis Manolis, chief pharmacy officer at UPMC Health Plan in Pittsburgh, PA. “They are raising awareness.”
Price-hikes are perfectly legal. Drug firms can raise the prices of their products anytime they like (payers do not have similar freedom around insurance premiums). Many of the top seven alleged product price increases in ICER’s report are easily explained – if not justified – by the arrival of generic or biosimilar competition.
Yet only Eli Lilly acknowledged that dynamic in their written response to the UPI report. Several companies listed studies – including real-world trials – that, in their eyes, supported the inflation. ICER did not agree: at best, the studies backed up evidence that was already available, it said.
Worst-offender AbbVie said the “pricing data was inaccurate,” ICER’s methodology is questionable, and the agency “failed to consider the totality of the evidence.” Amgen claimed the net price of Neulasta in fact grew in line with inflation over the period, and that it is committed to responsible pricing.
They may have a point. Calculating net prices in the US is fiendishly complex. After the report appeared, Roche's Genentech provided ICER with net price and volume data that reduced the estimated price increase for Rituxan to 14% and the spending impact to $549 million. ICER updated the report on November 6, adding that "there remains uncertainty in all other net price changes."
This blunts the blow somewhat. Yet opacity around pricing what ICER is seeking to highlight. Pearson said the idea was to hold up a mirror to industry, not to denigrate it. But the effect was more or less the same. And the timing is not entirely coincidental: policy-making around drug pricing in the US has been especially creative in the run-up to an election. Many politicians – including President Trump – are hell-bent on reducing drug prices. There are multiple bills swirling around Congress, from the bipartisan Senate Finance Committee bill, Prescription Drug Reduction Pricing Act of 2019, to Speaker Pelosi’s “Lower Drug Costs Now” Act of 2019. Some are particularly radical: Democratic candidate Elisabeth Warren’s “Medicare For All” plan would abolish private insurance entirely and require trillions of dollars’ of tax rises.
Few if any of these bills are expected to see the light of day before the next election, experts say. Most will be heavily amended anyway. But the President may not need Congressional approval for his idea of an international pricing index which ties the price Medicare pays for hospital-administered drugs to a benchmark of prices in other developed countries. “Even if Congress fails to strike a big drug deal, Trump is likely to proceed with his international reference pricing proposal; we are expecting a final version next year,” said Kim Monk, managing director at Capital Alpha Partners, LLC. Meanwhile, state legislators continue to reach out to ICER, “trying to figure out how to apply the UPI report,” said Pearson.
The direction of travel is clear – clearer still as the UPI report lands on policy-makers’ desks. That is why pharma is worried, according to Michael Sherman, chief medical officer at Harvard Pilgrim Health Care, an East Coast payer (which has provided funding to ICER). “If they appear to be pushing unreasonable prices, the concern is that it is more likely something bad will happen.” Conversely, by taking action to show that they are good corporate citizens, “they can perhaps forestall more invasive legislation,” he said.
Not everyone agrees that the link is direct. “ICER is reputable, but is not considered as an alternative” to what may come out of Washington, opined Kim Caldwell, previously VP, pharmacy professional affairs at Humana, now principal at Texas Star Healthcare Consulting. But he does agree that the UPI report will help fuel some of the debate. Plus, the report was not a one-off. It is the first of a planned annual naming-and-shaming around prescription drug price hikes.
ICER’s Influence On Pricing Was Growing Before UPI Report
ICER has already become a household name among some US payers. “They are the go-to organization when people talk about drug evaluation, heath technology assessment (HTA) or cost effectiveness,” said Edmund Pezalla, who served as VP and national medical director at Aetna until 2016 and is now a consultant. The organization’s main output is reports analysing the effectiveness and value of new or existing drugs that have, or are likely to have, a significant budget impact. The final versions of these reports include a “value-based” benchmark price range that would allow the drug to reach commonly-cited cost-effectiveness threshold (usually between $100,000 and $150,000 per quality-adjusted life-year [QALY] gained).
Some groups, like CVS Health (which owns health insurance firm Aetna and the pharmacy benefit manager [PBM] CVS Caremark) have allowed employer groups to use ICER reports as a basis for formulary and benefit design – in other words, to exclude drugs priced outside ICER's threshold range. (The program faces fierce resistance from pharma and pharma-funded patient groups though.)
