PharmaDiplomacy Consultation Document by Meteos

PharmaDiplomacy Consultation Document Checklist for Collaborative, Mutually Acceptable Drug Pricing September 2015

Meteos

Meteos is a not-for-profit company that convenes cross-sector, multi-stakeholder dialogues to accelerate solutions to a range of systemic challenges. Meteos uses a highly consultative, research-based approach to facilitation. Our dialogues provide a forum for senior figures in the corporate sector, civil society, public sector and investment worlds to share different perspectives on the major trends that will shape market, regulatory and societal outcomes in coming years. The dialogues analyse the speed and direction of these trends and provide an opportunity for those who will determine future outcomes to work together to achieve an alignment of interests.

Meteos

Meteos dialogues are funded by participant fees on a not-forprofit basis and through the provision of in-kind research and information sharing. As we are committed to ensuring that all relevant stakeholders contribute to the dialogues we provide some spaces on a non-fee basis. Such participants typically pay their own expenses. All participant voices are of equal weight in the dialogues. PharmaDiplomacy is funded on this basis.

The Invitation

This is an invitation from the PharmaDiplomacy Group1, an EU/US leadership initiative, convened by Meteos and led by senior executives from health systems and pharma. The Group includes individuals who represent patient groups, health insurers, healthcare providers, payer organisations, health technology assessment bodies, the pharmaceutical industry, bioethicists, investors, and health systems experts. The PharmaDiplomacy Group came together with the aim of ensuring that effective, affordable and innovative medicines get to patients who need them. It recognises that the achievement of this aim requires agreement on the value of medicines to be reached between patients, manufacturers, and – crucially – payers and health systems responsible for their funding, allocation and administration. The group acknowledges that such agreement is hampered today, amongst other things by low levels of trust between these protagonists. Consequently, it has spent 18 months exploring where and how trust is being eroded (or built); identifying practical steps to improve relations; and considering mechanisms that could hold agreements in place and avert future disagreements. Drug pricing emerged from the discussions as the principal source of mistrust today, although marketing and data transparency were notable others. When a market is functioning well, prices should reflect broad agreement between buyer and seller on value, affordability and societal priorities. This is not the case today. Health systems personnel are wary of what many consider to be unjustifiably high prices, and apparently arbitrary annual price increases. Pharma companies are fearful

that “value” is becoming synonymous with cheap and that pharma is an easy target for cost reduction in inefficient systems. Despite these reservations health systems and the pharma industry will need to work together for the foreseeable future. Any definition of value will have to reflect the views of multiple stakeholders who hold different data and multiple perspectives. This enhanced mutual understanding is in the interests of all participants in healthcare, particularly patients. This document consequently focuses on how to improve understanding and trust around pricing arrangements and decisions. The PharmaDiplomacy Group offers its expertise and experience to complement existing efforts to support more sustainable, value- and patient-focused healthcare systems.2 We hope the findings of our Dialogue will add to these debates by bringing a multi-stakeholder (from patients to investors) perspective into discussions about what we want from health systems; by defining the contribution of medicines within that; and by identifying concrete steps for action. The following document is an invitation to healthcare stakeholders to engage in these debates. It comes in the form of a ‘Checklist’, which proposes steps along the pharmaceutical value chain at which value can and should be agreed. The document will be the subject of a number of roundtables held for and in partnership with stakeholders from September to December 2015. Having stress-tested its ideas and assumptions, the PharmaDiplomacy Group will publish a revised version of the document, which incorporates lessons learnt, and build these findings into their work practices. Our intention is to produce the final version for release and dissemination in early 2016.

The PharmaDiplomacy Group

1 - Members of the PharmaDiplomacy Group participate in a personal capacity. While members fully support the objectives of the initiative, they do not necessarily endorse all the views expressed in this document. See Working Group List in Appendix Three.

- These include, for example, the US Institute of Comparative Effectiveness Research (ICER), the University of Michigan’s Center for Value-Based Insurance Design, MIT’s New Drug Development Paradigms (NEWDIGS), the Tapestry Network, Europe’s MOCA initiative for orphan drugs and the European Steering Group on Sustainable Healthcare (ESG). 2

Background to PharmaDiplomacy Healthcare is transforming. Under pressure from stuttering economies, squeezed budgets and ageing populations, healthcare systems are focused firmly on cost-effective outcomes. This logical response to growing demand and limited resources has long been evident in Europe where there is now almost universal practice of health technology assessment. It is increasingly present in US healthcare reforms as well, where the focus on agreed definitions of value are driven by the growing role of government in paying for healthcare, the realisation that higher healthcare costs do not necessarily lead to better patient outcomes, an increase in patient responsibility for healthcare costs and more public reporting of quality and cost. There are dozens of experiments and initiatives underway to determine how to deliver the best value care. In the US, providers (hospitals and physicians) are grouping into Accountable Care Organizations, whose payment is linked to outcomes, efficiency, and avoidance of high-cost, unnecessary interventions. There is also a renewed focus on care pathways, more integrated care and on measuring episodes of care in areas such as oncology. Outcomes are a key focus of European HTA bodies and, increasingly, regional payers in de-centralised markets such as Italy, Spain and the UK. The flurry of new technologies and data sources has generated multiple tools to measure clinical care, quality and costs and to make care more efficient. The technologies require, and offer the potential for, standardised and common methodologies for measuring care quality and outcomes (though this potential remains to be realised in a crowded marketplace). Likewise, technology has triggered and enabled greater patient awareness and empowerment. Patient-led organisations, such as PatientsLikeMe, use it to capture, evaluate and share patient perceptions of how best to manage their diseases, while public organisations like the US Patient-Centered Outcomes Research Institute (PCORI) use it to strengthen and standardise measures, and to better capture patient experience and priorities. ICHOM, the International Consortium for Health Outcomes Measurement, is also developing global, standard sets of outcomes measures for key disease areas such as coronary heart disease.

