The convergence of biologics and consumerism could be a nightmare – or it could force that long-elusive synthesis of quality and efficiency of care.
Abstract
The emergence of the consumer as decision maker could spur careful analyses of the value of biotech therapies and diagnostics relative to alternatives.
Outside in the cold distance,
A wildcat did growl.
Two riders were approaching, and
The wind began to howl.— Bob Dylan
In Bob Dylan’s song “All Along the Watchtower,” two approaching horsemen herald impending change, appearing on the horizon as two faces of an unknown future that threatens a complacent kingdom. If any two horsemen call forth conjecture — and represent two halves of a future about to disturb the status quo — they are biotechnology and consumer-directed healthcare.
Both forces already have arrived in some form, yet they are embryonic in terms of their expected repercussions on the healthcare system. The number of biotech drugs on the market is miniscule compared to the eventual stream of targeted therapies promised by the continued mining of the human genome.
Employers anxious to contain health benefit costs are increasingly looking to consumer-directed plans in the form of health savings accounts (HSAs) and high-deductible health plans (HDHPs), which put more responsibility and choice into the hands of consumers.
“We put a lot into evidence review because the FDA is not mandated to decide whether a drug is actually better than what is already on the market and no one else does.” says David Clark, MBA, vice president of pharmacy services for The Regence Group.
PHOTOGRAPH BY NICK SOKOLOFF
HSAs became available last year as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, which allows anyone with an HDHP — a plan with a minimum annual deductible of $1,000 for single coverage and $2,000 for couples and families — to open an HSA. Use of HSAs is expected to explode next year, according to Inside Consumer-Directed Care, an online newsletter.
Growth of consumer-directed health plans
Actual (1998–2004) and predicted enrollment shifts from indemnity to managed care, PPOs, and consumer-directed health (CDH) plans.
Due to rounding, some totals do not equal 100 percent.
SOURCES: KAISER FAMILY FOUNDATION/HEALTH RESEARCH AND EDUCATIONAL TRUST (ACTUAL), FORRESTER RESEARCH (PROJECTIONS)
“HSAs are likely to grow very rapidly,” says Mark Jasper, consultant in the life sciences and health-care practice of Washington, D.C.-based PA Consulting Group. “This growth will create demand from patients for diagnostics and drugs and create more demand for doctors’ time, because of an increase in the number of consumer queries.”
The combination of these two trends — one aimed at cost control, the other sure to add costs — will result in either a train wreck or, hopefully, a long-sought synthesis of quality and efficiency. Either way, both will transform healthcare.
THE DRIVER
“There’s a monster coming, and it’s biotech,” says David Suchanek, RPh, VP of operations at CuraScript, an Orlando, Fla.-based specialty pharmacy whose parent is Express-Scripts, the country’s third-largest pharmacy benefit manager. “Payers will see costs they’ve never seen before. The mechanisms we put in place today are going to be those that help manage the patient population and costs in the future.
“It’s going to be an interesting next five years,” he adds. “A lot of new products — not just injected but infused — will arrive on the market.”
The stream is already growing.
“It’s daunting that 97 targeted therapies are currently in phase 3 clinical trials and another 340 are in phase 2,” says Ron Andrews, president and CEO at Atlanta-based Clarient Inc., a majority-owned subsidiary of Safeguard Scientifics that provides cancer diagnostic services to pharmaceutical and biotech companies and clinicians. Today, only a few of those therapeutics are coupled with diagnostic tests that tell who is likely to benefit the most from those therapies. “Without diagnostics and the insight they provide, we can’t give physicians the critical information they need to use these complex therapies in a consumer-driven world,” he says.
The downside, Andrews acknowledges, is that predictive diagnostics increase up-front healthcare costs. But the targeted nature of these drugs means they have the potential to be more cost- and clinically effective. With 45 percent more people entering their senior “cancer years” over the next decade, the challenge, he says, will be to marry knowledge of the molecular makeup of care with its economic benefits.
The advent of consumer-directed care has led companies like Clarient to add two new groups to their traditional customers of laboratories and oncologists: families and advocacy groups. “With the emergence of all this information in biopharma and biotech, the reality is that it’s available on the Internet to anyone.” It’s incumbent on payers, Andrews asserts, to adjudicate this information for consumers.
“Payers have to think differently about what they do. There’s very little money that rewards wellness. Incentives are based on being reactive once disease develops. [As a society,] we’re willing to pay exorbitant back-end costs.” Instead, he argues, payers must develop an economic model that accounts for biotech diagnostics and therapy.
“When payers look at the $1,000 to $5,000 cost — not the typical $100 — for a diagnostic test that will tell you that a patient needs a $30,000 biotech therapy,” they blanch, says Andrews. “Yet, what they need to understand is that having such relevant information also means it is likely that you will not have to pay another $40,000 and then another $40,000” for follow-up treatments that may or may not work.
