Here’s some good news for employers: The overall cost of employee prescription drug coverage is projected to decelerate in 2007, according to the Segal Company’s annual Health Plan Cost Trend Survey. Prescription drug trend — defined as the predicted change in per-capita claims, as influenced by drug costs, utilization, and cost shifting — ranges from 11.5 percent to 11.9 percent for commercial plans, depending on the benefit. For purchasers, Segal’s findings are tempered by news that the specialty drug trend is 19.5 percent — down from last year but still strong.
The report cites increased availability and greater demand as the primary reasons for specialty drug growth, though a combination of factors is responsible for the trend. “We are seeing some cross-applications of drugs driving the increase,” says Sean Brandle, vice president and Segal’s national pharmacy practice leader. In combination, product cost and benefit design are a factor, too; many employers do not have plan designs that require members to take on a large portion of specialty drug expenses. “The fact that employer plan designs don’t really require the member to fund a large portion of costs means that those drugs are going to represent a higher percentage of what employers pay for year after year,” Brandle says.
Plan sponsors have been successful in efforts to initiate aggressive copayment structures for traditional prescription drugs, but the same does not hold true for specialty drugs.
“It’s tough,” says Brandle. “You don’t want to make the copayment so high that it is cost prohibitive, yet you don’t want it to be too low, either.” A careful balance, he says, is necessary when providing specialty drugs that patients may need. “The question is how to make sure patients get them at a reasonable cost and with effective administration so that they are closely monitored to ensure that they are benefiting from the drug.”
With an onslaught of new biotech drugs set to hit the market over the next several years, cost-management strategies remain somewhat limited. Brandle says some health plans are looking at separate plan designs for biotech drugs as one way to manage costs, but most are concentrating on choosing the right specialty drug vendor to help with utilization strategies. “We are starting to drill down to try to figure out the program mechanics that the vendor offers when dispensing drugs,” says Brandle.
With the lack of generic competition and a slew of new drugs pending on the market, Brandle sees cost management of specialty drugs as a challenge. “At some point, there will be a fixed amount of dollars that employers will be able to afford to pay. Some tough decisions will have to made,” he says.
Cancer Drug Price War?
Following the U.S. Food and Drug Administration approval of its late-stage colorectal cancer drug, panitumumab (Vectibix), Amgen set the drug’s price 20 percent lower than ImClone Systems’ similar product, cetuximab (Erbitux). Amgen also capped limits on patients’ out-of pocket expenditures and copayments. Genentech joined the trend, capping the total cost of its cancer drug, bevacizumab (Avastin), for patients whose income falls below a certain income level.
Specialty drug trends, 2005–2007
SOURCES: SEGAL HEALTH PLAN COST TREND SURVEYS, 2005, 2006, 2007, SEGAL CO., NEW YORK
Biotech Companies Oppose Patent Regulation Change
A proposal by the U.S. Patent and Trademark Office, aimed at reducing the burgeoning number of biotech patent applications, has the BIO trade group and the Intellectual Property Owners Association worried. The plan would limit the number of patent continuations a company can file for an existing patent. This could hit some biotech companies particularly hard, as biotechs rely on continuations as part of their research-and-development processes.
Unlike other technologies, biotechs often do not know far in advance what final form their product will take because the product is being continually changed and adapted with new research.
Aimed at reducing the backlog of more than 700,000 cases — a two-and-a-half-year backlog —the proposal would limit continuations to only one per patent. The patent office is reviewing the manufacturers’ concerns.
Under the Skin –Or Under the Radar?
Medicare could save $537 million annually if epoetin alfa (Epogen) were administered subcutaneously rather than intravenously, according to a study published in the American Journal of Kidney Disease. About 95 percent of kidney dialysis patients receive epoetin alfa intravenously, though studies have found that about 30 percent less of the drug is required if injected under the skin.
Last year, Amgen changed the Epogen label to state that IV delivery is preferred, following an outbreak of pure red cell aplasia in patients who received erythropoietin (Eprex), a similar drug manufactured by a Johnson & Johnson subsidiary. J&J traced the cases to rubber stoppers in syringes; the outbreak ended after the stoppers were replaced.
After release of the study, conducted by Detroit’s Henry Ford Hospital, some kidney specialists told the Boston Globe that dialysis clinics use the IV method to boost profits.
Chit Chat…
Dude, what? American biotechs are complaining that today’s college graduates don’t know enough about the drug-approval process and lack the technical skills they need for research. … Software start-ups have long been darlings of venture capitalists, but, for the first time, biotech and medical device companies have become more attractive to VCs than software, according to a MoneyTree Report. … A year after buying pegaptanib (Macugen) from Eyetech, OSI has put a “for sale” sign on the drug. Genentech’s competing therapy for macular degeneration, ranibizumab (Lucentis), has bitten heavily into OSI’s market share.
What biotech has the largest product development portfolio? MedImmune has 43 potential treatments for cancer, infectious disease, and autoimmune diseases, according to a report in the Baltimore Sun. … Lawyers for Med-Immune have asked the U.S. Supreme Court for the right sue to overturn a patent owned by Genentech on a component of MedImmune’s palivizumab (Synagis). A lower court refused MedImmune’s request in 2004, ruling that its deal with Genentech amounted to recognition of the patent’s validity. MedImmune told the Washington Post that it licensed the patent “under protest,” lest it surrender a significant piece of its business or face a patent-infringement suit.
Shopping sprees: Merck expects to capitalize on RNA technology with its $1.1 billion acquisition of Sirna Therapeutics. Merck acquired Sirna stock at more than twice its closing price on the day of the offer. … Pfizer will buy Britain’s PowderMed, which is developing a new generation of DNA-based vaccines, including one for avian flu (see Biotechnology Healthcare, October 2006). … Genzyme won a rare hostile biotech bidding war for AnorMed, beating Millennium’s offer of $515 million. Genzyme won the battle with a purchase price of $585 million, $200 million more than it originally offered. … In its second recent acquisition, Gilead Sciences will acquire Myogen for $2.5 billion to bolster its pulmonary product line. Gilead previously exercised its option to purchase Corus Pharma for $365 million. … Genentech has agreed to pay CGI Pharmaceuticals $25 million up front, and up to $500 million in milestones, in a development deal targeting multiple cancer and autoimmune indications.