Guest Blog, Modern Healthcare Editor Merrill Goozner: When it comes to pricing Sovaldi, how NICE of them

Merrill Goozner is the editor of Modern Healthcare. During 30 years as a journalist and educator, he has been a foreign, national and chief economics correspondent for the Chicago Tribune and professor of journalism at New York University. He was a keynote speaker at this year’s HSCA National Pharmacy Forum. This article originally appeared in Modern Healthcare.

Are the British agency's guidelines setting U.S. drug prices?

The first cost-effectiveness analyses of Sovaldi and other new drugs for treating chronic hepatitis C virus infections are in, and it appears the guidelines set by the United Kingdom's National Institute for Health and Clinical Excellence (NICE) have become the new ceiling for setting U.S. drug prices.

For those who have never heard of NICE, it is the advisory body that makes recommendations on the affordability of new therapies to the budget-constrained British National Health Service. When the price of a new drug goes over $50,000 per “quality adjusted life year” gained or QALY, NICE usually recommends the NHS look elsewhere for treatment options.

During debates over the Affordable Care Act, former Alaska Gov. Sarah Palin accused the Obama administration of backing British-style cost-effectiveness analysis to limit access to drugs. Coining the phrase “death panels,” which PolitiFact dubbed “the lie of the year,” the former vice presidential candidate stoked widespread fears the government would now apply a cost test to life-saving therapies.

Cost-effectiveness analysis made headlines again last year when Sovaldi hit the market at the budget-busting price of $84,000 per course of treatment, which amounted to about $1,000 a pill. In an editorial challenging the usual justifications for high drug prices (see “Why Sovaldi shouldn't cost $84,000”) and another debunking claims in the New York Times that it would save the healthcare system money over the long run (see “Sovaldi's cost-effectiveness is being overplayed”), I speculated that “the back of my envelope says its QALY cost will come in right around or slightly above the earlier treatments—and somewhat below the $50,000 threshold.”

I based that analysis on the fact that a cost-effectiveness analysis for another new drug that wasn't quite as effective as Sovaldi tipped the pricing scales at about $35,000 per QALY gained.

A study released yesterday that will appear in the journal Clinical Infectious Diseases confirms that speculation. It found that using sofosbuvir (Sovaldi) and ribavirin for HCV will cost $47,304 per QALY gained. In darts, that is pretty close to a bullseye.

The study's authors, affiliated with NORC at the University of Chicago and the U.S. Centers for Disease Control and Prevention, received funding for the study from the CDC foundation. But they also report they received other funding from Gilead Sciences, Inc., the maker of Sovaldi.

Sovaldi is now in a price war with newer treatments on the market, especially Viekira Pak from AbbVie. In the same NORC study, that combination pill's cost-effectiveness tipped the scales at $24,921. Pharmacy benefit managers Express Scripts and CVS Health have cut exclusive deals with the competing firms to help drive down the price, and it's likely that the market price for Sovaldi these days is as much as 40% below the original $84,000.

The final word isn't in yet on Sovaldi's cost-effectiveness, however. Another study that appeared today in the Annals of Internal Medicine pegged the drug's cost-effectiveness at $55,400 per QALY gained - higher than the NICE threshold. But like the earlier study, that is probably based on the original price – not the discounted price.

Perhaps the last word should go to NORC researcher David Rein, who wrote on the organization's Sparks blog that “limiting treatment access to patients with moderate and advanced disease has been offered as one possible solution to financing concerns. This strategy appears reasonable when one assumes no health impact from delaying treatment."

Unfortunately, physicians don't have research to support a medical decision to delay treatment and “studies examining this issue will not be available for several years,” Rein wrote.

GAO Releases New Drug Shortages Report for Drugs Containing Controlled Substances

The Government Accountability Office (GAO) recently released a new report on shortages of prescription drugs containing controlled substances. The report looked at trends in these types of shortages, potential causes, what effects they may have on patients and providers, the U.S. Drug Enforcement Administration’s (DEA) management of the quota process, and how interaction between the DEA and the U.S. Food and Drug Administration (FDA) can help mitigate the impact shortages and prevent future shortages.

The report notes that prescription drugs containing controlled substances are often used in various clinical settings and are very important for the treatment of patients with genuine medical conditions. The report also explains that it is the responsibility of the DEA to ensure that these substances are not diverted—which the DEA accomplishes in part by setting quotas on manufacturers. The DEA attempts to enact these quotas without inhibiting the supply of controlled substances needed for legitimate medical concerns.

Because the DEA necessarily puts quotas on these controlled substances, management of this system is an exceptionally important matter for public health, as these medications are often critical for patient care. The report notes that there has been a spike in shortages over recent years.