From Cost-effectiveness to Price Scrutiny The shift to outcomes is being triggered in part by increased focus on cost-effectiveness and concern about the affordability and budget imact of interventions. In turn this has provoked increased drug price scrutiny. The $84,000 launch price tag on Gilead’s Hepatitis C treatment Sovaldi in April 2014 may turn out to have been the tipping point in debates about drug pricing. Since then, heated discussions over pricing – and affordability – have been joined not only by other

payers, physicians and providers but also by more forceful patient interventions and even by hedge fund advocates of fair prices.3 In Europe HTA bodies’ grip is tightening, and multi-country drug price negotiations are edging closer to reality, The Netherlands and Belgium, for example, are undertaking joint pricing negotiations for the first time. In the critical US market, payer and provider resistance to high-priced novel treatments is increasing. Pharmacy Benefit Managers (PBMs) like Express Scripts are now so vocal about the rise in specialty drug spend, that it’s easy to forget that public drug pricing debate was virtually non-existent in the US before Memorial Sloan Kettering Cancer Center’s rejected Sanofi’s cancer drug Zaltrap in 2012. Nor is it just providers. Patients are increasingly vocal in pricing discussions as their out-of-pocket expenditure rises in response to the re-designing of health plan and increased co-pays. Some US state legislatures are joining the voices of patient and clinician groups and asking pharmaceutical firms to disclose their development costs in order to justify rising prices. (Similar suggestions were mooted in the UK last year). Express Scripts says US prescription drug spending shot up by over 13% in 2014, thanks mostly to specialist medicines, such as Sovaldi and follow-on Harvoni. The specialty drugs aren’t just expensive to begin with; their prices are also inflating fast – over 25% in 2014, according to Express Scripts, compared with a 6.5% increase for mainstream drugs (still way above inflation). The pharma industry points out that increases in prescription spending are at least in part due to the 10 million previously uninsured Americans who have gained healthcare coverage since the introduction of the ACA. In addition, it argues that retail prescription medicine expenditure is still only around 10% of total US healthcare spend, and is predicted to remain at that level until 2024.

New Players Defining Value Payers, providers and patients are increasingly taking matters into their own hands — as well as, in some cases, inviting a much wider debate on drug pricing. Initiatives designed to define pharmaceutical value are proliferating. In June 2015 Memorial Sloan Kettering Cancer Centre launched its DrugAbacus, which allows prescribers to determine, based on certain variables, what a “value-based” price would look like for cancer drugs. Also in early 2015 the American Society of Clinical Oncology (ASCO), a professional association, launched its cancer drug rating system, which assesses the value of new cancer therapies based on treatment benefits, toxicities, and costs. Nor is it just cancer. Real Endpoints’ RxScorecard, first developed in 2013, offers a value assessment tool for pipeline and marketed drugs across

- The Coalition for Affordable Drugs, a subsidiary of the hedge fund Hayman Credes Master Fund, is investing based on assumptions about fair pricing.

multiple indications, including hepatitis C virus (HCV) and chronic obstructive pulmonary disease (COPD). In June 2014, the American College of Cardiology/American Heart Association Task Force on Performance Measures and Task Force on Practice Guidelines published a paper describing how to synthesise the evidence base supporting a particular medicine into an overall value classification (Level Of Value, LOV), based on Quality-Adjusted Life Years (QALYs), a measure much questioned by some in industry. The number of powerful voices seeking to influence (and influencing) drug pricing will continue to grow as more high-priced, specialist drugs come to market, and as novel therapies appear for more prevalent diseases such as high cholesterol. Payers are already warning that the forthcoming cholesterol-lowering PCSK9 inhibitor class could break the bank: Prime Therapeutics, another PBM, says the class could cost over $23 billion a year – far more than Sovaldi – based on estimates of $8-10,000 in annual per patient cost. Patients, feeling the pinch of ever-more costly co-pays, have proved more ready to accept more limited formulary offerings based on cost than was predicted. And if, as expected, the Affordable Care Act leaves more people reliant on the Insurance Exchanges this trend is likely to continue. At the same time, however, patient activism is also gaining greater traction, including via organisations like the Fair Pricing Coalition (FPC), which negotiates with pharmaceutical manufacturers to help limit price increases for HIV and hepatitis drugs in the private and public sectors.

