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Department of Health Policy and Management, Johns Hopkins Bloomberg School of Public Health, Baltimore, MD, USAJohns Hopkins Berman Institute of Bioethics, Baltimore, MD, USA
Department of Health Policy and Management, Johns Hopkins Bloomberg School of Public Health, Baltimore, MD, USAJohns Hopkins Berman Institute of Bioethics, Baltimore, MD, USA
Medicare Part D spending on ultra-expensive drugs increased from 1.5% to 19% of spending on brand-name drugs between 2012 and 2018. Some industrialized countries use added therapeutic benefit assessment to evaluate drugs.
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Very little is known about whether these assessments are consistent across multiple countries and specifically how these assessments apply to ultra-expensive drugs.
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We found that between 73% and 85% of ultra-expensive drugs assessed in France, Canada, or Germany received a low added therapeutic benefit rating.
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Policy reforms in the United States could use added therapeutic benefit to inform coverage and pricing decisions for ultra-expensive drugs.
Abstract
Objectives
While the United States does not have a method for assessing the added therapeutic benefit of drugs, France, Canada, and Germany do. We examined the added therapeutic benefit of the most expensive drugs prescribed to Medicare Part D beneficiaries in the United States.
Methods
We identified ultra-expensive drugs with annual Medicare spending that exceeded $62 794 (United States GDP per capita in 2018) using Medicare Part D Prescription Drug Spending and Utilization Data. We used added therapeutic benefit ratings assessed by health technology assessment agencies in France, Canada, and Germany.
Results
We identified 122 ultra-expensive drugs in 2018. Sixty-five percent of these drugs (n = 79) were assessed by at least one of the countries. Based on these assessments, approximately 75% received a low added therapeutic benefit rating.
Conclusions
Most ultra-expensive drugs prescribed in the United States and assessed by France, Canada, and Germany provide low added therapeutic benefit. Policy reforms in the United States could use added therapeutic benefit to inform coverage and pricing decisions for ultra-expensive drugs. Similar to Germany, one approach would be to allow the company to set a market price for a limited period of time before requiring a price reduction if the added therapeutic benefit is below a certain threshold. Another approach would be to identify when drug prices are substantially more expensive in the United States and conduct an added therapeutic benefit assessment and price review on these drugs.
All countries are now facing significant challenges deciding whether to cover very expensive drugs and how much to pay for these drugs. The United States may have more difficulty making these pricing decisions than other industrialized countries because of its decentralized decision-making process and a lack of a government-sponsored entity to assess the value of new health technologies. A recent proposal for value-based payment from the Centers for Medicare and Medicaid in the United States suggests that this new wave of ultra-expensive drugs and gene therapies are pushing public and private health insurers to evaluate the value of certain new drugs.
Given recent advances in gene therapy that have created a new generation of ultra-expensive drugs, exemplified by Onasemnogene abeparvovec (Zolgensma), a drug to treat spinal muscular atrophy in children, whose US list price is $2.1 million, and newer and even more expensive therapies nearing approval by the Food and Drug Administration, the price differentials between the United States and other industrialized countries may increase even more.
In this study, we defined drugs as “ultra-expensive” when the average annual per beneficiary spending by the Medicare Part D program and the beneficiary exceeded the gross domestic product per capita ($62 794 in the United States in 2018). There were 122 drugs that met this criterion in 2018. Medicare Part D spending on brand-name drugs for these ultra-expensive drugs increased from 1.5% in 2012 to 19% in 2018.
Most insurers in the United States will cover these ultra-expensive drugs but may also impose formulary constraints or significant patient cost sharing. In this article, we focus on the prices and coverage in the Medicare program. While all insurers face challenges with ultra-expensive drugs, we focus on the Medicare Part D program for several reasons. First, Medicare Part D is the public payer that spends the most on pharmaceuticals in the United States.
and by law Medicare cannot directly negotiate the price for these drugs with the drug companies. In addition, Medicare Part D beneficiaries can be expected to pay a significant amount out-of-pocket for these ultra-expensive drugs. For example, for some oral anticancer drugs in Medicare Part D, patients’ out-of-pocket spending was expected to exceed $10 000 in 2019.
