Biotechnology Healthcare - July/August 2008 - (Page 23)

By the numbers 1 or 2 Number of biosimilars (in addition to Omnitrope) expected to gain FDA approval by 2010 4 Number of Medicare prescription drug plans (PDPs) that required a 33 percent coinsurance for specialty drugs in 2006a 21 Number of Medicare PDPs that require a 33 percent coinsurance for specialty drugs in 2008a 41 Number of national Medicare PDPs (out of 47) that include a tier for high-cost specialty or injectable drugsa 60 Percentage of new medicines submitted to the FDA for approval that are specialty drugsb 130 Number of indications for biologics granted by the FDA between 2000 and May 2008c 300 Percent growth rate in spending on oral biologics from 2002 to 2006d 2010 Year the FDA expects to launch its Sentinel surveillance network, which — with its integrated national database of pharmacy claims — could displace the historical role of biopharma companies as sources of product informatione 1,000,000,000,000 Dollars lost from the economy annually from 7 common chronic illnessesf Sources: a-Kaiser Family Foundation; b-Drug Benefit News; c-BIOTECHNOLOGY HEALTHCARE analysis; d-Journal of Managed Care Pharmacy; e-FDA; f-Milken Institute problematic, though, for a number of reasons. For one, some state insurance and regulatory agencies have ruled that coinsurance is illusory3 and will not permit it in benefit design. In response, many payers have initiated high copayments — $200 or more, or “a lesser-of” approach — and manage the distribution channel by restricting the number of vendors or by disallowing mail order purchase of multiple months’ supply, which can lend itself to waste. On the supply-management side, payers’ intent is to engage the pre- scriber through such tools as medical necessity review, treatment algorithms, prior authorization, and formulary management — “all necessary evils as process control in a silo, although they do not really answer the question about total cost control and clinical return on investment in the long run of managing a chronic condition,” says Kwok. For their part, exasperated physicians argue, “If you are going to approve it anyway, why do you make me do that?” In theory, the exercise might make physicians think twice about whether the patient needs that drug, though the extent to which this happens in actual practice is unclear. Reference pricing is another mechanism payers are testing. This presumes that two or more drug therapies are interchangeable. In a classic reference-pricing scenario, the therapeutic effectiveness of drugs within a disease group is examined, the most effective products are identified, and the least expensive option among them serves as the benchmark. Formulary status or reimbursement is then based on that benchmark, although patients will have the option of taking the more expensive drug if they want to pay the difference. Reference pricing has caught on in Europe for oral medications and, reportedly, has driven down pharmaceutical prices significantly. “Conceptually, reference pricing is not very different from having people pay the difference between a brand drug and a generic,” says Kwok. But reference pricing may not be 3 An insurance provision is considered illusory if “a premium was paid for coverage which would not pay benefits under any reasonably expected set of circumstances.” Fidelity & Guaranty Ins. Underwriters Inc. v. Everett I. Brown Co., 25 F.3d 484, 490 (7th Cir. 1994). JULY/AUGUST 2008 · BIOTECHNOLOGY HEALTHCARE 23

Table of Contents Feed for the Digital Edition of Biotechnology Healthcare - July/August 2008

Biotechnology Healthcare - July/August 2008 Openers Contents Editorial/David B. Nash, MD, MBA Drug Track Health Plan Confidential Rheumatoid Arthritis A Decade of Trial, Error, False Starts, and Hope What Path Will Comparative Effectiveness Research Take? RA Therapies in Development: A New Generation of Relief Assessing the Full Impact of RA on Employers and Payers Stem Cells: Health Insurance You Can Bank On Specialty Pharmacy Employer to Employer Personalized Medicine Trends Clinical Briefs

Biotechnology Healthcare - July/August 2008

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