Meanwhile, even payers that can afford in-house research teams to determine what drugs to cover, find ICER reports offer a “welcome second opinion” on the value or otherwise of new drugs at their given prices, said UPMC’s Manolis. For many of the smaller payers that lack in-house expertise or resources to perform cost-effectiveness analyses, ICER reports are all they have to keep check on “whether the PBMs that they contract with to provide medicines are making wise decisions, or seeking to line their own pockets,” said one experienced payer.
So-called “ICER prices” – the benchmark net price range provided in ICER’s reports – now feature regularly in pricing negotiations between pharma and payers. More than a third of the US payers recently surveyed by ICON, a consulting firm, indicated that they were likely to request a rebate to match the net ICER cost-effective price or range.
Manufacturers have been forced to get on board. Most have entire teams devoted to dealing with ICER; consultants are churning out white papers and pitching ICER-focused project teams. Analysts comb through ICER decisions and factors likely to influence them, as they do for other European HTA bodies. Those drug firms that do reach – or come close to – the ICER price are noticed and rewarded. Several payers referred to Sanofi/Regeneron’s responsible pricing for Dupixent (dupilumab) used to treat eczema and other allergic diseases. “Even though the drug was expensive in dollar terms, we concluded from reading the ICER report that it was dollars well spent” and made it available without unnecessary hurdles, said Harvard Pilgrim’s Sherman. Other payers point to the PCSK9 cholesterol lowering drugs, whose priced were tied to the ICER review.
“The biggest mistake [for pharma] is failing to engage” with ICER, advised Pezalla. “It precludes the opportunity to give and take.”
ICER Changes Its Mind To Be Policy-Relevant
ICER does change its mind. Not often: researchers at the Tufts Medical Center found that in fewer than 5% of cases, between 2017-2019, did public comments following a draft report lead to a change in conclusions in the final report. In October 2019, though, ICER performed a significant about-turn in an analysis of next-generation treatments for rheumatoid arthritis, in particular three new JAK inhibitors, AbbVie’s Rinvoq (upadacitinib), Pfizer’s Xeljanz (tofacitinib) and Lilly/Incyte’s Olumiant (baricitinib; see box: Changing Minds)
The U-turn happened because the conclusion from the first analysis “was counter-intuitive and not helpful for policy-making,” Pearson said. It concluded that the new drugs offered only marginal benefits, and were unlikely to be cost-effective if priced above Humira. But the newer products are being used in the real-world; US formulary designers cannot refuse to cover them (as can occur in some European markets if a drug is deemed too expensive). So, saying that they should not is not helpful. ICER re-evaluated its models to generate a slightly different – more positive – result. The situation showcases the sometimes uncomfortable transition between cost-effectiveness theory and practical policy.
Changing Minds: AbbVie’s Humira Follow-On Is Cost-Effective After All
An initial draft ICER report of next-generation RA drugs, published in early October condemned three new janus kinase (JAK) inhibitors, AbbVie’s Rinvoq and Pfizer’s Xeljanz and Lilly’/Incyte’s Olumiant as offering only marginal or uncertain clinical benefits. It hinted that pricing higher than existing RA mainstay Humira (facing biosimilar competition) would not be cost-effective.
Days later, that report was pulled and replaced, the following week, with a version that was much friendlier to Rinvoq. The revised draft report brought the drug’s estimated added cost per QALY versus Humira below the $150,000 threshold. There was insufficient data – in particular head-to-head data – to assess the other two drugs, the report said.
ICER changed core assumptions about the RA treatment pathway, treatment timelines and the drug’s net price. Patients failing first-line treatment were assumed to transition to a basket of targeted immune modulators, not palliative care – more accurately reflecting what happens in the real world. Cost effectiveness was calculated over a year, not over a life-time – the longer the time-horizon used, the more the beneficial effects of the expensive drug get washed out. “We weren’t happy with the perspective that we felt [the initial report] would leave policy-makers,” said ICER president Steven Pearson. The earlier model implied that a better, potentially more expensive drug was less cost-effective because its use delayed transition to much cheaper (and less effective) alternatives. “It is important that we remain transparent, and humble. If we change our minds, or make a mistake, we are not going to push that under the rug,” said Pearson.
