Pharmaceutical Pricing and Reimbursement in Oncology - Payer Pressure to Justify Premium Pricing of Novel Agents, Pushing Companies to Risk-Sharing Modalities by GBIResearch

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									Pharmaceutical Pricing and Reimbursement in
Oncology
Payer Pressure to Justify Premium Pricing of Novel Agents, Pushing Companies
to Risk-Sharing Modalities
GBI Research Report Guidance




                                              GBI Research Report Guidance
                                              ·     Chapter two gives an introduction to the healthcare scenario and pricing and reimbursement in
                                                    oncology in the key geographies.
                                              ·     Chapter three gives a snapshot of the pricing and reimbursement scenario in oncology in the key
                                                    geographies - the US, the top five countries of Europe (France, Germany, the UK, Italy and Spain), and
                                                    Japan.
                                              ·     Chapter four gives a detailed overview of the healthcare systems, pricing and reimbursement
                                                    processes, and key trends in pricing and reimbursement in oncology brought about by the enactment
                                                    of changes in the pricing and reimbursement landscape in the US.
                                              ·     Chapter five discusses the healthcare systems, processes related to pricing and reimbursement, and
                                                    key trends in pricing and reimbursement in oncology brought to effect due to recent changes in the
                                                    pricing and reimbursement scenario in the top five countries of Europe and Japan.




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                                                                                                                                                      Page 2
Executive Summary




  Usage of oncology
                                              Executive Summary
  therapeutics differs between                According to the World Health Organization (WHO), around 13% of all deaths in the world are due to
  countries depending on                      cancer. The principal treatment modalities for several cancer therapies include surgery, radiation therapy
  policies regarding the                      and chemotherapy; often two or more modalities are combined to create a therapeutic program
  availability of new                         appropriate for a patient. Surgery is considered to be the oldest form of effective cancer therapy. The
  technologies, and economic                  approval of a new broad family of molecularly targeted anti-cancer drugs is indicative of one of the most
  prioritizations in healthcare               substantial advances in clinical oncology, resulting in benefits such as reduced toxicity, improvement in
                                              survival, pain reduction, and overall improved quality of life, among others. However, the access to these
                                              treatments is influenced by several factors, such as the policies regarding the availability of new
                                              technologies, and economic prioritizations in healthcare. Hence, the usage of such drugs differs between
                                              countries, resulting in less effective use of treatment options in many cases.
                                              The following figure shows the distribution of the estimated diseased population for different types of
                                              cancer in the top seven countries of the world; the US, the UK, Germany, Italy, France, Spain and Japan.

                                                Pricing and Reimbursement in Oncology, Diseased Population in the Top Seven Countries for Major
                                                Types of Cancer (millions), 2010

                                                                                5



                                                                                    3.9
                                                                                4
                                                         Population (million)




                                                                                3

                                                                                               2.2
                                                                                2
                                                                                                        1.6          1.5


                                                                                1                                              0.8
                                                                                                                                       0.5   0.4
                                                                                                                                                             0.1         0.1       0.1
                                                                                0
                                                                                                                     Bladder




                                                                                                                                                                         Ovarian
                                                                                    Prostate




                                                                                                                                       NHL




                                                                                                                                                             Esophagus
                                                                                               Breast



                                                                                                        Colorectal




                                                                                                                               NSCLC




                                                                                                                                                                                   Cervical
                                                                                                                                             Head and Neck




                                                Source: GBI Research, Globocan 2008, GBI Research Proprietary Database



                                              Payers in the European Countries are Managing the Influx of New Therapies in Oncology through
                                              Innovative Strategies
                                              Demand has risen significantly for new cancer drugs that have the clinical potential to address new cancer
                                              segments and tumor types. The overall cost of the drug therapy component has grown over time due to the
                                              use of combination therapies, where new drugs are used in combination with older therapies, resulting in
                                              an overall increase in the cost of drug therapy. This has led to a situation where payers find it difficult to
                                              afford the increasing cost of new therapies. One of the innovative strategies adopted by payers is to
                                              demand higher levels of performance in terms of survival and remission, in order for a drug to either qualify
                                              for reimbursement or to sustain the launch price over a period of time. The bodies responsible for the
                                              reimbursement decisions now scrutinize the benefits derived from innovative therapies more rigorously
                                              than before, and compare them to those gained in treatment with other available therapies. It is probable
                                              that in light of new drug launches on the basis of perceived remission data in late-stage patients, the
                                              examination of benefits will be more rigorous by the payers. These comparisons are being made as the
                                              payers are looking for a novel value standard to allocate the budgets more prudently. Agenzia Italiana del
                                              Farmaco (AIFA) - the Italian Medicines Agency - introduced innovative risk-sharing agreements to manage
                                              delivery and funding of novel and expensive drugs.