A Diplomatic Approach to Drug Pricing Pricing debates are dovetailing with broader, societal discussions about how to allocate health expenditure. These include how to balance demand for high-cost pharmacological treatments that can prolong life by weeks or months with the need for chronic and palliative/end-of-life care centred on patient comfort, and how to invest in treatments or prevention methods that can save future healthcare costs. They are highly politicised, controversial and sensitive issues, which politicians have proved reluctant to tackle. These debates are happening in both Europe and the US. Resolving them in the US is particularly problematic, though, due to the fragmented nature of the markets (with commercial, Medicaid and Medicare segments), served by multiple private sector organisations, some of which operate in only a single part of the health care value chain: pharmacy benefits managers (PBMs), for example, are primarily concerned with the drug component of health care. The practical and political difficulties in resolving these issues means that the focus on pricing is likely to continue and unless action is taken debates over drug pricing will become increasingly acrimonious. If pharma and payers continue to regard drug pricing as a zero sum game it will be much harder to achieve

mutually acceptable compromises on how to practicably quantify value and to ensure that it is appropriately adjusted as usage evidence emerges. This type of compromise needs patients, providers, payers and pharma all to be at the table. The PharmaDiplomacy Group has designed the following Checklist which outlines a way to make this happen, systematically and iteratively, that acknowledges changing perception of value the longer a medicine is in use. For this Checklist, or any other process aimed at fostering agreement on fair value and price to gain traction in the real world, a number of enabling factors would need to be in place. First, it requires leadership. Sufficient numbers of healthcare stakeholders across the health system will have to be prepared to take leadership by creating an environment that allows for aligned incentives, credible data sharing and risk-sharing, thereby demonstrating the value of collaborating with others in the system. Second, the establishment of a strong policy steer would help. Public health care goals would enable a more rational approach to value-focused pricing. The definition of desired outcomes by disease state and the inclusion of reference to the need for a longer-term (e.g. 10 years or more) perspective on the value and cost-saving potential of new drugs is vital for true estimation of drug value. The third enabling factor of improved collaboration would be the presence of a neutral convenor capable of bringing together the relevant parties, and assisting the group to overcome mistrust in order to be able to work through the practical requirements of a negotiated solution. Neutral, trusted convenors will be needed to facilitate ongoing discussions about fair and appropriate pricing, based on agreed definitions of value. Finally, regulatory and legal adjustments will be needed (particularly in the US) to allow pharmaceutical firms to discuss potential drug outcomes with payers before such outcomes have been demonstrated in clinical trials. They will also be needed to allow multiple drug firms to engage in appropriate and constructive dialogue around the principles and boundaries of value-focused drug pricing. And the regulatory system needs to continue to develop its initiatives to better recognise patients’ voices and to better define how patient inputs influence the system. Payers, patients and industry must be permitted — indeed encouraged — to discuss unmet needs, the limitations of existing therapies, and the potential value of new types of innovations. Waiting for these enabling factors to be fully in place would doubtlessly make collaboration faster and easier. But waiting isn’t an option: moves to establish greater multi-stakeholder agreement on drug pricing must start now.

Introduction to the Checklist To support healthcare participants to come to agreement on the value of medicines, which is reflected in price, the PharmaDiplomacy group has identified the following Checklist for a Collaborative Approach to Mutually Acceptable Pricing.

of stakeholders or significant cultural change. And finally, it aspires to be principled – measureable against the need for simplicity, transparency, patientcentricity and accountability.

The Checklist is designed to: • Address payer concerns about affordability and budget impact by providing greater certainty and control on price, data and volume • Provide more targeted and better outcomes for patients and providers4 • Support and encourage innovation within the drug industry

The Checklist outlines the concepts, data and compromise required from payers, pharma and patients in order to move towards value-focused pricing. It uses outcomes and therapy area costs to help determine how to reach mutual acceptance of that pricing. It identifies three touch-points along the drug development timeline where discussions could make the most difference: (Pre) Phase II Dialogue, Launch/Post-Approval, and On-Market Price Review.

To achieve these goals the Checklist seeks to be pragmatic, seeking to identify where savings can be made from existing inefficiencies in the system, thereby incrementally demonstrating the benefits of collaboration. It aims to be step-wise – outlining actions that can be undertaken immediately; actions that are achievable, but which require negotiation; and actions that require buy-in from a wider range

At each point along this timeline the Checklist identifies items for discussion and agreement among stakeholders that could lead to fairer and more acceptable pricing – generated less by who has the upper hand in negotiations, and more by agreeing what is beneficial for both sides. These discussions would encourage continuous engagement among stakeholders in ways that, ultimately, help to build trust.

Pre/During Phase II

Launch/Post Approval

On-Market Price Review

Phase II trials are planned or underway. Phase III have not yet begun, and there remains scope to adjust protocol and/ or data items to be collected.

Drug has been marketed for a certain period (e.g. year or more); some information is available on its uptake and performance.

Drug is approved and pricing negotiations underway, as standard.

The Checklist is not designed as a tool to be applied to each new drug candidate. It requires a common base-line agreement on aims, but it does not stipulate that all items be addressed, in all cases, in order to reach mutually acceptable pricing. Discussions around a drug’s impact and value require time and resource, from all sides. The goal is to provide a concrete tool to help initiate this process, under select circumstances, on the understanding that this could help to develop trust and greater understanding on all sides, as well as avoid inflammatory pricing situations in future.