Manufacturers do not appear to offer substantial rebates for these ultra-expensive drugs, and limited available data suggests that the rebates are lower for these ultra-expansive drugs compared to cheaper drugs, probably because they have no competition.
An added therapeutic benefit assessment determines the extent to which a drug offers additional therapeutic value compared with the current standard of care. The countries then use this added therapeutic benefit assessment to inform the price or reimbursement rate that will be paid for the drug. When considering drug pricing policy reforms for the United States, added therapeutic benefit assessment offers a possible alternative to the use of cost-effectiveness analysis, which faces potential legal obstacles and strong political opposition in the US context.
Added therapeutic benefit assessment is also less directly related to income levels and willingness to pay, which complicates some reference pricing discussions.
Previous research examining the added therapeutic benefit of drugs in the United States has considered assessments from a single country.
Why do health technology assessment coverage recommendations for the same drugs differ across settings? Applying a mixed methods framework to systematically compare orphan drug decisions in four European countries.
A recent article reported the added therapeutic benefit scores of 46 new drugs approved by the United States in 2017 as assessed by HTA agencies in France, Canada, and Germany.
Due to the small sample and recent approval date, only 6 of these drugs had received an assessment in all 3 countries. As a result, very little is known about whether added therapeutic benefit assessments are consistent across multiple countries and specifically how these assessments apply to ultra-expensive drugs, which represent a significant burden to payers. Our study focuses on ultra-expensive drugs that comprise a significant portion of Medicare Part D spending and how consistently they score on the added therapeutic benefit across several countries. We discuss potential policy options regarding the implementation of an added therapeutic benefit assessment system for ultra-expensive drugs in the United States.
Methods
Study Sample
Ultra-expensive drugs were identified using the publicly available 2018 Medicare Part D Prescription Drug Spending and Utilization Data.
Annual average spending per beneficiary was used as a proxy measure of the annual drug cost to both Medicare and the beneficiary. Following Kang et al, drugs with annual average spending per beneficiary greater than the US gross domestic product per capita in 2018 were categorized as ultra-expensive drugs.
Our use of a cost threshold rather than a percent cutoff (eg, the top 10% of drugs on annual average spending per beneficiary) is in line with related policy choices, such as Medicare’s definition of specialty drugs. A definition based on a percent cutoff would likely be more difficult to implement since frequent price changes means the set of drugs that qualify would be very unstable. Finally, all drugs that had substitutable generics on the market were excluded because other countries typically assess and price them differently from brand-name drugs without available generics.
Variable of Interest
We used publicly available added therapeutic benefit ratings assessed by HTA agencies in France, Canada, and Germany: the Commission de Transparence (Transparency Commission) in France, the PMPRB (Patented Medicine Prices Review Board) in Canada, and the G-BA (Gemeinsamer Bundesausschuss, or Federal Joint Committee) in Germany.
Our choice of countries was purposive to include those with large pharmaceutical markets
Haute Autorité de Santé Medicinal products assessment: Transparency Committee Doctrine: principles of medicinal products assessment and appraisal for reimbursement purposes.
Haute Autorité de Santé Medicinal products assessment: Transparency Committee Doctrine: principles of medicinal products assessment and appraisal for reimbursement purposes.
Haute Autorité de Santé Medicinal products assessment: Transparency Committee Doctrine: principles of medicinal products assessment and appraisal for reimbursement purposes.
Because of the different rating mechanisms, we constructed a binary variable for each country’s assessment by aggregating the top 2 levels in each country (“high ATB”) and the remaining levels (“low ATB”).
We made 1 modification in the case of Canada. Canadian assessments carried out prior to 2010 had only 3 levels: breakthrough or substantial, moderate/little/none, and a line extension (eg, a new strength of an existing drug). We classified drugs assessed as “breakthrough or substantial” before 2010 as “high ATB” and the rest as “low ATB.” Because Canada groups “moderate” with “none” in pre-2010 assessments and “slight” with “none” in post-2010 assessments, we could not adopt variable definitions used in previous studies.
However, our definition of the “high ATB” category is appropriate given our study objective: ultra-expensive drugs ought to meet an especially high bar of added therapeutic benefit to justify their very high prices. See the Appendix in Supplemental Materials found at https://doi.org/10.1016/j.jval.2020.10.021 for a summary of the added therapeutic benefit variable definition in the various countries.