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                                                                                                                                                                                           Page 3
Executive Summary




                                              The agency applied a health technology assessment (HTA) system in the area of anti-cancer drugs, primarily
                                              motivated by the high cost accounted to the NHS. The other countries of Europe also adopted such
                                              conditional reimbursement agreements.
                                              Oral Chemotherapy Parity Act in the US
                                              The insurers in legislatures across the US are facing the issue of covering intravenous chemotherapy as well
                                              as oral chemotherapeutics. The need for such an act was felt due to hefty out-of-pocket costs for treatment
                                              with oral cancer drugs leading to financial hardship for many cancer patients. In cases where there was no
                                              intravenous substitute for the oral chemotherapy drugs, the burden was entirely on patients to bear the
                                              higher cost for necessary treatment. The states that have already enacted the cancer drug parity laws
                                              include Oregon, Indiana, Iowa, Vermont, Hawaii, Connecticut, Kansas, Colorado, Minnesota, New Mexico,
                                              Washington, Texas, Illinois and New York.
                                              Market Entry Restrictions for Cancer Drugs in the UK Lead the Way for Risk-Sharing Schemes
                                              Janssen-Cilag Ltd’s Velcade (bortezomib), a first-in-class proteasome inhibitor, has shown significant
                                              improved survival in patients who receive the drug relative to those given traditional myeloma therapy with
                                              high-dose dexamethasone. However, Velcade was rejected by the National Institute for Health and Clinical
                                              Excellence (NICE) in 2006, after being deemed cost-ineffective. Subsequently, the company proposed an
                                              offer to pay fully for the treatment for patients who experienced less than 50% reduction in serum M-
                                              protein; this was an example of a ‘surrogate endpoint-based’ reimbursement agreement. It was considered
                                              to be a landmark deal in risk-sharing agreements, where a drug originally rejected by NICE on grounds of
                                              high cost was ultimately approved for market entry. The agreement was considered to be in line with the
                                              objective of effective use of NHS resources. The Velcade Response Scheme (VRS) was a unique way of
                                              bridging uncertainty and bringing the drug to patients when there were very slim chances of doing so
                                              otherwise.
                                              There have been other examples of risk-sharing agreements surrounding expensive cancer drugs since VRS;
                                              these agreements have been borne out of negative appraisal by NICE. Merck-Serono in the UK initiated a
                                              cost-sharing program for the metastatic colorectal cancer drug Erbitux (cetuximab), which included
                                              refunding the Primary Care Trusts (PCT) the cost of treatment for patients who fell into a pre-specified ‘non-
                                              responder’ category at up to six weeks. Another example was that of Roche’s ‘Tarceva Access Program’,
                                              where the company offered a rebate as a credit note against future purchases of the company’s Non-Small
                                              Cell Lung Cancer (NSCLC) drug Tarceva (erlotinib) over and above the cost of the incumbent treatment for
                                              NSCLC, which was Sanofi’s Taxotere (docetaxel), with an upper boundary on the total number of packs.
                                              Such schemes and other similar risk-sharing agreements represent a way to improve patient access to
                                              cancer drugs in the UK without causing excessive financial burden to the patients or the NHS.
                                              New List of Innovative Drugs that Regions are Obligated to Reimburse Does Not Include Oncology
                                              Therapeutics
                                              In accordance with a decision taken in November 2010, the AIFA published its first list of drugs, in December
                                              2010, for diseases approved for reimbursement by AIFA that must be included in the formularies of regions
                                              and autonomous provinces. Oncology therapeutics were conspicuous in their absence from the list. A
                                              primary reason for the exclusion of oncology drugs was the high cost of some of these drugs and the issues
                                              related to the significant debts of the regional healthcare authorities. The list included drugs for diseases
                                              such as type 2 diabetes, wet age-related macular degeneration (AMD), and Human Immunodeficiency
                                              Virus/Acquired Immune Deficiency Syndrome (HIV/AIDS).




