In late February, seven pharmaceutical executives were called before the U.S. Senate Finance Committee to testify about the prices of brand-name prescription drugs, which are often described as “skyrocketing.”
CEOs from AbbVie, AstraZeneca, Bristol-Myers Squibb, Johnson & Johnson, Merck, Pfizer, and Sanofi – together representing $140 billion in U.S. revenue – defended the value of the drugs they manufacture and cited high research-and-development costs as the reason for continued price increases. Senators discussed Medicare’s inability to negotiate drug prices, the use of patents to stifle competition, drug rebates, value-based pricing, and much more.1
Sen. Charles E. Grassley (R-IA) set the tone for the tense, three-hour meeting when he opened with a declaration that the practices of the pharmaceutical industry “thwart the laws and regulations designed to promote competition,” according to The New York Times. Reining in high prescription drug prices is an issue with bipartisan support, as evidenced by Sen. Robert Menendez’s (D-NJ) warning to the CEOs, “If you don’t take meaningful action to reduce prescription drug prices, policymakers are going to do it for you.”
This hearing was just one of almost a dozen House and Senate committee hearings on drug costs to occur in 2019. In April, executives from pharmacy benefit managers (PBMs) took their turn testifying before Congress, fielding questions about the secrecy of their operations and their role in driving up drug prices.2
Perhaps the treatment that best epitomizes the impact of such pricing is that for multiple myeloma (MM). Several agents have been approved by the U.S. Food and Drug Administration (FDA) in recent years, leading to a proliferation of new, multi-agent treatment combinations. Patients often are treated indefinitely, so their health-care costs continue to add up.
Despite the fervor over this issue, Ronny Gal, a securities analyst who follows the pharmaceutical industry for Sanford Bernstein & Company, said he “doubted that drug companies would change their pricing practices because of the hearing.”1
Like Mr. Gal, myeloma specialist Rafael Fonseca, MD, chair of the department of medicine at Mayo Clinic in Phoenix, was not surprised by the lack of progress, telling ASH Clinical News that “there is no easy answer to this issue.”
“That’s not to say that we shouldn’t be looking for one, just that any proposal will come down to choosing between pros and cons and making trade-offs,” Dr. Fonseca said. (Note: Dr. Fonseca reports that he has relationships with Amgen, Bristol-Myers Squibb, Celgene, Takeda, and Janssen, and he, along with the Mayo Clinic, hold a patent for prognosticating myeloma using FISH.)
ASH Clinical News spoke with Dr. Fonseca and other myeloma and drug-pricing experts about the high costs of diagnosing and treating myeloma, how the pharmaceutical industry got to this point, and whether the skyrocketing prices are justifiable.
Putting a Price on Survival
Prior to 1995, the cornerstone of MM therapy was the oral regimen of melphalan plus prednisone. About 50% of patients responded to this treatment, and the five-year survival rate was about 25%.3 Between 1995 and 1996, data emerged about the clinical efficacy of a slightly more expensive treatment, autologous hematopoietic cell transplantation, which, in eligible patients, could increase five-year survival to about 50%.
It wasn’t until 2003, nearly a decade later that the FDA approved the next agent for MM: bortezomib (Velcade).4
In the 16 years since bortezomib’s approval, there have been eight new FDA-approved drugs and indications for MM.
“We have gone from having two drug classes – the proteasome inhibitors and immunomodulatory drugs that were introduced in the 2000s – to now having monoclonal antibodies, histone deacetylase inhibitors, second-generation proteasome inhibitors, and second- and third-generation immunomodulatory drugs,” said Saad Usmani, MD, chief of Plasma Cell Disorders and Director of Clinical Research in Hematologic Malignancies at the Levine Cancer Institute in Charlotte, North Carolina. “This wave of new approvals in the past decade has resulted in multiple options and multiple combinations for patients, especially in the early relapsed setting. If you’re a myeloma clinician or patient, that’s a good problem to have,” he added.
These newly approved drugs come in four broad categories:
- proteasome inhibitors: bortezomib (Velcade, manufactured by Takeda), carfilzomib (Kyprolis, Onyx Pharmaceuticals), and ixazomib (Ninlaro, Takeda)
- immunomodulatory drugs (IMIDs): lenalidomide (Revlimid), pomalidomide (Pomalyst), and thalidomide (Thalomid) – all manufactured by Celgene
- monoclonal antibodies: daratumumab (Darzalex, Janssen) and elotuzumab (Empliciti, Bristol-Myers Squibb)
- other: the histone deacetylase inhibitor panobinostat (Farydak, Novartis)
“Our discussions with patients a decade ago were very different from what they are today,” Dr. Usmani noted. “Compared with where it was in the late 1990s, the survival for myeloma has more than quadrupled.”