Cost-effectiveness, as the word suggests, is influenced by both price and effectiveness. A new drug may be more effective than an existing (cheaper) therapy, but if the price difference is found to outweigh the incremental effectiveness, then the cheaper – and perhaps only slightly less effective – drug wins. Hence the choice of comparator is key.
Novo Nordisk is feeling this tension right now. Its recently approved Rybelsus (semaglutide) is the first oral GLP-1 agonist available for diabetes. It allows patients to benefit from the well-proven effects of the GLP-1 class without enduring injections. But at an estimated annual net price of $6,103, ICER concluded in a November 1, 2019 report that Rybelsus was probably less cost-effective than another, much cheaper kind of oral diabetes drug, Merck’s Jardiance (empagliflozin). Payers have taken note (see Choosing The Comparator).
ICER Speaks Out On Other Areas
While everyone is paying attention, ICER has seized the opportunity to talk about other meaty policy areas, too. Among them: biosimilar interchangeability and the use of real-world evidence (RWE) to support drug efficacy and differentiation. “ICER has worked hard to gain prominence, so why not use the platform to delve into other areas. It just increases their value proposition,” opined UPMC’s Manolis.
ICER’s recent (revised) draft evidence report on rheumatoid arthritis therapies highlights the low penetration of biosimilars in the US, despite the FDA having approved over 20 such products. It is a thinly-veiled dig at payer, regulator and pharma behaviour within a system that does little to encourage the use of cheaper biologics.
In Europe, the arrival of biosimilar copies of drugs like Remicade (infliximab) and Humira, priced 30-40% (and sometimes more) below the originators, have generated significant savings, albeit after a slow start. Yet in the US, four of the country’s top insurers – Anthem, Cigna, Humana and United Healthcare – “designate infliximab [the originator drug] as the preferred product compared to [Inflectra] infliximab-dyyb [Pfizer/Celltrion’s biosimilar, approved in 2016],” states the report. In other words, they continue to prioritize the reference drug over the cheaper equivalents; patients must fail on branded Remicade before they are allowed to receive the biosimilar.
ICER is well aware of the main reasons for this. Originator drug manufacturers offer juicy rebates on their products to dissuade payers from moving to alternatives whose list-price may be lower, but which also come with lower rebates (and a much smaller market share and track record). The result is that the originator drug may come in cheaper. (As is clear from the UPI report, the price of many biologics has increased considerably, giving sponsors plenty of room to rebate aggressively.)
Choosing The Comparator
The challenge for Novo Nordisk is that ICER is comparing Rybelsus (oral semaglutide) not only to injectable equivalents, like Novo’s own once-daily Victoza (liraglutide), but also with cheaper oral therapies (Merck’s Januvia (sitagliptin) and Jardiance, added to metformin). Jardiance’s estimated annual net price is just a third of Rybelsus’, based on a wholesale acquisition discounted by 35%, similar to discounts for Novo’s Ozempic (injectable semaglutide).
Indeed, ICER also concluded that oral semaglutide enables better blood sugar control than all the comparators, and better weight loss than Januvia or Victoza. And even though it does not quite stack up against Jardiance, Rybelsus was considered cost-effective compared to Victoza (annual net cost: $8,000); versus Januvia there remains “substantial uncertainty” as to the relative cost-effectiveness, the report concluded.
It is not a clear-cut picture and it rarely is. But that actually works in Novo’s favor. In over two-thirds of cases, ICER has point-blank undermined the prices of drugs under review, according to Bernstein analysts. That did not happen here. ICER also acknowledged data showing Rybelsus is better at preventing cardiovascular complications than its comparators.
Hence at least some payers are bracing themselves for higher GLP-1 costs – already a high-spend category. “Our concern is that oral GLP-1 will lead to more GLP-1 use when other [oral] drugs may be more appropriate,” and cheaper, said Harvard Pilgrim’s Sherman. There are constraints on when Rybelsus can be taken, but an oral drug is still likely to lead to greater adherence among some patients. As such, “we’re certainly going to cover it, likely as an alternative to [injectable] GLP-1s,” he said. “We are just not sure on the tiering,” (which determines how easily patients can access it). Some analysts are predicting blockbuster sales despite a frantically competitive market.
