ICER said a $14,000 drug should be a fraction of the cost. Why its makers listened.

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Pharma's relationship with the Institute for Clinical and Economic Review is frequently uneasy. Occasionally, it's downright hostile.

Such reactions aren't all that surprising. The nonprofit aims to assess the value of treatments based on real-world evidence and the baked-in costs of innovation. Often, there's a wide gulf between the figure it comes up with and the price drug companies assign to new drugs.

But earlier this month, in an unusual twist, Regeneron Pharmaceuticals and Sanofi announced they were re-pricing their cholesterol-lowering treatment Praluent to reflect its value, as determined by ICER.

It was a dramatic adjustment: Previously priced at $14,000 for a year, the companies announced they would lower the cost to align with ICER's recommendation of $4,500 to $8,000 a year for high-risk patients.

Moreover, the move represents a reversal of the standard drug-pricing narrative in which pharma companies raise costs at a clip that far outstrips inflation. Is this break with tradition an anomaly, or will similar market forces bring down the list prices of other drugs?

Stonewalled

To understand Regeneron and Sanofi's unexpected embrace of ICER's pricing recommendations, it helps to have some background on the drug in question.

Praluent is part of a new class of drugs called PCSK9 inhibitors, which mimic the effects of a genetic variant that stops the buildup of low-density lipoprotein (LDL), or “bad” cholesterol. Despite being marketed as the next generation of cholesterol-lowering drugs by their developers – Amgen has a similar treatment, called Repatha – the category has failed to gain traction since launching in 2015.

There are a variety of reasons for this and, if you're looking, plenty of available parties to blame.

According to Dr. Richard Evans, founder and general manager of the stock analysis company SSR Health, the evidence was there from the start: For many Americans with high cholesterol, PCSK9 inhibitors provide advantages over existing medications, often succeeding where statins failed. “I'm surprised payers didn't have to include them sooner,” he said.

But the drug's merits weren't enough to overcome the hurdle of price, which was staggering: Both PCSK9 drugs were priced at around $14,000 a year. For comparison, generic statins can cost less than $1 a day. “Cardiologists saw it as an expensive alternative that the vast majority of people would do no better on than a generic statin,” explained Mark Merritt, president and CEO of the Pharmaceutical Care Management Association, a national trade association that represents pharmacy benefit managers. “When clinicians are telling payers that the drug isn't worth it except for a small percentage of the population, payers are going to listen.”

It didn't help that insurers and PBMs were already reeling from the cost of hepatitis C drugs: Gilead's Sovaldi was approved by the FDA at the end of 2013. Its list price at launch was $84,000, a figure made possible by its clear-cut superiority over existing treatments. By comparison, for the majority of Americans with high cholesterol, PCSK9 as a class offered more modest benefits.

Research by Amgen appears to have backfired on this front by failing to identify patients who would benefit most from its drug. Designed to expand the market for Repatha, the Amgen study included participants with a relatively low risk of heart attack and stroke.

Payers looked at the vast pool of Americans who were potentially eligible, according to the study's criteria, “and were horrified,” said SSR's Evans. To force the payer's hand, he believes drug companies needed to exhibit a benefit in preventing deaths. But the Amgen study didn't find one, likely because the study was relatively short and many participants had low-risk profiles. The drug companies “didn't distinguish between high-risk and no-risk patients,” noted Merritt.

Without a mortality benefit, payers were able to widely deny coverage. Less than half of patients who received a prescription were approved by their insurance carriers.

As a result, PCSK9 sales fizzled. It seemed the once-promising category was destined to languish, caught between the rock of drug companies' overzealous pricing and market grab and the hard place of protective payers.

But then, a plot twist: On March 10, Sanofi and Regeneron presented new data. In a large-scale, multi-year study of patients who had a recent heart attack or severe episode and were already on statins, Praluent was found to reduce the risk of complications including heart attacks, strokes, and chest pain by 15%.

The results appeared promising, but the reduction of adverse events fell below the 20% threshold experts believe would compel insurers to cover the class of drugs. To widen access, concessions were still needed. And, voila: Shortly after presenting the research, Regeneron and Sanofi announced they were slashing the list price to align with its ICER-endorsed value, which incorporated the new data.

What's more, they would only pursue prescriptions for high-risk patients who saw the greatest benefit from the drugs – participants whose levels of LDL cholesterol were over 100 milligrams per deciliter at the beginning of the study saw a 24% reduction in complications, and a 29% reduction in deaths – whittling down an 8 million-plus person market into one a fraction of the size.

The ball has effectively been passed back to payers and PBMs. “We will review the new study data now that they are available, and we will re-examine our coverage criteria to see if they are still relevant,” a spokesperson from Express Scripts told MM&M. “Overall, we are encouraged to hear Regeneron and Sanofi are willing to reduce the price of this medication to make it more accessible for patients.”

From here, clinicians will take another look at the drug's effectiveness and value, Merritt said. Health insurers and PBMs will then use these findings to re-evaluate their formularies. But he stressed that just because the price is lower doesn't mean it isn't still an issue: “You're competing against generic statins that might cost $4 a pill.” Ideally, the end result is increased and easier access for high-risk patients who would benefit the most from the drug.

Does this signal that other pharma companies could warm to ICER?

“Industry will have to recognize the signal ICER provides in its assessment of the cost-effectiveness of new treatments,” wrote Patrick Sullivan, Ph.D., a pharmaceutical economist at Regis University in Denver, in emailed comments. While the nonprofit's analysis “will not always dictate the success or failure of a new drug in the market, it is a very important indicator of relative value.”

In the future, he predicted, drug companies will pay more attention to ICER's recommendations at the time of launch. PCSK9 inhibitors were a promising category from the onset, but given the available evidence, developers priced the drugs too high.

“Price reductions post-launch may be able to help salvage a product's market marginally, but getting the price right at launch would be far more impactful,” Sullivan noted. If the initial list price for PCSK9 inhibitors had been around $4,000, “they would have taken the market by storm.”

The pendulum is swinging away from rebates and toward greater transparency, explained Dan Mendelson, president of the consulting firm Avalere Health. If pharma companies continue to lean on outcomes-based pricing to establish preferred access, we should see a drop in list prices for drugs that offer moderate benefits over existing treatments or have solid competition. (Life-saving therapies with a monopoly on the market are another matter.)

Such reductions always benefit consumers, as cost-sharing is based on a drug's list price, not the opaque discounted prices negotiated by payers and PBMs, said Gerard Anderson, professor of health policy and management at the Johns Hopkins University Bloomberg School of Public Health. For pharma companies, which typically don't receive the bulk of a drug's list price due to substantial discounts and rebates, the move makes a kind of strategic sense. “If they can keep the price close to what they receive, they win the PR battle,” Anderson explained. “I hope more companies follow suit.”

We'll likely see more concession from drug companies going forward, noted SSR's Evans. Life-saving drugs without an existing equivalent will continue to be covered by PBMs and insurance plans. But treatments that don't meet this threshold could find themselves stonewalled by payers and PBMs.

“Formulary managers have become more aggressive about limiting access,” he said. In the case of PCSK9 inhibitors, “payers built a brick wall between a good drug and a ton of patients who would benefit from it because they are trying to avoid a large expense.”

Evans believes the above will likely repeat itself, which casts a dark pall on the entire scenario. However, there is a silver lining: For once, these market forces could drive drug prices down, not up.

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