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                                                                                                                                                       Page 4
Table of Contents




                                              1         Table of Contents
                                              1   Table of Contents ........................................................................................................................................ 5
                                                  1.1      List of Tables .................................................................................................................................... 6
                                                  1.2      List of Figures................................................................................................................................... 7
                                              2   Pricing and Reimbursement in Oncology - Introduction ............................................................................. 8
                                              3   Pricing and Reimbursement in Oncology - Overview .................................................................................. 9
                                                  3.1      Development of Oncology Drugs................................................................................................... 12
                                                  3.2      Market Access and the Role of Health Economics in Cancer Drugs .............................................. 13
                                                      3.2.1       Regulation of Cancer Drugs in Europe ................................................................................... 13
                                                      3.2.2       Hospital Budgets and Patient Access to Drugs ...................................................................... 13
                                                      3.2.3       Payers Managing Influx of New Therapies through Innovative Strategies............................ 14
                                                      3.2.4       Risk Sharing Agreements in the US Vis-à-vis Europe ............................................................. 15
                                                  3.3      Difference in Reimbursement for Oncology Drugs between the US and Europe .......................... 15
                                                  3.4      Rationalizing Costs in the US ......................................................................................................... 15
                                              4   Pricing and Reimbursement in Oncology - The US .................................................................................... 16
                                                  4.1      Introduction................................................................................................................................... 16
                                                  4.2      Regulatory Bodies.......................................................................................................................... 17
                                                  4.3      Trends ............................................................................................................................................ 18
                                                      4.3.1       Oncology Practice and Expenditure in the US ....................................................................... 18
                                                      4.3.2       Expenditure on Cancer Care Until 2020 - Costs May Increase by 27% from 2010 ................. 18
                                                      4.3.3       Reimbursement of Prescription Drugs - Oncology Falls under Tier Four ............................... 24
                                                      4.3.4       Strategies to Control Healthcare Spending ........................................................................... 24
                                                      4.3.5       Oral Targeted Chemotherapeutics are the Next Paradigm in Cancer Care ........................... 25
                                                      4.3.6       Reimbursement Issues in Oral Chemotherapeutics ............................................................... 25
                                                      4.3.7       Oral Chemotherapy Parity Act............................................................................................... 26
                                              5   Pricing and Reimbursement in Oncology - Top Five Countries of Europe ................................................. 27
                                                  5.1      Italy ................................................................................................................................................ 27
                                                      5.1.1       Introduction ........................................................................................................................... 27
                                                      5.1.2       Regulatory Bodies ................................................................................................................. 28
                                                      5.1.3       Trends.................................................................................................................................... 29
                                                  5.2      Spain .............................................................................................................................................. 31
                                                      5.2.1       Introduction ........................................................................................................................... 31
                                                      5.2.2       Regulatory Bodies ................................................................................................................. 31
                                                      5.2.3       Trends.................................................................................................................................... 32
                                                  5.3      Germany ........................................................................................................................................ 34
                                                      5.3.1       Introduction ........................................................................................................................... 34
                                                      5.3.2       Regulatory Bodies ................................................................................................................. 35
                                                      5.3.3       Trends.................................................................................................................................... 37
                                                  5.4      France ............................................................................................................................................ 39
                                                      5.4.1       Introduction ........................................................................................................................... 39
                                                      5.4.2       Regulatory Bodies ................................................................................................................. 41
                                                      5.4.3       Trends.................................................................................................................................... 43
                                                  5.5      The UK ........................................................................................................................................... 47
                                                      5.5.1       Introduction ........................................................................................................................... 47
                                                      5.5.2       Regulatory Bodies ................................................................................................................. 48
                                                      5.5.3       Trends.................................................................................................................................... 50
                                              6   Pricing and Reimbursement in Oncology - Japan ...................................................................................... 55
                                                  6.1      Introduction................................................................................................................................... 55
                                                  6.2      Regulatory Bodies.......................................................................................................................... 57
                                                  6.3      Trends ............................................................................................................................................ 58
                                                      6.3.1       Fee Changes for the Elderly in Japan Suffering from Cancer ................................................. 58


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                                                                                                                                                                                               Page 5
Table of Contents