But, with each new approval, price tags continued to climb, from $50,000 for a year’s supply of bortezomib to almost $200,000 for pomalidomide.5
Although these prices are similar to those for therapies in other cancer types, certain aspects of MM escalate the financial burden of its treatment even further, according to Josh J. Carlson, PhD, MPH, of the Comparative Health Outcomes, Policy, and Economics (CHOICE) Institute at the University of Washington.
“One of the big issues with pricing in myeloma is the doublet, and now triplet, therapies that are recommended as standard care,” Dr. Carlson said. “Using expensive combinations of drugs really drives up the price.”
Also, because myeloma has no cure, many patients are advised to continue on these therapies as maintenance treatment. “They can be treated indefinitely,” Dr. Carlson said. “There are no clear guidelines on when to stop therapy, which, again, increases the treatment costs for any given patient.”
Who Foots the Bill?
Pharmaceutical manufacturers often downplay the high list prices by noting that patients don’t pay the full amount. Instead, they pay a portion through a copay or through coinsurance payments after their deductibles have been met.
“With specialty drugs, a patient typically pays about 20% of the drug cost through coinsurance, until he or she reaches the out-of-pocket maximum for the year, which can be quite high,” Dr. Carlson said. “Then it all resets at the beginning of the next year.”
However, the risks of financial toxicity are still high, even among patients with private insurance or Medicare. According to a 2015 survey of 111 myeloma patients, 71% reported at least a minor financial burden.6 Almost half of patients (46%) were forced to dip into their savings, one-third (36%) to apply for financial assistance, and one in five (21%) to borrow money to pay for medications.
Even if individual patients aren’t footing the bill for the entire cost of the drug regimen, someone else is covering what they don’t pay.
“Organizations may advocate for lower prices for myeloma drugs, for lower out-of-pocket costs for patients, or for eliminating deductibles, but people have to keep in mind the overall cost to society,” said Vincent Rajkumar, MD, the Edward W. and Betty Knight Scripps Professor of Medicine at the Mayo Clinic in Rochester, Minnesota.
For example, in the commercial space, when a health insurance plan has to cover the remaining costs of a medication, that expense ends up being spread out among all of the plan’s members through premiums, Dr. Carlson explained. As more money is spent on drugs, the premiums for health insurance rise.
In employer-based plans, increasing premiums are often covered, at least in part, by the employers. “To cover these costs, employers are using money that could have been put into increased employee wages, rather than toward health insurance,” he said.
In some cases, health insurers may benefit from prescription drug rebates – a complex and controversial topic itself. With prescription drug rebates, the drug manufacturer may provide a rebate to the PBM, which may share a portion of the rebate with the health insurer. These rebates serve as incentive for the PBM to include one product over another or to list that product in a preferred tier.7 As evidenced by the Senate testimony that took place in April, regulators and legislators have called for more transparency about how these rebates are negotiated. Recently, the U.S. Department of Health and Human Services (HHS) proposed a rule eliminating rebates. As HHS Secretary Alex Azar explained, this rule would “end this era of backdoor deals in the drug industry … and deliver savings directly to patients when they walk into the pharmacy.”8
A Value Proposition
The cost of medication is not the only financial burden put on patients, noted Dr. Fonseca.
“When patients live for many years, they have expenses associated with hospital stays, doctor visits, and medication copays, and many patients cannot continue working,” he said. “This creates a major strain on the finances of a household, which often has limited savings. The cost of drugs is only one part of the story.”
“The fact that pharmaceutical companies can price a drug high regardless of whether or not it is innovative or just a modification, like an analog rather than a new class of drugs, is the enemy of innovation.”
—Vincent Rajkumar, MD
A 2017 study by Dr. Fonseca and colleagues looking at trends in overall survival and costs of MM therapy bore that out: From 2000 to 2014, the percentage of patients with MM using a novel therapy increased from 8.7% to 61.3%, which was accompanied by substantial improvements in survival outcomes.9
The new wave of FDA approvals in myeloma have successfully extended survival, but there are plenty of investigational drugs that never made it to market. The pharmaceutical industry argues that prices for approved drugs are set high to recover the costs of failed drugs. According to the Pharmaceutical Research and Manufacturers of America (PhRMA), the trade organization representing biopharmaceutical research companies, research and development of a new medicine takes between 10 to 15 years and costs an average of $2.6 billion.10
“This reasoning is a function of how hard it is to conduct clinical trials and how many different attempts companies have to make to bring a successful drug to market,” Dr. Carlson said. “They try to recuperate all failed attempts with a single successful attempt.”