- For definition of terms, see Glossary

Each item on the Checklist is classified using a traffic-light system, reflecting the fact that some requirements will be tougher to meet than others and that the level of challenge will vary depending on the health systems and pharma players involved, as well as the particular drug or therapy area under discussion. Some Therapeutic Areas (TAs), for instance, have more established patient group representation than others, making patient engagement more straightforward. In addition, some discussion items may not apply to certain drugs or therapy areas at all.

Green items present minimal hurdles which could in theory be implemented immediately. On their own, these are not enough to achieve value-focused pricing, but they could contribute to re-building trust among stakeholders. In many cases they simply involve protagonists meeting, engaging and addressing the topics. Amber items present some challenges, but surmountable ones, at least under certain circumstances. Different stakeholders groups may choose to tackle one or more of these items as confidence builds, and/or as a function of the particular drug or drugs under discussion. Some amber items may require green items to be underway/completed in order to succeed. Red items are the most challenging issues and are likely to demand buy-in from a wider range of stakeholders (e.g. regulatory or legislative authorities) and/or significant cultural change within particular groups. These items are aspirational today, but could become more tractable as green and amber items are addressed in a widespread fashion. Many red items are predicated on some degree of discussion already having taken place among stakeholders â&#x20AC;&#x201C; and on most green and some amber items having been addressed.

The Application of the Checklist The Checklist is a guidance tool, designed to reflect what the PharmaDiplomacy Group agreed must be an iterative approach to achieving both more mutually acceptable pricing and greater trust among stakeholders. The Checklist recognises different EU and US health care structures and players. The majority of items can be applied to some degree in both systems, allowing this proposal to have wide utility and impact. It is designed to work alongside â&#x20AC;&#x201C; and supplement â&#x20AC;&#x201C; existing initiatives attempting to achieve pricing

agreements (see footnote 2). The Checklist is a guidance tool for people involved in determining drug prices. To illustrate how it could be applied to specific drug candidates during development, approval and post-approval, in order to achieve acceptable pricing please see Appendix One, which outlines scenarios for how it might be used for two fictional drugs; one a targeted cancer treatment, the other a novel treatment for high cholesterol. These scenarios are not factual, but are designed to be realistic, and to reflect current challenges around two categories of novel therapies.

A Checklist for Collaborative, Mutually Acceptable Drug Pricing (Pre-) Phase II Dialogue Dialogue, involving pharma, payers (public or private depending on market), patients and potentially HTA as well, should occur during Phase II or earlier; ideally before Phase III trials are initiated. It would complement the current “early scientific advice” offerings from EMA and FDA, and parallel the Adaptive Licensing initiative.

• Pharma, Payer and HTA to discuss extent/limitations/validity of existing therapy area costs (including whether they are based on appropriate care) and how potential drug may influence/ impact them. • Patient groups outline access to existing medications and outcomes expectations; stakeholders agree to maintain open dialogue as data emerge. • (Where legal) pharma, payer, patients, prescribers and physicians discuss planned/ meaningful Phase III endpoints; the drug’s purported added-value; potential real-world outcomes; and position relative to existing therapies. • Determining meaningful outcomes will require consideration of how to fairly and practically take into account patient (and where possible) societal views at this stage. • Pharma and payer to agree current TA cost range and how, broadly, to define costs for certain areas, such as Hepatitis C and/or certain cancers, allowing reasonable adjustments/ margin of error. • Pharma and payer to discuss possible approaches to situation where drug’s impact on TA costs may not be apparent for several years (e.g. escrow funds/ compromise price). In the US this may most feasibly done first in the Medicare system where there is greater incentive to take a longer term view. • Pharma and payer to assess competitive landscape and the implications of similar innovative therapies reaching the market within a similar period. • Pharma, payers and patient groups to explore feasibility of appropriate risk-sharing and adaptive pilots. Agreements are made known within participating organisations. • Pharma and payer agree scope of costs (e.g. social care/ economic productivity/patient quality of life) and time-frame for calculating them for key TAs, including chronic diseases with co-morbidities. • Pharma, payers, providers and politicians determine how drug-related cost savings can be shared across different parts of the health care system (e.g. via an accumulating savings ‘fund’, or annual re-distribution). • Pharma, payers and HTA address how to deal with drugs used across more than one TA where costs/outcomes may differ.

Launch / Post Approval These discussions take place, as at present, after a drug has received regulatory approval. The items below are designed to help pharma, patients and payers (public or private depending on market) and providers (where appropriate) agree on a price range and pricing strategy that is mutually acceptable, affordable and sustainable.