GAO recommended the Administrator of the DEA take five actions “to ensure an adequate and uninterrupted supply of controlled substances for legitimate medical use and respond to shortages of drugs containing controlled substances.” These five actions included:

• Establishing controls and data checks so manufacturer quota submissions and DEA decisions are accurate;
• Creating DEA performance measures to facilitate the uninterrupted supply of controlled drugs needed for medical use;
• Monitoring all data to assess DEA administration of the quotas;
• Designing internal policies for processing quota applications;
• Instituting policies and procedures to facilitate coordination with FDA in preventing drug shortages.
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GAO also suggested the DEA and FDA update their Memorandum of Understanding (MOU) to strengthen their ability to respond to existing and future drug shortages involving controlled substances.

For the full GAO report, “DRUG SHORTAGES: Better Management of the Quota Process for Controlled Substances Needed; Coordination between DEA and FDA Should Be Improved,” click here.

For information on what the healthcare supply chain is doing to help combat drug shortages, click here.

FDA Approves First Biosimilar Medicine in the U.S.

The U.S. Food and Drug Administration (FDA) recently announced its approval of Zarxio, the first biosimilar medicine in the United States. Biosimilars are therapies which have no clinically meaningful differences from innovator biologics—revolutionary medicines that treat chronic and life-threatening conditions. Biosimilars have the potential to significantly impact the healthcare system by increasing patient access to life-saving treatments while also reducing costs.

The Healthcare Supply Chain Association (HSCA) applauded the approval of Zarxio because it represents the first step in providing other biosimilars a pathway to market. Biosmilars will increase market competition for biologics, reduce costs and increase patient access to these vital medications. In fact, one study projects biosimilars could save the healthcare system as much as $250 billion over the next ten years.

HSCA President Curtis Rooney said the following on the approval of Zarxio:

“Biologic medicines have revolutionized treatment for many patients living with chronic or life-threatening conditions, but their high price has also created a barrier to access in many cases. Biosimilars promise to increase access to biologic treatments while also lowering costs for the entire healthcare system.”

For HSCA president Curtis Rooney’s full statement, click here.

For more information on HSCA, click here.

HHS Call for New Safe Harbors Demonstrates Ongoing Value to Federal Health Programs

Every year, the U.S. Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) solicits recommendations for potential new “safe harbor” provisions under the federal anti-kickback statute of the Social Security Act. HHS recently announced the comment period, which runs through March 2nd, in the Federal Register.

So-called “safe harbors” under the Social Security Act exist because Congress was concerned that the range of activity potentially proscribed by the statute was so broad as to include innocuous and even beneficial commercial arrangements. Congress empowered OIG to create safe harbors to limit the statute’s reach and ensure that federal healthcare programs would continue to capture the benefits of legal business activity.

Safe harbors are now commonplace – there are currently 25 existing safe harbor provisions under the law. A broad array of business practices are now protected within federal healthcare programs by safe harbors, including price reductions offered in health plans, equipment rentals, replenishment of ambulance supplies, and referral arrangements in specialty services. Safe harbors have been enacted to protect the benefits delivered by cooperative hospital service organizations, ambulatory surgical centers, and healthcare group purchasing organizations (GPOs).

OIG codified the so-called GPO safe harbor to protect the billions of dollars in annual savings and additional efficiencies that GPOs deliver to hospitals, Medicare and Medicaid, and the healthcare system. The GPO safe harbor allows supply chain organizations to charge administrative fees to suppliers in order to help hospitals source life-saving products and to lower overall healthcare costs.

Healthcare Supply Chain Association (HSCA) member organizations go above and beyond the ethical business conduct contained in the GPO safe harbor. All HSCA members are also part of the Healthcare Group Purchasing Industry Initiative, an independent and voluntary organization dedicated to establishing the highest ethical standards and business conduct practices in the healthcare group purchasing industry. All HGPII member supply chain organizations must adhere to a strict Code of Conduct, report annually on adherence to these principles using an Annual Public Accountability Questionnaire, and participate in an Annual Best Practices Forum to discuss best ethical and business conduct practices with other supply chain organization representatives and interested parties.

In its annual review of safe harbors, the OIG considers a number of factors regarding the existing safe harbor provisions to ensure that practices are aboveboard and meet the agency’s strict qualifications. OIG then issues the report to Congress to ensure transparency. This process has repeatedly shown the value that safe harbor provisions continue to yield federal healthcare programs.

For in-depth analysis on the GPO Safe Harbor, read a full report from Richard P. Kusserow, former Inspector General of the HHS, here: Activities and Perspectives of the Office of Inspector General in the U.S. Department of Health and Human Services Regarding Group Purchasing Organizations (GPOs)

To read the OIG’s notice seeking comments for potential new safe harbors, click here.