Dr. Bates’ Talkback: Payers and personalized medicine
Dr. Andree K. Bates examines the 5 issues that need to be addressed to increase uptake of personalized medicine
By on May 18, 2012Gleevec and Herceptin (and their clinical and commercial success)were pioneering drugs in terms of personalized medicine. They were followed by Avastin, Tarceva, Iressa and Erbitux. Now, many companies are developing or have developed drugs with the aim of identifying patients based on the existence of specific biomarkers, in the hope thatthese subpopulations willrespond optimallyto treatment. Having an associated biomarker clearly generates morefavorable risk-benefit profiles than with the traditional 'all-comers' approach. This enables a personalized approach withthe potential to reduce the costsof cancer care. However, for drugs with a biomarker, a companion diagnostic test is needed. (For more on companion diagnostics, see Personalized medicine: Regulating companion diagnostics and Personalized medicine: Lesson for Oncology.)
Still, clinical adoption of personalized medicine diagnostic tests remains relatively low. Where is the problem? There are many potential influencers on this result, but they all fall into three main areas: scientific, economic, and operational. (For more on biomarkers, see Biomarkers and oncology forecasting: How to hit a moving target; for more on health economics, see Health economics data and market access.)
Payers and barriers to widespread adoption
The approach payers take with personalized medicine is important, as payer reimbursement will obviously impact the pharma and diagnostics companies’ business models. It is widely assumed that using biomarkers and diagnostic tests has the potential to reduce the cost of cancer care, and yet payers appear to be slow to approve these. According to Price Waterhouse Coopers, currently less than 5% of all US private companies reimburse for genetic tests, indicating that we may not be able to deliver personalized medicine.
Although there is, of course, a strong possibility that by targeting patients accurately the costs will go down in the long term, this has yet to be realized. More outcomes studies are probably required to assess this fully. Some innovative payers are enthusiastic, but five issues need to be considered.
1. Uncovering which tests will save costs
Payers need to know the economics of the cost savings to make informed decisions. McKinsey conducted a study analyzing per patient savings of tests (the difference between the cost of treating the illness versus the cost of the treatment suggested by the diagnostic test) as well as the probability that the diagnostic test recommended a treatment costing between $100 and $3,000. McKinsey found that the cost savings varied from $600 to $28,000 per patient. If a test was able to ensure avoidance of a costly drug, decrease adverse events, or delay procedures, it was found to be very strong on cost savings for payers.
2. Long-term results data
Due to many of these tests being relatively new, there are less long-term outcomes data available upon which to base decisions. The more this comes to light, the more easily payers can make decisions.
3. Analysis models
The actuarial models many payers use were historically basedon large, stable, predictable populations. The populations targeted for personalized medicine are small, niche, dynamic and unpredictable.
4. Sustainability
The payers no doubt have a nagging worry that the costs of personalized medicine have the potential to be unsustainable, given the high price premiums of new targeted diagnostic tests and drugs. Personalized medicine has the potential to be additive rather than replace existing diagnostics and drugs.
5. Plan churn
Yet another prickly issue could be that one payer is paying for something that will not benefit them but one of their competitors in the long term. A significant proportion of people change health plans regularly, given that many of them are based on employers. If you change your job, you often change your health plan. So you invest now in something that benefits costs in the long term by eliminating the need for surgery or care in the future. But when that benefit is realized, the company that paid for it may not be the beneficiary of the savings. Alternatively, people may begin by being in a costly plan that covers diagnostic tests and, once they are diagnosed, they may switch to a cheaper plan.
Some of the larger players are reimbursing these types of tests and drugs. Positive examples can be seen at Aetna, Geisinger Health System and Kaiser Permanente, although it should be noted that Kaiser Permanente has low patient turnover compared to many so is less subject to some of these risks.
The pay-for-performance model
An innovation that began in Italy is gaining more acceptance in several countries: the pay-for-performance model. This is growing at an annual rate of around 26% in the US. This model could increase the reimbursement and adoption of personalized medicine when more evidence mounts to show that targeted diagnostics and drugs reduce payer costs.
This was the case with Oncotype DX, which Genomic Health initially did not cover. Once evidence mounted that the overall cost was significantly reduced, it gained reimbursement. It was found that if 50% of eligible patients got the test, the overall saving (reduced chemotherapy, adverse events management and supportive care) was $1,930 per patient. It should be noted that it took some time to gain reimbursement as evidence was collected. Launch was in 2004 and it has only recently become a routinely covered test.
Yet another study in 2009 showed that $604 million could be saved annually if the use of Vectibix and Erbitux was restricted to those patients with mCRC whose KRAS gene was not mutated, since they are the only patients who would benefit from it. Numbers like these do make a compelling case but more studies are needed to convince more payers.
Clearly, reimbursement can be a slow moving beast for personalized medicine. Companies need to take a long-term view of the environment and really stay focused on the area that will impact access, including strong outcomes data. Given the move by several countries towards more risk share and outcomes-based pricing, a partial reimbursement is given until the outcomes data is available. If positive, the company is then paid for the remainder. This seems like a win-win for good drugs: early coverage for the pharmaceutical and diagnostic companies and reduced financial exposure for the payers.
Dr. Andree K. Bates, a regular contributor to eyeforpharma, is CEO of Eularis, which applies analytics to determine the sales impact of marketing programs.
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