CLEVELAND – The biopharma industry has found itself between a rock and hard place, or at least that was the premise for a panel of experts across the drug development supply chain that convened at the 2016 Medical Innovation Summit sponsored by Cleveland Clinic Innovations.

Breakthroughs in research, biomarkers and genomics offer great potential to develop more effective treatments than ever for a great deal more patients. But is the price more than the market, and patients, can bear? Addressing that thorny topic will require collaboration from erstwhile adversaries and, as the discussion made clear, players are not on the same page about who makes the next move.

As the only biopharma representative on the panel, Bob Bradway, chairman and CEO of Amgen Inc., of Thousand Oaks, Calif., was careful to declare up front that innovative medicines, like those developed by his company, represent only 10 percent of prescription drugs on the market. Generics, he said – including products from Valeant Pharmaceuticals International Inc. and Mylan NV that have heightened scrutiny of the industry – account for 90 percent.

"The good news is that we're in an era now where new innovative drugs are being approved that have a very big effect against bad diseases," Bradway said. Those drugs are priced to reflect the value they create in the health care system by displacing costs for certain hospitalizations and surgical procedures and to society by helping individuals to go back to work or to avoid costly complications.

The U.S. is enjoying "a wave of innovative, effective drugs being approved by regulators for very serious illnesses, in areas where there haven't been good drugs available for some time," Bradway added.

Roy Beveridge, an oncologist who serves as senior vice president and chief medical officer of insurance giant Humana Inc., conceded that "how we treat patients now in oncology and hematology is dramatically different" than in years past, thanks to innovations that have occurred largely in the pharmaceutical industry.

He was quick to add that, "As a payer, we represent our membership, and our membership is always looking for cost-effective plans with high quality. They want innovation but at the same time want reasonable costs."

Naturally, everyone wants access to all of the choices in the candy store, but payers "have to weigh" the value of innovation with the cost, Beveridge maintained.

That view raised the hackles of Steve Nissen, chairman of cardiovascular medicine in the Cleveland Clinic's Heart and Vascular Institute.

"The problem here is that we are not doing a good job of pricing pharmaceuticals based upon their innovative properties," Nissen said, calling the system "terribly, terribly broken."

'We're facing a very difficult access environment'

But how to define "innovation"? Does the fourth or fifth generation of a multiple sclerosis drug or insulin product – though consuming R&D dollars – still warrant the "innovation" label?

"We're not active in either of those programs, so I won't speak to the details," Bradway said. "But I know that, in both of those categories, the innovators continue to invest heavily in both the inline products and in the pipeline products."

That strategy – particularly when used to extend patent protection and high prices of blockbuster therapies – is a problem, other panelists suggested. The payer world "is not averse to paying high dollar for value," Beveridge said, but isn't willing to ante up big bucks for the growing number of "look-alikes" in the so-called innovative pipeline.

Nissen argued for spending even more dollars on true innovation while tamping down on the excessive costs in generics and older branded drugs.

"If I were the CEO of a major pharmaceutical company and I knew that I could not recover the costs of developing innovative medicines, I wouldn't do it," he said. "If we spend all of our money on non-innovation and don't spend it on innovation, we're not going to have new drugs."

Nissen then jumped on the pharmacy benefit manager (PBM) community for another issue plaguing the industry: access to newly approved drugs.

"We can't get those drugs for our patients," he said, lamenting the hoop-jumping that PBMs require of physicians to seek access for their patients to therapies such as PCSK9 inhibitors. "The system is set up to be virtually impossible for patients to get drugs that they actually need," Nissen said. Such a system "is not in the public's interest," he added.

Steve Miller, chief medical officer of Express Scripts, the nation's largest PBM, sought to explain why prices remain high and access is challenging by observing that the U.S. "is the only free market for drugs, and really not quite a free market" because of price sensitivity.

Market dysfunction results in part, from the fact that the U.S. represents about 4 percent of the world's population but consumes about 40 percent of the manufactured supply of drugs and generates 50 percent to 70 percent of the pharmaceutical industry's profits, he maintained.

"The United States is subsidizing the world when it comes to innovation in the pharmaceutical industry," Miller said. "The reality is we need to spread this cost over 600 million Westerners, not just 300 million Americans. It's no longer sustainable, and we're seeing market failures creep up."

Amgen markets the PCSK9 Repatha (evolocumab), a monoclonal antibody that Bradway called "a very effective drug for lowering bad cholesterol, or LDL" and "an attractive new way to help manage the risk of heart disease for patients who are at high risk of developing that serious disease. For patients who are using appropriate low levels of statins and other drugs that have been on the market for 30 years, this represents an innovative new treatment option."

But, Bradway added, "we're facing a very difficult access environment for it" from payers.

Humana's Beveridge quickly jumped on the list price of more than $14,000 per year for Repatha and PCSK9 competitor Praluent (alirocumab, Regeneron Pharmaceuticals Inc./Sanofi SA) compared to statins that cost about $250 annually.

"Let me point out the obvious," he said. "If we don't get this balance correct, we're going to price out people in terms of buying insurance. What we worry about is that we have wonderfully innovative, great, spectacular products that people can't afford."