In some cases, a drug received more than one added therapeutic benefit rating due to different drug strengths or indications. For purposes of constructing the binary variable, we used the highest rating (ie, the rating that corresponds to the category for the largest added benefit) given to that drug.
Data Collection and Analysis
All added therapeutic benefit data was collected between March 24 and April 4, 2020. We identified French ratings through publicly accessible data files.
We used Google Translate to translate G-BA reports to English when necessary and confirmed German translation accuracy with an archival research consultant. We identified alternative brand names using Micromedex. Seventy-nine drugs in our sample received an added therapeutic benefit score in at least one of these countries. We calculated descriptive statistics to summarize the added therapeutic benefits scores and agreement across each country.
Results
Table 2 describes the characteristics of brand-name ultra-expensive drugs in our sample (n = 122). The average annual spending per Medicare beneficiary for each drug was $174 669. Seventy-nine percent of ultra-expensive drugs were approved as orphan drugs in the United States. Twenty-five percent were for treating cancer, and no other therapeutic group except “miscellaneous” comprised greater than 10% of the drug sample (see the Appendix in Supplemental Materials found at https://doi.org/10.1016/j.jval.2020.10.021 for details).
Table 2Characteristics of ultra-expensive drugs.
Variable
Median (IQR)
Total (N = 122)
Beneficiaries
294 (59-2040)
278 089
Annual spending
$47 800 000 ($11 400 000-$180 000 000)
$24 560 040 801
Annual spending per beneficiary
$101 183 ($78 129-$151 243) Mean: $174 669
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Years since US FDA approval
7 (4-14) Mean: 11
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N (%)
-
Orphan approval in US (yes)
96 (79%)
-
Cancer treatment (yes)
31 (25%)
-
FDA indicates Food and Drug Administration; IQR, interquartile range.
Figure 1 displays added therapeutic benefit scores by country. Sixty percent of the 122 ultra-expensive drugs were assessed in France, 45% in Canada, and 35% in Canada. In each country, the majority of ultra-expensive drugs received a low added therapeutic benefit rating. In France, 85% (62 drugs) received a low added therapeutic benefit rating. In Canada, 73% (40 drugs) received a low added therapeutic benefit rating. In Germany, 74% (32 drugs) received a low added therapeutic benefit rating. Of the 62 drugs that received a low rating in France and the 32 drugs that received a low rating in Germany, 29% (n = 18) and 31% (n = 10), respectively, were rated as providing no added therapeutic benefit. The Canadian ratings, for reasons described above, do not permit analysis at this level of detail.
Figure 1Percentage of ultra-expensive drugs per added therapeutic benefit score by country. The “low ATB” category includes ratings of “no ATB,” but we distinguish them here for purposes of interpretation. The Canadian rating system does not provide assessments at this level of granularity.
Figure 2 compares the added therapeutic benefit of drugs that were assessed by 1, 2, and 3 countries. Ninety-three percent of drugs assessed by just 1 country received a low ATB rating. For drugs assessed by 2 countries, 61% were always rated as low ATB, and 17% were always rated as high ATB (78% agreement). For drugs assessed by all 3 countries, 61% were always rated as low ATB, and none were always rated as high ATB (61% agreement).
Figure 2Comparison of the added therapeutic benefit (ATB) of ultra-expensive drugs that were assessed by 1, 2, and 3 countries.
Figure 3 summarizes agreement on added therapeutic benefit for each country pair. Agreement in scoring was highest between France and Canada (85%) and lower between Canada and Germany (69%) and between France and Germany (67%). The percentage of drugs that were always rated as low ATB was 67% in France and Canada, 62% in Canada and Germany, and 67% in France and Germany. In France and Germany, no drugs were always rated as high ATB.
Figure 3Percentage of agreement on added therapeutic benefit (ATB) for each set of 2 countries.
