One neat trick for forcing pharma to set lower drug prices

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Can a prescription drug simply cost too much for health insurance to cover?

That idea is implicit in a new program by CVS Health, one of the largest pharmacy benefits managers (PBMs) in the country. The pros and the cons of the proposal were debated on Monday in Health Affairs, with pharmaceutical interests coming out with a critique and CVS defending itself.

The particulars of the CVS program are pretty simple. The PBM will allow the self-funded insurers (read: large employers) it works with to exclude coverage for certain drugs if the list price is too high. If a drug launches at a price above $100,000 for every year of quality life its treatment provides, then health plans can refuse to cover it under the CVS plan.

CVS alleges that list prices have been increasing unchecked, but formularies give insurers and PBMs a tool to pressure drug makers to keep their launch prices lower.

”Until now, PBMs such as CVS Health have had no ability to impact the initial launch price of a drug, which is set solely by the manufacturer, seemingly without regard to the inherent value of the medication or what the payer or patient can afford,” CVS’s Troyen Brennan and Surya Singh wrote.

 CVS Health

They pointed out that it will be up to individual employers to choose whether or not they want to take advantage of the new program. But the hope is that the threat of not being covered by big health plans will encourage drug makers to set lower launch prices.

The critique of CVS from Robert DuBois of the National Pharmaceutical Council, which has the support of the drug industry, was multi-pronged:

  • First and foremost, DuBois portrayed the $100,000 threshold as arbitrary.
  • Second, DuBois criticizes the metric being used to assess value as insufficient to fully gauge a medicine’s worth. For example, the value could be higher if it’s a new treatment for a previously untreatable disease.
  • The industry standard also doesn’t account for the secondary values provided by a successful treatment, such as any increased economic productivity or the reduced burden on caregivers.
  • Lastly, DuBois argues the binary cover-or-don’t-cover nature of the CVS program doesn’t account for how different patients react to different medicines (and therefore doesn’t reflect the full value for a patient who responds the best to a certain treatment).

“The reason why it’s a good debate is because there really isn’t a right answer,” said Walid Gellad, who studies prescription drug policy at the University of Pittsburgh.

At this point, Gellad said, there is little doubt that strategies like CVS Health’s are the way of the future. Everybody, from President Donald Trump on down, laments our impotence in bringing down the list prices of drugs. Stricter formulary designs are one of the few direct tools that might be able to influence drug manufacturers’ behavior.

But that doesn’t mean that the CVS program is flawlessly designed. Pharma has a point when it argues that relying on a single metric, even one designed by a generally respected body in the Institute for Clinical and Economic Review (ICER), isn’t necessarily a foolproof way to gauge a medicine’s value.

”The idea that we base something solely on a cut point determined by one cost effectiveness analysis from ICER is a big step to take,” Gellad said. “It’s like a giant step forward when you don’t really know how to walk yet.”

Gellad did wonder whether the CVS plan would have more bark than bite. There is an important caveat to the PBM’s policy: If a drug is approved by the Food and Drug Administration as a “breakthrough” therapy, then plans could not deny coverage based on the price. A “breakthrough” therapy is one that treats a serious or life-threatening disease or improves substantially on existing treatments for a particular malady. (There is an ongoing debate about those definitions and the rate of approvals that we’ll leave aside for now.)

When you consider how many high-cost drugs might be classified as breakthroughs, and then consider how many high-cost drugs CVS Health might already be excluding from coverage, the PBM’s new policy might not actually have much effect.

”I don’t see this applying to almost any medicines,” Gellad said.

CVS Health did not respond to my request for an estimate on how many medicines could be affected.

Still, it’s a worthwhile debate because CVS isn’t doing this in isolation. The Veterans Affairs Department has started using ICER’s quality assessments to make its own decisions about which drugs to cover.

Barring more ambitious (and disruptive) ideas like paying companies a prize for new drugs, tinkering with formularies and better defining quality so as to better pay for it are likely the incremental, maddeningly slow paths to addressing high drug costs.

”Something like this is the inevitable future. Nothing else is talking about launch prices,” Gellad told me. “Some version of this is where everybody is heading.”

This story appears in VoxCare, a newsletter from Vox on the latest twists and turns in America’s health care debate. Sign up to get VoxCare in your inbox along with more health care stats and news.

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