                                                    6.3.2     Off-label Uses of Drugs Agreed to be Given Conditional Reimbursement ............................. 58
                                                    6.3.3     Changes to Japan’s Pricing System for Market Leading Drugs .............................................. 58
                                                    6.3.4     New Medicines Included in NHI List Including Eisai’s Breast Cancer Drug Halaven............... 58
                                              7 Pricing and Reimbursement in Oncology - Appendix ................................................................................ 60
                                                7.1      Market Definitions......................................................................................................................... 60
                                                7.2      Abbreviations ................................................................................................................................ 60
                                                7.3      Sources .......................................................................................................................................... 63
                                                7.4      Research Methodology ................................................................................................................. 64
                                                    7.4.1     Introduction ........................................................................................................................... 64
                                                    7.4.2     Regulatory Bodies ................................................................................................................. 64
                                                    7.4.3     Key Trends ............................................................................................................................. 64
                                                7.5      Contact Us ..................................................................................................................................... 65
                                                7.6      Disclaimer ...................................................................................................................................... 65


                                              1.1        List of Tables
                                              Table 1:         Pricing and Reimbursement in Oncology, Age Standardized Cancer Incidence, Top Seven
                                                               Countries, 2008 ............................................................................................................................ 10
                                              Table 2:         Pricing and Reimbursement in Oncology, Age Standardized Cancer Mortality, Top Seven
                                                               Countries, 2008 ............................................................................................................................ 11
                                              Table 3:         Pricing and Reimbursement in Oncology, Examples of Innovative Reimbursement Agreements 14
                                              Table 4:         Pricing and Reimbursement in Oncology, the US, Expenditure for Cancer Care in the Top Five
                                                               Sites ($bn), 2010 and 2020 ........................................................................................................... 20
                                              Table 5:         Pricing and Reimbursement in Oncology, the US, Expenditure for Cancer Care in Other Sites
                                                               ($bn), 2010 and 2020 ................................................................................................................... 21
                                              Table 6:         Pricing and Reimbursement in Oncology, Average Retail Coinsurance Rates, the US, By Tier (%),
                                                               2009.............................................................................................................................................. 24
                                              Table 7:         Pricing and Reimbursement in Oncology, Public Pharmaceutical Expenditure, Pharmacies, 2010-
                                                               2011.............................................................................................................................................. 33
                                              Table 8:         Pricing and Reimbursement in Oncology, Germany, Healthcare Expenditure by Financing Agent,
                                                               $ per inhabitant, 2007, 2008, 2009 .............................................................................................. 35
                                              Table 9:         Pricing and Reimbursement in Oncology, France, Types of Treatment and their Reimbursement
                                                               Levels ............................................................................................................................................ 40
                                              Table 10:        Pricing and Reimbursement in Oncology, Market Entry Restrictions for Cancer Drugs, the UK .. 51
                                              Table 11:        Pricing and Reimbursement in Oncology, the UK, General Price Changes (%), 2009-2013 .......... 53
                                              Table 12:        Pricing and Reimbursement in Oncology, Healthcare Expenditure, Japan, 2009 ......................... 55
                                              Table 13:        Pricing and Reimbursement in Oncology, Trend in Revision Rates of Reimbursement Prices,
                                                               Japan, 1992-2008 ......................................................................................................................... 56
                                              Table 14:        Pricing and Reimbursement in Oncology, Change in Premiums, Japan, 2002-2008 .................... 57
                                              Table 15:        Pricing and Reimbursement in Oncology, List of Drugs Introduced to NHI, Japan, 2011 ............. 59




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                                                                                                                                                                                                Page 6
Table of Contents