More importantly, the FDA has ruled that biosimilars are not interchangeable with the originator drug – patients cannot just be switched from one to another. If they were interchangeable, payers could decide to only cover the biosimilar, igniting more price competition. But without interchangeability, payers must still cover the originator drug, removing the incentive for price-lowering.
ICER’s report implicitly critiques the FDA’s decision on interchangeability, which is controversial within the payer community and seen by some as evidence of pharma’s undue influence on the agency. (Pharma funds the FDA via user fees.) The report also takes the trouble to showcase payers, including Aetna, which do not prefer originator brands. Divisions of Kaiser Permanente have surveyed patients switching to biosimilar infliximab, and found the vast majority to be satisfied, it said. Kaiser Permanente Northwest “uses the biosimilar for about 97% of infliximab infusions,” the ICER report states.
Policing Real-World Evidence
As well as cheering for biosimilars and the payers that encourage them, ICER also wants to lead the debate around the use of RWE. This is a huge area, attracting growing investment – but lacking clear standards and guidelines. The FDA has declared its interest, but so far provided little concrete guidance to manufacturers on how and when RWE might be considered in approval decisions.
Post-approval, mountains of RWE are being generated by patients, payers, providers and manufacturers. Such evidence is particularly important in capturing patient-relevant outcomes, including, for instance, around quality-of-life. As such, “we want to contribute to methodological discussions and [ultimately] to actively generate RWE in our own reports,” said Pearson.
ICER’s support for RWE did not come across clearly in the UPI report, despite its being “happy to consider” this evidence category. Many studies submitted by the seven black-listed companies in defence of their price hikes were RWE; they included observational studies, patient-report-outcome trials or studies of drugs’ impact on quality of life. Yet none of them justified a price hike, according to ICER. Most provided “no new clinical evidence,” and some of the observational trials were considered insufficiently robust. What were ICER's evidence criteria? “ICER applies the same evidentiary standards to RWE that it applies to all other forms of evidence,” it said in response to manufacturers’ frustrated comments.
That may not be appropriate. RWE is different to the controlled, randomized clinical trials that comprise the bulk of pre-approval trials. Standards are not yet agreed. The National Pharmaceutical Council (which represents research-based biopharma companies) was quick to declare that the “troubling” and “one-sided, biased” UPI report set an “unreasonably high bar for the types of evidence it would consider, and a low bar for the pricing data utilized.”
Pearson said he did not want to convey the message that ICER was anti-RWE, or that companies should not bother investing. “We are not saying RWE is inferior to RCT evidence just by being RWE,” he said. It is about study quality, and about the questions they are set up to answer. Many submitted studies simply confirmed drugs’ already-known benefits, albeit sometimes over a longer time-frame.
Yet perhaps evidence that a drug’s benefits are maintained over the longer term is worth something. “We will wrestle with that question,” acknowledged Pearson. “It is not unreasonable to suggest that the health system benefits by knowing that short-term advantages [of particular therapies] are sustained.”
How such longevity may be measured and, potentially, rewarded is another thorny issue. ICER promises to learn from the feedback to this inaugural report; one of its core principles is multi-stakeholder engagement.
Meanwhile, the organization continues to broaden the range of tools it is offering, ultimately to help support a fairer, more transparent and more value-focused system. It is launching a digital evidence compendium of all its value-assessment work, to make it easier to access and use. It is also creating an interactive modeller program, on the cloud, that allows manufacturers and payers to plug their own assumptions into ICERs’ models – for a fee.
And, in part to avoid being seen as picking on pharma, ICER may launch an ‘Unsupportable Barriers to Access’ report in 2020, said Pearson, that instead would put the spotlight on payers. The report would highlight fairly-priced drugs that are not deemed to be appropriately covered by health plans. “The goal [of both kinds of report] is to ensure there is affordable access,” said Pearson.
These additional projects will require ICER to increase its headcount by 50% over the next 18 months. Most of ICER's funding comes from non-profit foundations, including the Laura and John Arnold Foundation. Billionaire John Arnold has been vocal in his support for lower drug prices.
Whatever happens in Washington, ICER has taken on the job of drug pricing and access referee. It is not perfect. But there are not any better candidates. And ICER has shown it is not afraid to blow the whistle – on either side.