• Pharma, payers and patients to agree process for improved collaboration, and for defining outcomes of primary interest and standardised metrics • Pharma, payers and patients to agree that price should take into account some combination of Standard of Care (SOC), TA costs (and drug’s impact thereon), unmet need and outcomes. • Pharma and payers to consider and test shared payment set-ups that measure outcomes, e.g. pharma contributing funding to feasibility stage of aligning and agreeing outcomes of primary interest. • Pharma, payers and patients to jointly take into consideration current and future competitive landscape and its implications for pricing. • Pharma and payers engage to more frequently align the clinical value and volume levers in appropriate TAs: i.e. higher volumes, lower price (predicated on appropriate payers being involved (e.g. those able to influence volumes). • Pharma and payers agree reasonable margin for error and timeframe for calculating drug’s impact on TA costs. • Pharma and payers discuss and determine how a drug’s estimated impact on TA costs, its HTA-determined added benefit related to SoC, and eventual outcomes should relate to price range (and establish any exceptions to this framework). • Pharma and payers to consider how changes in SoC can/ should influence price; explore potential compromise pricing options e.g. in case of genericisation. • Pharma and payers to engage creatively in risk-sharing deals and/or incentive-based deals which reward certain outcomes over given timeframes. Savings accrued should benefit payers/insurers. • Pharma and payers, with patient group input, agree on relative weighting and influence on price of a drugs: a) estimated impact on TA costs; b) HTA-determined added benefit related to SOC; c) eventual outcomes. • Pharma and payers to consider impact on pricing of additional indication approvals during drug’s life-cycle; mapping out of life-cycle revenue. This is a particular importance in the US because of price challenges across multiple segments and indications. Care should be taken to align approaches and metrics e.g. cost per unit of effectiveness, or cost per unit of utility • Explore payer-led price ‘banding’ or advice price parameters for certain product categories, and/or for individual drugs whose use is likely to expand, potentially drawing on aspects of existing tiered reimbursement systems (US, EU). Such arrangements would need to permit changes to dosing/ indications. 9

On-Market Price Review On-market price review may take place at agreed intervals for certain drugs, e.g. high-budget items, drugs whose efficacy/cost-benefit is questionable, and/or where external circumstances change (e.g. disease prevalence, competitive landscape changes, etc.) It may also allow adjustments to take into account drugs’ value accruing over time (e.g. new indications or improved data sets), and/or additional evidence of effectiveness. Ideally it would pre-empt unjustified price increases.

• Payers, pharma and patient groups confirm (or reiterate) meaningful outcomes (contingent on earlier discussions having taken place) having agreed enabling technology for the purpose. • Formalise patient group involvement in review process; establish criteria that patient organisations must meet. • Pharma, payers, providers and patients state their commitment to the principle of on-market price adjustment, in both directions, according to outcomes, and taking into consideration premiums, deductibles, co-pays, insurance etc. In the US, this may require changes to mandated price requirements. • Pharma and payers embrace wider use of volume lever in some therapy areas as a substitute for price increase in case of positive outcomes. • Pharma, payers and providers exploit new technologies to facilitate outcomes data capture and track volumes. • Pharma, payers and providers engage more frequently and creatively in risk-sharing deals and/or incentive-based deals which reward certain outcomes over given timeframe. In the US, this may require changes to mandated price requirements. • Pharma, payers and providers agree practicable review time-frames and structures for sharing cost of data review/collection across key therapy areas. • Pharma and payers discuss appropriate price adjustments (and/or the practicalities of indication-specific pricing and alternatives) if a drug is approved for further indications. • Payer, provider and pharma work to improve the frequency and minimise the resource/ implementation burden of multiple on-market drug reviews; e.g. priority review for certain drug types and/or therapy areas; grouping certain drug classes for review. • Pharma and payers implement a price adjustment plan for when SoC goes generic, and/or implement interim price plan in the face of inconclusive outcomes data.

Next Steps The Checklist is a guidance tool for people involved in determining drug prices. To ensure its relevance and applicability, the PharmaDiplomacy group will undertake a process of consultation with key stakeholders and groups engaged in the debate about what constitutes fair and appropriate pharmaceutical prices linked to value.

Stakeholders are invited to provide feedback during the outreach phase of the project, which will take place between June and December 2015. The PharmaDiplomacy Group will then reconvene to review the findings of these consultations, before issuing a final document in early 2016. We look forward to engaging with you on this important topic.

Appendices

Appendix One Applying the Checklist: Hypothetical Drug Pricing Scenarios The Checklist is a guidance tool for people involved in determining drug prices. The following scenarios illustrate how it could be applied to specific drug candidates during development, approval and post-approval, in order to achieve acceptable pricing. These scenarios are not factual, but are designed to be realistic, and to reflect current challenges around two categories of novel therapies. Case Study One is about a fictional, targeted cancer therapy, combilizumab (Combyza). It is indicated for a narrow population, but with significant scope to expand including across different cancer types. There is limited overall

survival data at approval, in part due to trial design in cancer. Finally, there is a strong likelihood of combination treatment – e.g. several medicines with different mechanisms of action being used together or sequentially. Case Study Two is about a fictional novel treatment for high cholesterol, lipolodumab (SuperStat). Used initially in specialist sub-populations, the drug is nevertheless likely to end up as a primary care product, with a significant budgetary impact given generic standard of care. Its treatment modality (injection) incurs further cost and administrative burden.