“It’s a little bit unfair just to look at the cost of the relatively few winners that you have in this business and say, ‘Aren’t you making a lot of money on those winners?’” Kenneth Frazier, CEO of Merck, told Harvard Business Review. “When in fact, in order to be a sustainable, ongoing business, you have to be able to pay for the cost of all those programs that inevitably don’t succeed.”
The pharmaceutical industry is a business, and companies are beholden to shareholders who “keep giving us the capital to do the research that’s going to produce tomorrow’s drugs, while at the same time allowing patients and health systems to have access,” Mr. Frazier continued.
In 2015, the FDA approved Merck’s PD-L1 inhibitor Keytruda (pembrolizumab) for advanced lung cancer, at a price of roughly $150,000 per year, per patient. When asked if he considered the cost reasonable, Mr. Frazier said, for patients who need pembrolizumab in this setting, “we’re talking about a life-and-death situation. … When you say the $150,000 for this successful drug doesn’t make sense, you have to realize that we’re actually paying for the 90% -plus projects that fail. Because we can’t have the winners if we’re not able to pay for the cost of the losers, so to speak.”
This argument is harder to justify when one looks at some of the year-over-year price increases, however, Dr. Carlson said.
A recent study looked at the contributions of both new and existing drugs to the changes in costs of oral and injectable brand-name drugs.11 Between 2008 and 2016, the costs of oral brand-name drugs increased 9.2% annually, and the cost of injectables increased 15.1%. According to the study, these increases were largely driven by existing drugs.
There is also a lack of understanding about how drug prices are derived. According to Mr. Frazier, at Merck, determining the list price for a newly approved medication involves asking first, “What is the value that this new medicine provides to patients and to the health-care system? … And the second [question asked] implicitly is, ‘What can patients and the health system afford?’”
Pharmaceutical companies often fix their prices according to other available agents within that drug class. However, in the myeloma space, there is a definite lack of competition; the proteasome inhibitors are owned by two companies, and all three IMIDs are owned by the same company.
Pharmaceutical manufacturers have been accused of using unsavory tactics to keep potential competitors at bay, which, in turn, keep prices high. For example, “product hopping,” also known as “forced switching” or “evergreening,” involves companies issuing a reformulated version of a branded drug before the original product’s patent expires. Patients are switched to the reformulated drug that offers little to no therapeutic advantage over the original version, but it has an expanded patent, meaning a longer market exclusivity period.12 If a generic version of the original drug becomes available after a clinician has switched to the new drug formulation, pharmacists cannot substitute the reformulated version for this generic because state laws allow for substitutions only when the dosage strength or other characteristics remain the same.
Regardless, competition between companies does not always have a big impact on price, Dr. Carlson said. This is especially true with cancer therapies; even if patients receive one company’s drug as firstline treatment, they may use another company’s drug as second- or thirdline treatment.
“In myeloma, because patients go through many sequences of drugs, the companies are not getting completely excluded [from the treatment plan]; they may just get a smaller market share,” he explained. “The health care marketplace doesn’t operate like a full free-market system.”
The CEOs who testified before Congress earlier this year also justified the high costs of medicine on the complexities of the U.S. drug-pricing system. According to PhRMA, only about two-thirds (63%) of a branded drug’s list price is retained by the companies, with one-third going back to payers, the government, or other stakeholders.13 Of that revenue, about 20% is then re-invested in research and development for new treatments.
“The biotech market is considered a high-risk, high-reward area of investment,” Dr. Fonseca noted. Economic trade-offs exist between cancer drug pricing and innovation, he continued, with several studies having shown that a reduction in drug profitability stifles innovation and investment.14
So, while lower prices could increase access to drugs, they may reduce access to innovative therapies in the future.
Dr. Rajkumar, however, takes the opposite stance: “The fact that pharmaceutical companies can price a drug high regardless of whether or not it is innovative or just a modification, like an analog rather than a new class of drugs, is the enemy of innovation.”