Our study found that between 73% and 85% of ultra-expensive drugs prescribed in 2018 for Medicare Part D beneficiaries and assessed by France, Canada, and Germany were rated as offering low added therapeutic benefit compared with the current standard of care. Moreover, in France and Germany 30% of these drugs were rated as offering no added benefit at all. Agreement between 2 countries regarding the added therapeutic benefit of ultra-expensive drugs is high, especially between France and Canada. Notably, the percentage of drugs always rated as low ATB is consistently between 60% and 70% regardless of whether considering the drugs assessed by 2 countries, 3 countries, or each pair of countries. Despite this consistent perception of the primarily low added therapeutic benefit of ultra-expensive drugs, their total cost comprised approximately 19% of total Medicare Part D spending on branded drugs ($25 billion) in 2018.
Federal and state legislatures in the United States are now exploring policies to address prescription drug spending. Our findings highlight why the United States could consider using added therapeutic benefit assessment to inform appropriate pricing and reimbursement policies for ultra-expensive drugs. This approach could represent an early step toward broad adoption of value-based pricing in the United States. Because added therapeutic benefit assessment does not depend on the quality-adjusted life year or the use of a value threshold, it may be more politically acceptable than cost-effectiveness analysis, which is used in countries such as the United Kingdom to control drug prices. Though value-based pricing has traditionally failed to gain traction in the United States, there are signs of change among both private and public payers. For instance, CVS Caremark has announced a willingness to use cost-effectiveness analysis in coverage decisions, and New York’s Medicaid program, in a widely followed case, ruled that the benefits of a new cystic fibrosis drug were not worth its cost and requested a larger rebate from the manufacturer. Recently, the Centers for Medicare and Medicaid Services proposed new regulations for Medicaid that would better accommodate value-based pricing arrangements.
In this climate of potential change, it is important to begin considering how added therapeutic benefit assessment could inform drug pricing in the United States.
Ideally, the United States could develop its own measure of added therapeutic benefit. In the short term, the United States could consider using the added therapeutic benefit ratings from countries that exhibit considerable agreement, such as France and Canada. The United States could use these international added therapeutic benefit ratings to inform pricing and reimbursement policies for its public insurance programs.
The countries examined in our study provide different models for how to implement and use added therapeutic benefit assessments in a drug pricing system. France uses the added therapeutic benefit rating to set pricing parameters for drugs ahead of market entry. Drugs receiving higher ratings may be priced according to prices in other international markets, whereas the prices of drugs receiving low ratings are set equal to or lower than those of relevant comparators in the French market.
Canada and Germany conduct assessments after drugs have already entered the market. Canada uses ratings to conduct price reviews and to determine whether manufacturers must return a portion of any revenues determined to be excessive.
In Germany, manufacturers are free to set the price of a drug for its first 12 months on the market, but then an added therapeutic benefit assessment determines whether the future price of the drug will be negotiated (drugs receiving a rating above a certain threshold) or set according to the prices of relevant comparators already on the German market (drugs with a rating below a certain threshold).
Receiving a low rating can contribute to a manufacturers’ decision to pull the drug from the German market; among drugs that entered the German market between 2012 and 2016, those that did not receive a major, considerable, or minor added therapeutic benefit rating were over 10 times more likely to be withdrawn from the market.
Given that market-based pricing is highly valued in the US political context, an approach like Germany’s—wherein manufacturers are free to set a market price for a limited period of time, but then must reduce the price if the rating is below a certain threshold—may be more politically feasible in the United States than an approach like France’s that constrains pricing at launch. Another benefit of this approach is that the negotiations that follow a period of market availability are less likely to delay patient access.
An additional option could involve pairing added therapeutic benefit ratings with an external reference pricing program. Kang et al found that the prices of 79 drugs in Medicare Part D were approximately 4 times higher than in the United Kingdom after accounting for the average Medicare rebate for branded drugs.
Drugs that are especially expensive compared to reference countries could undergo price reviews on the basis of an added therapeutic benefit assessment. Such ratings could also be used as a criterion for determining drug placement in formularies. Because these ratings often differ by indication, a move toward indication-based pricing in the United States could consider the use of added therapeutic benefit assessments as one factor to inform these prices.