Case Study One: Combyza (combilizumab) Summary: What Happens in the Case Study Combyza (combilizumab), a targeted cancer therapy developed for a genetically defined group of ovarian cancer patients, is approved for reimbursement in the UK. In Pre-Phase II Discussions payers, HTAs, patients and pharma agree the scope of unmet need, the changing scope of target populations and a process to refine protocols. In Post-Approval Pricing Discussions they agree data requirements for price adjustments as well as prices in the event of expanding target populations and indications. Prices are subject to manufacturer support for, and patient group input into, outcomes data collection and diagnostic testing. Finally, agreement to meet regularly at On-Market Price Review paves the way for approval and reimbursement in further indications. These successful negotiations lead to the following results: • • •

Patients: Patients that meet approval criteria are able to access Combyza on the NHS. Payer: Combyza is priced at an affordable £1,700 per month for the targeted patient population, plus the cost of diagnostic testing. Company: Onco-Therapy is satisfied that its drug is appropriately valued and benefits relevant patient groups. It is confident of receiving reimbursement for the drug in further indications if approved. The outcomes data and patient feedback will support and inform future R&D programmes.

The Therapy Combyza (combilizumab) is approved in December 2015 for the treatment of relapsed ovarian cancer in women with mutations in the BRCA1 or BRCA2 genes. The drug is approved on the basis of a Phase II trial among 290 patients with ovarian cancer that had previously responded to chemotherapy. The trial shows a significant improvement in progression-free survival (PFS) but no statistically significant improvement in overall survival (OS). On approval trials of combilizumab are ongoing in three other cancer types.

What Happens at the Checklist Touch Points Pre-Phase II Discussions

1. Agreement on the Scope of Unmet Need: Onco-Therapy meets to discuss the drug’s potential benefit with NICE, UK CCG representatives and the Ovarian Cancer Patient Group (OCPG) during discussions as Phase II trials were recruiting. Independent physicians were also consulted. The benefits of Combyza are agreed as there are few treatment options for patients with advanced disease. 2. Agreement on Target Population, now and in future: Data on the initial target population was guided by the genetic marker. However, it was noted that the target population may increase if/as further genetic markers are discovered for this indication. It was also noted that combilizumab may have further potential in other cancer types. 3. Agreement to Refine Protocols: Onco-Therapy agrees that Phase II trial protocol should include a cohort of patients that undergo diagnostic testing (blood and tumour) in order to generate data about the practicalities and cost of testing.

Post Approval/Launch

1. Agreement on Price Adjustments: Following approval, Onco-Therapy meets again with relevant payer, HTA, patient and physician groups. Pricing negotiations take into account the cost of existing therapy in this area (multiple chemotherapy regimens), the unmet need (significant) and the existing outcomes data. Onco-Therapy compromised on its initial target price in exchange for commitment to a capped upward price adjustment if the drug’s real world outcomes, in a larger population than the trial cohorts, were shown to exceed those in the Phase II trial. Onco-Therapy agrees to support collection of outcomes data by independent clinicians using the Systemic Anti-Cancer Therapy Dataset (SACT). This data may support an upwards price adjustment if these reached an agreed significance. The manufacturer will contribute to the cost of diagnostic testing for a limited period as protocols are established. It will also fund therapy costs for those taking Combyza for more than ten months, in a scheme considered manageable for the health system, thanks in part to SACT. 2. Conditional Pricing Agreement for Expanded Target Population: Onco-Therapy informs relevant groups that it is close to validating a second biomarker for the drug, which would expand its target population by a further 50%. Payers and Onco-Therapy meet and agree to maintain price for this additional patient population on condition that the

same diagnostic testing process could be applied to identify the alternative biomarker. If not, the manufacturer would support the full additional cost of testing. 3. Agreement to Expand Indication and Volume Cap: Onco-Therapy notifies payers that it was close to reporting trial results for Combyza in prostate and brain cancer. Based on estimates of the potential expanded population size, a volume cap was agreed which could trigger a downward price adjustment across all indications. It was agreed that indication-specific pricing was impractical.

On-Market Price Review

1. Ongoing Discussions Permit Subsequent Agreements: Onco-Therapy and relevant stakeholders (payer, HTA, physician, patient) agree to meet regularly after Combyza’s launch to review outcomes data, and any challenges in the diagnostic testing process and/or data collection. Also on the agenda are discussions of the results of ongoing trials testing Combyza’s benefit in combination with another, as-yet unapproved, targeted therapy manufactured by Cancercure, and potential price discounting mechanisms if such targeted-therapy combinations were approved.

Case Study Two: SuperStat (lipolodumab) Summary: What Happens in the Case Study AmSan’s first-in-class, injectable cholesterol-lowering therapy gains Tier 2 formulary positioning at a major US ACO priced at a significant premium to the oral, off-patent standard of care for a defined group of high-risk patients. In the UK it gains NHS reimbursement. With outcomes data pending, the door is left open for expansion of the patient population, while imminent competition raises the prospect of downward pricing pressure. This positioning is achieved by agreeing protocols and data and target-setting requirements between Phases II and III; negotiating at launch how prices will be defined based on clinical outcomes and on-going data collection, and by acknowledging the likelihood of an expanded target population once more data becomes available. Finally, the pre-agreed on-market Price Review provides the framework within which expansion of the reimbursed population may occur, as well as requiring patient involvement in real world efficacy trials. These successful negotiations lead to the following result: • Patients: In the US Healthmark, a large ACO covering over 20 million patients, agrees to put SuperStat in Tier 2 formulary position, with a moderate co-pay of $15/month.