What a Life is Worth
Commenting on the new treatment options for myeloma, Dr. Usmani said that, “All of these developments are wonderful for patients, but the important question is, ‘Can we continue to pay for all these drugs?’ What does the introduction of so many myeloma therapies mean for our patients who are dealing with copays and out-of-pocket expenses for their cancer care?”
Dr. Fonseca, for one, believes that the extended survival seen with newer treatment approaches is worth the high costs. “We would not have all of this progress absent these expensive drugs,” he said.
However, Dr. Carlson and members of the Institute of Clinical and Economic Review (ICER) disagree. The organization recently looked at the cost-effectiveness of drugs used to treat relapsed or refractory MM in the U.S., evaluating carfilzomib, elotuzumab, ixazomib, daratumumab, and panobinostat in combination with lenalidomide, or bortezomib plus dexamethasone as second- or thirdline therapy.15 The introduction of these regimens appeared to provide clinical benefit by lengthening progression-free and overall survival and improving quality of life. However, using a cost-effectiveness threshold of $150,000 per quality-adjusted life-year, ICER found that “only the addition of daratumumab or panobinostat may be considered cost-effective options.” The authors concluded that “achieving levels of value more closely aligned with patient benefit would require substantial discounts from the remaining agents evaluated.”
“Critics will say that quality-adjusted life-years have some limitations, and that is true,” Dr. Carlson told ASH Clinical News, “but it is the best measure we have and has been widely adopted.”
A similar study comparing carfilzomib, daratumumab, and pomalidomide plus low-dose dexamethasone in relapsed or refractory MM suggested that the pomalidomide-dexamethasone combination may be the most cost-effective option.16 Assuming equal efficacy of the regimens, the doublet regimen resulted in a cost-savings of about $12,000 over the two other agents.
Because it is not practical to have direct comparisons for all regimens, creative cross-trial comparisons may be useful. Despite the results reported in these studies, the nature of MM is that most patients likely will require sequential treatment with a majority of the available agents to achieve the best possible outcomes.
Dr. Carlson encouraged clinicians to consider cost-effectiveness during treatment selection, no matter what patients are willing to pay.
“In the U.S., we are blessed that we have access to drugs for our patients with myeloma, but at the same time, we are a little frivolous with the spending part of it. There needs to be some reconciliation.”
—Saad Usmani, MD
“At some point, people need to understand that when we pay for medical treatments, we have to give up paying for other things… like education or infrastructure.”
Dr. Fonseca again noted the trade-offs that come with demanding lower prices for novel therapeutics. For example, more drugs are available in the U.S. and become available more quickly than in other countries.
“The reality is that access to drugs in countries like the U.K. occurs at a much later time than it does in the U.S.,” Dr. Fonseca said. “In turn, patients have inferior outcomes. It is a trade-off of spending less and having less access or spending more with earlier access.”
“In the U.S., we are blessed that we have access to drugs for our patients with myeloma, but at the same time, we are a little frivolous with the spending part of it,” Dr. Usmani noted. “There needs to be some reconciliation.”
Solutions in Sight?
A variety of solutions have been proposed to begin to rein in drug prices, at all levels of the drug-pricing system, but finding real solutions will require the participation of all stakeholders, Dr. Usmani added. “This issue has not been looked at systemically,” he said. “Physicians have been talking about it from their perspective, and patients have been talking about it from theirs. We need to have broader discussions about myeloma treatment costs that culminate in solutions.”
One concept is value-based reimbursement and pricing, which would allow the Centers for Medicare and Medicaid Services (CMS) or other agencies to negotiate the sale price of a drug based on the incremental value provided by that drug.
“Developed countries except the U.S. have a system where approval of a drug is only the first step,” Dr. Rajkumar said. “The second step is a negotiation of the price based on the value that new drug will bring.”
Dr. Rajkumar also supported an increase to competition by allowing for easier entry for generics and biosimilars into the market and patent reform. Legislative efforts have stalled in the past, but they may have received renewed interest recently, thanks to the introduction of biosimilars.
Earlier this year, Sen. Patrick Leahy (D-VT), re-introduced the Creating and Restoring Equal Access To Equivalent Samples (CREATES) Act, which – among other policies – would allow a biosimilar or generic developer to bring a civil action against an innovator drug company if the latter refuses to make available enough samples of a product for testing.17 The CREATES Act was first introduced in 2016 and has enjoyed broad bipartisan support but has not been voted on since its introduction.
“The more generics that come into the market, the more likely prices are to fall,” he said. “We’ve seen it happen with imatinib and many other prescription drugs.”