THREE CHALLENGES
Across the country, an academic expert agrees that all players — especially plans — must tackle the tough job of calculating the total cost of care in a biotech-ripe, consumer-empowered market.
“To a very significant degree, key decision makers — especially payers — have not yet taken time to understand new products like biotech drugs,” asserts Rick J. Carlson, JD, clinical professor at the school of public health at the University of Washington, in Seattle. “They haven’t thought much about it, but given the steep price tags, they are fast beginning to do so. Health plans generally say no to everything until it has proven value. Demand for such products is viewed as a cost to them, not necessarily a benefit. When they don’t understand something, they tend to shove it off into an experimental category.”
Carlson cites three biotech-related challenges with which health plans are being forced to grapple in a consumer-directed age:
Biologics. This includes biotech products that address undertreated conditions and those that might extend life for a cancer patient for a few months.
“Payers have to think differently about what they do. There’s very little money that rewards wellness.
— Ron Andrews, Clarient
Broad-based genetic testing. Plans look at all tests, whether designated biotech or not, to determine if there’s an obvious therapy that follows test results. “A genetic test says to the payer, ‘The patient isn’t sick yet — but here are the probabilities.’ Payers will not fund that kind of test.”
Carlson believes consumers should be given the option to purchase broader-based predictive tests on their own. “A lot of genetic testing will lead to known therapies. But if predictive testing results only in useful information without leading to targeted treatment, health plans will adamantly refuse to pay,” he says. That’s especially true given the fact that people rarely stay with the same plan for more than a few years, rendering predictive data about a person’s predilection for disease irrelevant from a plan’s perspective.
Carlson urges people with HSAs to consider paying for predictive tests that someday might rule out something like Alzheimer’s or macular degeneration — thus eliminating the need for costly therapies for those illnesses in the future.
Pharmacogenomics testing. Plans view this type of testing as important because, for the first time, it’s possible to target drugs for the most benefit. “Most payers think all drugs should be targeted,” he says, which suggests that the price of pharmacogenomic testing should be bundled into the price of the drug. Plans should negotiate such arrangements with drug makers and test producers, says Carlson.
Plans undoubtedly will cover powerful drugs with known effects. “I don’t believe plans will put those biologics into the consumer choice area,” he says. “Nobody messes around with cancer, for example. This is in the wheelhouse of the plan. The health plan won’t view this as consumer choice because biologics may be the least costly strategy for complex conditions.”
To limit their exposure, plans could conceivably establish coverage limits for particular therapies for people over a certain age — say, 75 — though they wouldn’t preclude families from paying for those treatments. Under an HSA plan, Carlson says, a family might be able to save $3,000 a year for five years and have $15,000 to spend on a biotech treatment. “Consumers might elect to spend that money on a biotech drug”
Plans will have to clearly lay out their rules as far as what is covered and what falls under the HSA. This early, however, it’s speculation as to how it all will play out. “We don’t know yet what consumers will elect to pay for in those consumer accounts,” says Carlson.
Some observers see a burgeoning market for certain types of testing as the result of the convergence of biotech and consumer-driven healthcare.
Sanuj Ravindran, MD, a director at Burrill & Co., a San Francisco-based venture-capital company, cites atorvastatin (Lipitor) — a $10 billion-a-year drug that is effective in perhaps 30 percent of the population — as a case in point. “If you had a marker for those who could benefit from Lipitor, from a payer’s perspective it would be feasible to save 70 percent of the drug’s cost.”
Though pharmaceutical companies are likely to be less than enthusiastic about the prospect of anything that limits the market for their products, Ravindran thinks payers and consumers will come to embrace this type of diagnostic.
“With diagnostics, you’re creating value rather than blindly throwing money at a problem. The keys to cost control are understanding who benefits, and then identifying who in your population has that particular genetic profile.”
Consumers will welcome the emergence of such tools as they assume more responsibility for how their healthcare dollars are spent. “Instead of consumers just demanding a particular drug,” says Ravindran, “they’ll demand the test that tells if it works for them.” He adds: “Prescribing is like buying a suit — one size does not fit all.”
“It’s true that people will demand optimal care” under consumer-directed healthcare, concurs Stephen Lash, PharmD, manager of value-based healthcare at Genentech. “But it also leads us back to the original concept of the drug benefit. We tend to spend more on products for upset stomachs and runny noses, as well as minor illnesses that require one-time applications of antibiotics. Consumers are absorbing more risk, but the appropriate role of insurance is to cover more expensive therapies when those treatments can demonstrate value such as extending life or improving productivity.”
“Consumers will take advantage of the most cost-effective option that they and their physicians determine is right for them.”
— William Fleming, PharmD, Humana
Instead of trying to be all things to all people, plans may start to cover products that will prevent morbidity, says Lash, a former managed care pharmacy director. “The drug benefit should be reserved to cover medications required to improve quality of life, prevent morbidity, and extend life. The larger issue for those who manage drug benefits is the amount of money paid out for noncritical conditions.”
