Cancer Drugs Continue to Drive Pharmaceutical Spending Trends

Wayne Kuznar

August 2015, Vol 6, No 7 - AVBCC 2015 5th Annual Conference


Washington, DC—The increasing number of specialty drugs will drive pharmaceutical spending and exert greater pressure on the demonstration of the value of these drugs, said Douglas Long, Vice President of Industry Relations at IMS Health, at the Fifth Annual Conference of the Association for Value-­Based Cancer Care.

Hepatitis C virus (HCV), multiple sclerosis, and oncology led specialty drug spending in 2014. However, in 2015, Mr Long predicted that the big stories will be in oncology and will include the PD-1 inhibitors for the treatment of cancer as well as orphan drugs, many of them in oncology.

The upcoming launch of the first biosimilar approved in the United States—Zarxio (filgrastim-sndz), a biosimilar for the branded drug Neupogen (filgrastim)—represents a milestone in the oncology market, Mr Long said.

The most notable story in pharmaceuticals in 2014 was not related to oncology but was sofosbuvir (Sovaldi) for the treatment of HCV infection. In 1 year, sofosbuvir became the largest specialty drug in the United States, with approximately $8 billion in sales. “It is by far and away bigger than any oncology product out there,” Mr Long said. “The previous generation of hepatitis C products are not even on the market anymore. They had a shelf life of about 3 or 4 years. I don’t know whether that means we’re going to see, as things advance, obsoletes of the previous generation of things. That has not happened in oncology yet.”

Because of the high cost of sofosbuvir, exclusive agreements between drug manufacturers and pharmacy benefits managers resulted in price concessions from manufacturers. “We’ve never seen this before. It did not happen in multiple sclerosis. It hasn’t happened in oncology yet,” Mr Long said.

However, this is changing in 2015, with oncology leading the news in drug development and drug costs. The cost of drugs for rare diseases, many in oncology, continues to soar. According to ­­Mr Long, their price averages between $250,000 and $400,000 annually. “Those aren’t cures,” he said. “Those are for the rest of somebody’s life. Eventually, the pressure on the pharmaceutical industry is going to get so intense that we’re going to have to do something about it or the government will do price controls.”

Innovation Shifts to Specialty Drugs

Drug spending is on the rebound, with specialty, niche, and orphan drugs being key sales drivers. The growth in specialty drugs in oncology reached 16.7% by November 2014 (Figure). Innovation is shifting to specialty drugs, Mr Long said, with even greater attention in the absence of savings from patent expirations.

Figure

The most successful recent launches have been specialty drugs and agents for distinct populations, many of them in oncology. The success of a new launch depends on the clear alignment of a drug’s value to stakeholders’ needs. A high unmet need in the market with high pharmaceutical differentiation is tied to successful launch performance.

This may explain the continuing growth in oncology drugs and supportive care agents, with hormone therapies in oncology showing rebounded growth.

“Targeted therapies still are pretty strong, but all facets are going up in the oncology market,” Mr Long said. Among the top 10 specialty drugs in terms of sales are rituximab (Rituxan), which reached $3.4 billion in 2014, ­­and bevacizumab (Avastin), with sales reaching approximately $3 billion.

In addition, 6 supportive care agents are top-selling drugs. The Table lists the 10 top-selling cancer drugs in the recent year, all showing robust market penetration and growth. Overall, the top 20 oncology drugs represent about 70% of the overall market spending on drugs in the United States.

Table

This specialty growth has coincided with the traditional “patent cliff,” bringing generic competition into the oncology market.

“One of the ways we paid for specialty spending is we had all these generic expiries,…branded patent expiries, and generic competition in primary care and in oncology,” said Mr Long. “We’re starting to run out of those.”

Here Come the Biosimilars

Another event to watch for is the launch of the first biosimilar in the United States, as noted earlier, which perhaps not surprisingly is a cancer drug. Several other biosimilars in this class are expected to receive FDA approval later this year or early next year.

A number of familiar specialty drugs will lose patent protection between now and the end of the decade, which is expected to drive a robust biosimilar marketplace, predicted Mr Long.

“It costs about $200 million to bring a biosimilar to the marketplace versus a small-molecule generic, which is approximately $2 million.” Therefore, “you’re not going to see a lot of discounting when they [biosimilars] do come,” he said. “They will give price relief, but it might be a discount of 20% or 30%. If you’re the payer and you have many patients, you’re going to see some significant savings.”

Avoidable Costs Exceed $200 Billion

Controlling costs for patients with chronic conditions who have high healthcare spending can yield big savings, said Mr Long. Of privately insured health plan members, 1% of patients account for 26% of all healthcare spending. The optimized and timely use of medicines can prevent avoidable hospitalizations and can improve drug use to control costs, as can curbing nonadherence and noncompliance.

According to Mr Long, the 6 factors that contribute approximately $213 billion annually in avoidable healthcare costs include:

  1. Medication nonadherence, resulting in complications that are often more expensive than the drugs and worsen health outcomes
  2. Delayed evidence-based treatment, which occurs when drugs are not delivered to patients at a time that would be most valuable in terms of health outcome and cost-effectiveness
  3. The misuse of antibiotics
  4. Medication errors, which occur across the 4 processes of prescribing, preparation and dispensing, administration, and monitoring, and often result in costly complications
  5. The suboptimal use of generics; in some areas, branded drugs are still prescribed and dispensed despite the availability of therapeutically equivalent, lower-cost generics
  6. Mismanaged polypharmacy, which occurs when healthcare professionals do not, or cannot, adequately oversee patients who receive multiple medicines concurrently.

New Models of Care

“Tomorrow’s models will be built on alignment and cooperation,” said Mr Long. “In 2015, we’re in the advanced integrated delivery network model of the marketplace. By 2020, we’re moving to population health.”

In the integrated delivery network model, payers, hospitals, and physicians are aligned to improve outcomes and deliver value. In the population health model, patients will be included, as in accountable care organizations (ACOs). “It’s going to be pay for performance and pay on the value, and 50% of Medicare payments will be on a value-driven basis in 2018,” Mr Long said.

The lines are blurring between the delivery of care and health insurance through vertical integration.

Of current health networks:

  • 66% are part of ACOs
  • 50% own or operate their own ­insurance plans
  • 33% have direct contracts with ­employers.
In addition, “as these networks emerge, they are trying to manage chronic diseases,” said Mr Long, and cancer is going to be one of the chronic diseases in the future. A teamwork approach is most efficient to manage chronic diseases, but with a shortage of oncologists, physician extenders will be paramount in the management of cancer in integrated networks.

The need is urgent to use evidence-based approaches: as integrated networks and payers take on risk, they are looking to improve patient outcomes and move to value-based models, according to Mr Long.

With the increased financial risk, payers will look to identify high-risk populations, such as those at high risk for readmission within 30 days, via predictive modeling.

“You’ve got to align metrics, payments, and outcome incentives, and identify and partner on high-risk populations,” said Mr Long.