Humana data suggest that the cost of specialty drugs for its members exceeds the median U.S. income, Beveridge said.

Repatha hasn't yet shown a survival benefit, Miller added, so the actual number of patients who qualify for treatment according to the label "is actually quite small."

Express Scripts covers both PCSK9s – a decision made because the PBM "got attractive prices" from both companies, according to Miller. The enormous price increase to pay for the cost of innovation "is a huge burden for payers, but it's the right thing to do," he said.

Physicians are 'tortured by PBMs'

Express Scripts also decided to cover all patients with hepatitis C virus (HCV), regardless of disease stage, after multiple products from Abbvie Inc., Gilead Sciences Inc. and Merck & Co. Inc. came to market and provided the PBM with negotiating leverage.

"Our goal was – and we achieved – getting the price down by over 50 percent," Miller said. The new generation of HCV drugs now is cheaper in the U.S. than in Europe, he said, and widely available to patients. "I believe that's the same direction we should go with the PCSK9, once the data are available," he maintained.

Miller added, "I think these drugs are potentially great drugs" that give doctors a choice in prescribing, expressing hope that "[Amgen] comes out with better data that expands the label." In the meantime, Express Scripts is working to create a concierge service to streamline access to the PCSK9 products for patients "who clearly meet the guidelines."

But the PBM has no intention of adding all newly approved drugs to its formulary. Without real-world clinical data, "the payer community and the patient community would essentially be cross-subsidizing outcomes research," Miller told BioWorld Insight. "They never signed up for that."

Express Scripts supports the inclusion of innovative products with demonstrated value, he added, citing cystic fibrosis drugs as examples of therapeutic categories that merit their high expense. PCSK9s, in contrast, represent a product class "in which the outcome is still unknown" until overall survival data are reported.

In the end, the panel of heavy hitters across the prescription drug supply chain was unable to cut to the heart of the extraordinarily complicated drug pricing system, which is characterized by multiple handoffs involving a dizzying array of costs, rebates, mark-ups and discounts among manufacturers, PBMs, wholesalers and retail pharmacy chains – not to mention patient assistance programs that seek to mitigate patient out-of-pocket costs. (See BioWorld Today, Oct. 17, 2016, and Oct. 21, 2016.)

Instead, each largely defended his organization's turf. Miller charged that plan administrators "have become addicted to rebate dollars" while Nissen shot back that physicians are "tortured by PBMs."

"I don't think there's one simple answer," Beveridge said. "It's going to require pretty much everyone in this room, in terms of different constituents, to think about how we can do some things differently."

Express Scripts supports price transparency – to a point, according to Miller.

"My clients should know exactly what the rebate is that I'm getting back from the manufacturer, and how much they're getting vs. how much I keep," he said. "What I don't want is transparency for my competitors. If you think about the price wars we were able to create for hepatitis C, it really occurred because the two companies had no idea what the other was bidding. If you have transparency between competitors, you actually end up with higher prices."

'We have de-coupling of value and pricing'

Change could come with the introduction of value-based contracts. Amgen has struck about a dozen value-based deals involving Repatha that call for the company to accept lower payments "if the drug doesn't deliver for the insurer's patient pool what we delivered in clinical trials," Bradway said, which he cited as an average LDL reduction of 71 percent. (See BioWorld Today, March 17, 2015.)

Value-based contracts "are hard to structure," he added. "It takes time, there's a complicated regulatory environment for having those discussions, but they are taking hold."

Beveridge agreed that "more innovative contracting" in which drug companies share downside risk offer the potential for greater flexibility in drug pricing.

"This is one of the ways, moving forward into value-based arrangements, that we can focus on the winners and put aside drugs that probably shouldn't get paid at the rate they currently are," he said. "In fee for service, you can base your rate on anything and not differentiate between high-quality vs. lower-quality innovative drugs."

Such initiatives will become even more important in pricing newer drugs for long-term, chronic diseases such as type 2 diabetes and Alzheimer's disease. Purchasers and payers remain focused on short-term outcomes – the health of their existing member populations – rather than thinking more broadly about the impact of such diseases 20 or 30 years down the road. Pharmaceutical companies, likewise, must satisfy investors in quarterly chunks rather than linking profitability to a drug's long-term therapeutic value. (See BioWorld Today, Oct. 31, 2016.)

"The problem here is that we have de-coupling of value and pricing," Nissen said, which mediates against coordinated care across the continuum of chronic disease.

"If we treat somebody with high cholesterol, and we start early, their life-long burden of disease is likely to be greatly reduced, and society benefits from lower long-term costs," Nissen pointed out. But "no one playing in the game here" takes the same long-term view.

Nissen pleaded for payers, PBMs and biopharmas "to get this pricing problem solved." If members of the drug supply chain syndicate don't work together to reward innovators and remove incentives for lack of innovation, "we're not going to get the breakthrough drugs," he said.

"I'm worried," Nissen added. "The medical community is very worried that we're going to lose the innovative edge if we don't fix this."