•

In the UK SuperStat is available on the NHS to patients with existing atherosclerotic disease, with LDL cholesterol levels above 190mg/dL or with diabetes and LDL levels above 100mg/dL, for whom statin therapy is inadequate. Payer: The cost of the treatment in the UK is £150 per month. The ACO’s treatment protocol recommends the drug for patients considered at high-risk – those with existing atherosclerotic disease, with LDL cholesterol levels above 190mg/dL or with diabetes and LDL levels above 100mg/dL. Physicians are discouraged from prescribing the treatment to patients outside this group, pending outcomes data. Company: AmSan is satisfied SuperStat is available to patients most in need, gaining familiarity among physicians, and that a wider group will access the drug once the outcomes data are available.

The Therapy SuperStat (lipolodumab) is approved in June 2016 as a first-in-class treatment to lower cholesterol in patients for whom statin therapy is inadequate or intolerable. Lipolodumab, given by injection once a fortnight, has been shown in three large Phase III trials to lower harmful low-density lipoprotein (LDL) cholesterol by over 60% among patients considered at high risk of cardiovascular disease, and already taking statins. A cardiovascular outcomes trial to determine whether lipolodumab reduces the incidence of heart attack and stroke is due to report in late 2017. Early extension data from one of the clinical trials suggests a halving of heart-attack risk among patients taking SuperStat, relative to those on statins alone. A similar treatment has recently been submitted to regulators.

What Happens at the Checklist Touch Points Pre-Phase II Discussions

1. Agreement Reached on Protocols to Define Value: AmSan meets key payers (and HTAs), as well as clinicians, before the start of Phase III trials of lipolodumab. Phase II trials had already hinted at the extent of the cholesterollowering potential of this new class of drugs. It was noted that statin therapy is inadequate for a significant portion of cardiovascular patients. Payers were aware of the Phase III timeline, and of at least two competitor treatments at a similar stage of development. It was agreed, with significant patient group input, that Phase III trials should also test a formulation and injection protocol that encourages self-administration. Plans for a longer-term, multi-year cardiovascular (CV) outcomes trial were discussed in confidence. 2. Agreements Reached on Data and Target-setting: AmSan, HTAs and payers review, with clinician input, the number of patients uncontrolled by statins, and going on to suffer from subsequent myocardial infarction (MI)/ stroke and hospitalisation. The challenge of setting LDL targets and assessing CV risk is discussed. The quality and extent of data around the cost of treating MI and stroke is jointly assessed.

Post Approval/Launch

1. Pricing Negotiated and Agreed: SuperStat’s price is negotiated on basis of available Phase III clinical data about the drug’s added benefit in terms of LDL lowering, and on early-read out from a year-long extension to a Phase III trial suggesting a 50% reduction in the likelihood of hospitalisation and CV events. Average cost of treating the most common CV events is considered, along with the very low (£3/month) price of generic statins.

2. Conditional Pricing Agreements for Expanded Target Population: Initially reimbursement is limited to those at high risk of CV events and poorly controlled LDL on statins, given the as-yet unproven link between lower LDL levels and a reduction in cardiovascular outcomes. Payers and Amsan agree a review of the target population, up to an agreed overall budget cap, at the current price on the basis of outcomes data that would be available in 2017 and the possible availability of two other similar therapies.

On-Market Price Review

1. 18 Month Review Leads to Expansion of Reimbursed Population. SuperStat’s pricing and reimbursed population was reviewed after launch, triggered by CV outcomes study results showing a significant reduction in the number of heart attacks and strokes among patients taking the drug. The population for which the drug is reimbursed is expanded to include all individuals with LDL levels at or over 120mg/dL who have suffered from a CV event in the past. 2. Agreement is reached to maintain the price of the drug and to increase by 10% the budget cap that was agreed in launch talks, due to the strength of outcomes data and independently assessed downstream cost savings. It is noted that the competitor drug, though approved, had thus far shown a weaker reduction in CV events in an outcomes trial. However, it was also acknowledged that stronger data in the future, coupled with aggressive pricing by the other manufacturer, could trigger a review of SuperStat’s reimbursement status. 3. Budgetary Flexibility Agreed: The increased annual budget cap for SuperStat was subject to flexible payment conditions agreed by AmSan, including quarterly fixed payments in arrears with outstanding sums settled at year-end. 4. Patients Agree to Participate in Pilots: More support is required for patients unable or unwilling to self-inject and it was agreed that AmSan would pilot three programmes for nurse home visits in selected regions to assist with administration. The impact of these on patients will be measured. 5. Stakeholder Dialogue: All stakeholders discussed the development within the clinical community of a CV risk factor measure which could help more accurately identify those patients who could benefit from drugs in the same class as lipolodumab. A data collection exercise was planned to determine how closely this risk factor measure matches up against current eligibility criteria, and the door left open to review treatment eligibility in the future. All parties agreed to work together to ensure best-possible outcomes and reduced hospitalisation costs.

Appendix Two

About the PharmaDiplomacy Dialogue PharmaDiplomacy is a US/EU leadership initiative seeking to overcome the trust deficit between health systems and the pharmaceutical industry in order to ensure that effective, affordable and innovative medicines get to patients who need them. The PharmaDiplomacy dialogue aims to: • • • •

Identify where and how trust is being eroded or built on specific topics. Identify pathways that could be taken to achieve better outcomes and take practical action to model them. Consider the mechanisms that could hold agreements in place and avert new potential flashpoints before they escalate. Undertake outreach to engage their peers and colleagues, as well as other key stakeholders in taking this agenda forward.