These suggested solutions aren’t new, and few – if any – have gained significant traction, but hematologists and oncologists should still be paying attention.
“Several parties are involved in the pricing of and payment for myeloma treatment,” Dr. Usmani said. “It’s not just the pharmaceutical industry or the insurance industry or the health-care organization or the patient advocacy groups or the treating physician – it’s all of us together. We need to find a way to bring all of these stakeholders together to actually start finding a solution.”
“We need to step up and we need allies. Big organizations need to step up, too, and forget about what big pharma brings them,” Dr. Rajkumar added. “We need to call people to task. If we don’t, who will?” —By Leah Lawrence
- Pear R.. Drug makers try to justify prescription prices to senators at hearing. The New York Times. Accessed May 8, 2019, from https://www.nytimes.com/2019/02/26/us/politics/prescription-drug-prices.html.
- Cunningham PW. The Health 202: Lawmakers are trying to prove they’re serious about lowering drug costs. The Washington Post. Accessed May 8, 2019, from https://www.washingtonpost.com/news/powerpost/paloma/the-health-202/2019/04/11/the-health-202-lawmakers-are-trying-to-prove-they-re-serious-about-lowering-drug-costs/5cadff831ad2e567949ec11d/?noredirect=on&utm_term=.aebf172a0906.
- Rajkumar SV, Gertz MA, Kyle RA, et al. Current therapy for multiple myeloma. Mayo Clin Proc. 2002;77:813-22.
- Center for Drug Evaluation and Research. Application Number: 21-602. Approval Letter. Accessed April 29, 2019, from https://www.accessdata.fda.gov/drugsatfda_docs/nda/2003/21602_Velcade_Approv.pdf.
- Rajkumar SV. Value and cost of myeloma therapy. Am Soc Clin Oncol Educ Book. 2018;38:662-6.
- Huntington SF, Weiss BM, Vogl DT et al. Financial toxicity in insured patients with multiple myeloma: a cross-sectional pilot study. Lancet Haem. 2015;2:PE408-16.
- Dieguez C, Alston M, Tomicki S. A primer on prescription drug rebates: Insights into why rebates are a target for reducing prices. Milliman. Accessed April 29, 2019, from http://www.milliman.com/uploadedFiles/insight/2018/Prescription-drug-rebates.pdf.
- U.S. Department of Health and Human Services. Trump Administration proposes to lower drug costs by targeting backdoor rebates and encouraging direct discounts to patients. January 19, 2019. Accessed May 16, 2019, from https://www.hhs.gov/about/news/2019/01/31/trump-administration-proposes-to-lower-drug-costs-by-targeting-backdoor-rebates-and-encouraging-direct-discounts-to-patients.html.
- Fonseca R, Abouzaid S, Bonafede M, et al. Trends in overall survival and costs of multiple myeloma, 2000-2014. Leukemia. 2017;31:1915-21.
- PhRMA. Advocacy: Research & Development. Accessed May 6, 2019, from https://www.phrma.org/advocacy/research-development.
- Hernandez I, Good CB, Cutler D, et al. The contribution of new product entry versus existing product inflation in the rising costs of drugs. Health Aff. 2019;38:76-83.
- Jones GH, Carrier MA, Silver RT, Kantajian H. Strategies that delay or prevent the timely availability of affordable generic drugs in the United States. Blood. 2016;127:1398-402.
- PhRMA. Advocacy. Cost & Value of Medicines. Accessed May 6, 2019, from https://www.phrma.org/advocacy/cost-and-value.
- Fonseca R, Peneva D, Clancy Z, et al. The importance of economic trade-offs in cancer drug pricing. Mayo Clin Proc. 2018;93:976-9.
- Carlson JJ, Guzauskas GF, Chapman RH, et al. Cost-effectiveness of drugs to treat relapsed/refractory multiple myeloma in the United States. J Manag Care Spec Pharm. 2018;24:29-38.
- Pelligra CG, Parikh K, Guo S, et al. Cost-effectiveness of pomalidomide, carfilzomib, and daratumumab for the treatment of patients with heavily pretreated relapsed-refractory multiple myeloma in the United States. Clin Ther. 2017;39:1986-2005.
- Congress.gov. S.974 – Creating and Restoring Equal Access to Equivalent Samples Act of 2018. Accessed May 7, 2019, from https://www.congress.gov/bill/115th-congress/senate-bill/974.