Our findings suggest paying particular attention to drugs with orphan approval. Seventy-nine percent of ultra-expensive drugs in our sample received orphan approval, and at least 70% of the orphan drugs assessed by each country received a low ATB rating (see the Appendix in Supplemental Materials found at https://doi.org/10.1016/j.jval.2020.10.021). The fact that many orphan drugs in our sample have low added therapeutic benefit ratings is especially concerning because the comparator used to assess most orphan drugs may be much less expensive clinical options such as symptom management and supportive care given the absence of alternative drugs. Importantly, orphan drugs in France and Canada are subject to the same review process and added benefit assessment as other drugs. Orphan drugs in Germany are exempt from receiving a designation of no or less added benefit,
suggesting that our findings from Germany may be biased in favor of an added benefit.
One potential concern is that some of the ultra-expensive drugs that were not assessed may offer a large added therapeutic benefit. However, the procedures for benefit assessment in each of these countries suggest this is unlikely. In France, all drugs reimbursable by public health insurance are assessed.
The only drugs that are not reimbursable are those determined to provide insufficient clinical benefit (ie, an absolute measure of benefit, whereas the added therapeutic benefit is a relative measure) or those for which the manufacturer does not apply for reimbursement (perhaps because the manufacturer does not anticipate a favorable added therapeutic benefit rating). In either case, the drug is unlikely to have received a high added therapeutic benefit rating if it had undergone assessment. The PMPRB assesses all new patented drugs marketed in Canada.
A manufacturer that developed a drug that it believed to offer substantial benefits would presumably want to sell this drug in Canada and Germany. The unavailability of a drug in these markets could therefore mean that the manufacturer does not consider the drug to provide a substantial benefit. It is also possible that some of the ultra-expensive drugs without added therapeutic benefit ratings are simply not yet approved for sale in these other countries or currently undergoing assessment. Future research could directly test these hypotheses and others regarding why some ultra-expensive drugs are not assessed by these countries.
The use of added therapeutic benefit ratings presents several limitations. First, there can be a lack of high-quality clinical evidence at the time of assessment,
though this lack of evidence is itself a reason to question whether the ultra-expensive price is justified. Nonetheless, this limitation is partially mitigated in our study because we used the highest rating across all assessments, which includes those based on new evidence. France, for instance, reevaluates drugs every 5 years, or sooner if new evidence becomes available.
Because our sample includes many relatively new drugs, our analysis should be repeated as new clinical and real-world evidence is generated. Future work could also examine whether the generation of new evidence impacts a drug’s rating or ultra-expensive drug status.
Second, the experience or composition of the decision-making committees may bias added therapeutic benefit assessments.
Our examination of data from multiple HTA agencies suggests a reasonable level of agreement across the decision-making bodies. However, because the US healthcare system differs from those in these other countries, ultimately the US may want to create its own HTA procedure to evaluate these ultra-expensive drugs.
Finally, although added therapeutic benefit ratings are formally assigned independent of price, it is possible that assumptions or concerns about the likely budget impact of ultra-expensive drugs could influence assessments.
Exploring whether this occurs could be a research question for qualitative content analyses or interview studies with HTA appraisal committees.
Conclusion
The number of ultra-expensive drugs and Medicare beneficiaries taking these drugs has grown significantly, resulting in a very high concentration of Medicare Part D spending on ultra-expensive drugs. Between 73% and 85% of these drugs assessed in France, Canada, or Germany received a low added therapeutic benefit rating. Policy reforms to address drug prices in the United States should consider developing an assessment framework for added therapeutic benefit to incentivize and reward the development of drugs that offer a significant clinical improvement over the current standard of care. In the interim, use of international assessments would be possible.
Author Contributions:Concept and design: DiStefano, Kang
Acquisition of data: DiStefano, Kang
Analysis and interpretation of data: DiStefano, Kang, Yehia, Morales, Anderson
Drafting of the manuscript: DiStefano, Yehia, Morales
Critical revision of the paper for important intellectual content: DiStefano, Kang, Yehia, Morales, Anderson
Obtainingfunding: Anderson
Supervision: DiStefano, Anderson
Conflict of Interest Disclosures: The authors reported no conflicts of interest.
Funding/Support: This work was supported by a grant from Arnold Ventures.
Role of theFunder/Sponsor: The funder had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; or decision to submit the manuscript for publication.
Why do health technology assessment coverage recommendations for the same drugs differ across settings? Applying a mixed methods framework to systematically compare orphan drug decisions in four European countries.
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