                                              1.2      List of Figures
                                              Figure 1:    Pricing and Reimbursement in Oncology, Diseased Population in the Top Seven Countries for
                                                           Major Types of Cancer (millions), 2010 .......................................................................................... 9
                                              Figure 2:    Pricing and Reimbursement in Oncology, Age Standardized Cancer Incidence, Top Seven
                                                           Countries, 2008 ............................................................................................................................ 10
                                              Figure 3:    Pricing and Reimbursement in Oncology, Age Standardized Cancer Mortality, Top Seven
                                                           Countries, 2008 ............................................................................................................................ 11
                                              Figure 4:    Pricing and Reimbursement in Oncology, the US, Total Healthcare Expenditure vs. Out-of-Pocket
                                                           Expenditure (%), 2009 .................................................................................................................. 17
                                              Figure 5:    Pricing and Reimbursement in Oncology, the US, Expenditure for Cancer Care ($bn), 2010 and
                                                           2020.............................................................................................................................................. 19
                                              Figure 6:    Pricing and Reimbursement in Oncology, the US, Expenditure for Cancer Care in the Top Five
                                                           Indications ($bn), 2010 and 2020 ................................................................................................. 20
                                              Figure 7:    Pricing and Reimbursement in Oncology, the US, Estimated Cancer Cases, By Sites, Men (%),
                                                           2011.............................................................................................................................................. 22
                                              Figure 8:    Pricing and Reimbursement in Oncology, the US, Estimated Cancer Cases, By Sites, Women (%),
                                                           2011.............................................................................................................................................. 23
                                              Figure 9:    Pricing and Reimbursement in Oncology, Total Per-capita Expenditure on Pharmaceuticals, Top
                                                           Five Countries of Europe and the US, $PPP, 1990-2009 ............................................................... 27
                                              Figure 10:   Pricing and Reimbursement in Oncology, NHS and Private Composition of Pharmaceutical
                                                           Expenditure, Italy, %, 2009 ........................................................................................................... 28
                                              Figure 11:   Pricing and Reimbursement in Oncology, Public Pharmaceutical Expenditure, Pharmacies,
                                                           Growth Rates (%), 2010-2011....................................................................................................... 32
                                              Figure 12:   Pricing and Reimbursement in Oncology, Germany, Healthcare Expenditure by Financing Agent,
                                                           $ per inhabitant, 2007, 2008, 2009 .............................................................................................. 34
                                              Figure 13:   Pricing and Reimbursement in Oncology, Germany, Structural Reforms by AMNOG, 2011 ........ 37
                                              Figure 14:   Pricing and Reimbursement in Oncology, European Counties, the US and Japan, Total Healthcare
                                                           Expenditure vs. Out-of-Pocket Expenditure, 2009 ....................................................................... 39
                                              Figure 15:   Pricing and Reimbursement in Oncology, Regulatory Bodies and Functions, France .................. 41
                                              Figure 16:   Pricing and Reimbursement in Oncology, HTA to P&R Decisions, France .................................... 42
                                              Figure 17:   Pricing and Reimbursement in Oncology, Public and Private Expenditure on Health as % of Total
                                                           Expenditure on Health, 2009 ........................................................................................................ 47
                                              Figure 18:   Pricing and Reimbursement in Oncology, the UK, NHS Expenditure on Medicines ($bn) vs. NHS
                                                           Medicines Cost Per Capita ($), 2000-2009 ................................................................................... 49
                                              Figure 19:   Pricing and Reimbursement in Oncology, Life Expectancy at Age 65 Years, Males and Females,
                                                           Japan, 2009................................................................................................................................... 56




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                                                                                                                                                                                           Page 7
Pricing and Reimbursement in Oncology – Introduction




                                              2        Pricing and Reimbursement in Oncology - Introduction
                                              Cancer is considered to be one of the most deadly diseases, and a cure has so far eluded researchers all
                                              over the world. The new lines of therapeutics, such as vascular endothelial growth factor (VEGF) inhibitors
                                              and epidermal growth factor receptor (EGFR) inhibitors, have been observed to make a sizeable impact on
                                              patient survival. However, progress in terms of patient survival and other benefits demands premium
                                              prices, which has necessitated several agencies responsible for making decisions pertaining to pricing and
                                              reimbursement for cancer drugs in many countries of the world to make moves in order to contain costs
                                              related to cancer treatment.




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                                                                                                                                                     Page 8
Pricing and Reimbursement in Oncology – Overview




  It is estimated that 13% of
                                              3         Pricing and Reimbursement in Oncology - Overview
  all deaths in the world are                 According to the WHO, around 13% of all deaths in the world are due to cancer, making it one of the major
  due to cancer                               causes of death globally. The principal treatment modalities for several cancer therapies include surgery,
                                              radiation therapy and chemotherapy; often two or more modalities are combined to create a therapeutic
                                              program appropriate for the patient. Surgery is considered to be the oldest form of effective cancer
                                              therapy. Although approval of a new broad family of molecularly targeted anti-cancer pharmaceuticals is
                                              indicative of one of the most substantial advances in clinical oncology, resulting in benefits such as reduced
                                              toxicity, improvement in survival, pain reduction, and overall improved quality of life, the access to these
                                              treatments is influenced by several factors, such as policies regarding the availability of new 
								
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