One possibility, he says, is that health plans could develop a separate injectable carve-out. However, if the employer does not purchase the carve-out and has employees in need of specialty care, exceptions and overrides would raise bigger issues.
“That one scares me the most,” says Lash. “Once you make an exception for a life-saving treatment, you set out on a slippery slope.”
EFFECT ON DRUG MARKET
William Fleming, PharmD, views consumers as the missing piece when it comes to reining in health-care costs. “Engaging consumers is extremely important,” says Fleming, vice president of pharmacy and clinical integration for Humana. “We have invested a tremendous amount of capital, both in financial and human terms, in creating tools to help consumers understand and wisely use their health benefits.” He cites a recent study by the Society of Actuaries that found Humana’s consumer-choice Smart products held premium increases to single digits for employers over a three-year period.
Opinion leaders differ about whether consumer-directed plans will benefit or retard the marketplace for biologics. An unscientific poll of the Biotechnology Healthcare editorial board earlier this year revealed substantial concern that consumers needing costly biologics — which are generally not substitutable — could defer important treatment. But Fleming believes that “substantial” biologic products will continue to be a component of the treatment plan used by physicians.
“Biotechnology drugs certainly cost more than traditional pills, but the advent of consumer-directed health plans and, specifically, high-deductible health plans, are unlikely to decrease usage of these products. Generally, consumers who have a disease burden that requires use of a biotechnology drug will have the peace-of-mind protection that consumer-directed health plans present. We do not expect the use of biotechnology drugs to be that different than with the traditional co-payment plan.”
If anything, Fleming says, the advent of HDHPs will spur dialogue between consumers and physicians about treatment options: “Consumers will take advantage of the most cost-effective option that they and their physicians determine is right for them.” Fleming doesn’t believe that consumers will push for availability of new biologics that might not be appropriate for them any more than they do today with other medical technologies.
Therein lies the rub, offers Lash, of Genentech. Although he thinks that more resources will be shifted toward biologics, “The true costs have yet to be described. It’s easy — but inaccurate — to look at the acquisition cost alone, which doesn’t reflect the value of eliminating such things as surgery, ancillary medications, laboratory work, repeat visits, toxicity, and other specialty services.”
Fleming would seem to agree, pointing out that Humana considers drugs in terms of safety, efficacy, and outcomes, as well as unit cost. “The big element missing from the review process today is the focus on understanding clinical outcomes and the trade-offs between the costs of the drug and the savings on the medical side. As more and more biotechnology drugs and genomic tests enter development and are launched, we’ll push manufacturers to help us find the value in the outcomes analyses.”
THE VALUE EQUATION
Other health plans share Fleming’s viewpoint.
“We’ve been working over the last five years on an evidence-based process looking at the clinical science of medications,” says David Clark, MBA, vice president of pharmacy services for Portland, Ore.-based The Regence Group, the largest health insurer in the Pacific Northwest. Regence created its own not-for-profit organization — a team of 20 pharmacists trained to study not only the safety and efficacy of drugs, but also how they fit into the panoply of existing products.
“The truth is,” says Clark, “most medications don’t add anything of value. To get approved by the FDA [U.S. Food and Drug Administration], they must answer safety and efficacy questions, but that doesn’t mean they’re better.” A study Regence conducted last summer determined that of all medications approved by the FDA between 2001 and 2003, more than half did not add any value to the market, with value defined as improved efficacy, safety, persistency, or lower cost. “Some of that applies to biotech,” he notes.
As an example, Clark’s team found no evidence that adali-mumab (Humira), though considered effective in the treatment of rheumatoid arthritis, is clinically superior to etanercept (Enbrel) or infliximab (Remicade). In the case of the cancer drug gefitinib (Iressa), Clark’s team found the evidence for effectiveness to be questionable, noting that the initial study was based on radiologic endpoints, not survival data.
“We put a lot into evidence review because the FDA is not mandated to decide whether a drug is actually better [than what is already on the market], and no one else does. There are pieces of it being done elsewhere but nobody is doing it with the same breadth and depth — and speed,” Clark says. Because Regence wants to be ready if a physician calls requesting information about a medication, “We’re very aggressive in going after data. We hound the manufacturers.”
The consumer movement, he continues, will spur greater demand for this type of information. P&T committees have long sought comparative data — which is virtually nonexistent for biologics — but giving the consumer a seat at the decision-making table and more say in how healthcare dollars are spent could finally be the catalyst. Groups like ECRI, a Plymouth Meeting, Pa.-based not-for-profit group that performs healthcare technology assessments, are seeking to develop a clearinghouse for such information.
“Healthcare is one of the few areas in which consumers have not been involved in purchasing decisions. They haven’t had much skin in the game,” says Clark. Judging from the horizon, that is about to change. The two riders of biotechnology and consumer-directed healthcare are about to enter the kingdom.