Phase One – Agenda-Setting (Nov 2013 – Jan 2014) • Conceptual Framework: to build understanding of how trust is built/undermined and how this relates to health systems and pharma • Identification and consideration of flashpoint issues that need to be addressed • Identification of alternative pathways to address these issues Phase Two – Solution Building (Feb 2014 – July 2014) • Continued exploration of underlying causes of mistrust • Consideration of two further flashpoints • Early identification of mechanisms and structures to address these issues Phase Three – Leadership, Trust & Pricing Framework (Aug 2014 – Feb 2015) • Identify how pricing is contributing to mistrust and what can be done about it • Identify key points along the pricing pathway where trust could be rebuilt • Explore the viability of issuing a public discussion document that highlights how such an approach could rebuild trust between pharma and health systems Phase Four – Consultation Document (Mar – Dec 2015) • Writing and agreement of “Checklist” for outreach (Feb – Aug 2015) Phase Five – Outreach and Launch (Jan 2015 – Mar 2016) The publication of the consultation document is the central plank of Phase Five of the project. The PharmaDiplomacy Group believes that the project’s objectives will be best achieved by a process of consultation with key healthcare stakeholders. The Group has outlined its views on what a more collaborative approach to pharmaceutical pricing might look like and how to achieve it in this document. The “Checklist” will be subject to consultation with European and US stakeholder between September and December 2015. Once complete, the Working Group will meet to consider the findings of the consultations and agree final conclusions of the PharmaDiplomacy Project. These will be incorporated into a final report, which will be launched in February 2016, followed by a process of dissemination. Meteos dialogues are funded by participant fees on a not-for-profit basis and through the provision of in-kind research and information sharing. As we are committed to ensuring that all relevant stakeholders contribute to the dialogues we provide some spaces on a non-fee basis. Such participants typically pay their own expenses. All participant voices are of equal weight in the dialogues. PharmaDiplomacy is funded on this basis. 15

Appendix Three PharmaDiplomacy Working Group NAME

TITLE

INSTITUTION

James Anderson

Head of Corporate Government Affairs

GlaxoSmithKline

Richard Ashcroft

Professor of Bioethics

Queen Mary University of London

David Cavan

Director of Policy & Programmes

International Diabetes Federation

William Crown

Chief Scientific Officer

Optum Labs

Charlotte ErsbĂ¸ll

Corporate Vice President, Corporate Stakeholder Engagement

Novo Nordisk

Richard Evans

Founder & Managing Director

Sector Sovereign

Thomas Graf

Chief Medical Officer

Geisinger Health System (April 2004 - Aug 2015)

Jane Griffiths

Company Group Chairman, Janssen Pharmaceuticals, EMEA

Johnson & Johnson

David Haslam

Chairman

UK National Institute for Health and Care Excellence (NICE)

Nick Hicks

Chief Executive

COBIC

Niels Lund

Corporate Vice President, Global Stakeholder Engagement

Novo Nordisk

Peter Neumann

Director of the Center for the Evaluation of Value and Risk in Health

Tufts University School of Medicine

Jacob Messina

Healthcare Analyst

Robeco

Jamey Millar

Senior Vice President, Managed Markets & Government Affairs

GlaxoSmithKline

Blasine Penkowski

Group Chief Strategic Customer Officer, Janssen North America

Johnson and Johnson

Thomas Pogge

Leitner Professor of Philosophy and International Affairs

Yale University

Roger Ray

Executive Vice President and Chief Medical Officer

Carolinas HealthCare System

Ri de Ridder

Director General

Belgian National Institute for Health and Disability Insurance (RIZIV-INAMI)

Lewis Sandy

SVP for Clinical Advancement

United Healthcare

Ad Schuurman

Vice-President

The Medicine Evaluation Committee (MEDEV)

Mark Skinner

President/ Chief Executive Officer

Institute for Policy Advancement

Chris Strutt

Senior Vice President, Government Affairs, Public Policy and Patient Advocacy

GlaxoSmithKline

Sean Tunis

Director

Center for Medical Technology Policy

Stijn Vanacker

Global Healthcare Analyst

Robeco

Glossary Drug Development Timeline Phase I: small safety trial usually among healthy volunteers and using low doses Phase II: tests dosing, efficacy and side-effects over a short period among sick patients Phase III: tests efficacy, side-effects and dosing among a large group of patients, over a longer period (some times up to a year), and usually compares the treatment to existing standard of care Phase IV: assesses the safety, effectiveness and side-effects of a medicine after it has been approved by reg ulators and while being used in practice Approval: FDA (US) or EMA (EU) authorizes the drug to be marketed, sometimes with conditions attached

Institutions Accountable Care Organisations (ACOs): groups of health care providers (physicians, hospitals) in the US which collaborate to provide cost-effective care and are paid by results, not per procedure. Commercial insurers: for-profit health insurers, e.g Aetna or UnitedHealth in the US, and BUPA in the UK. Employers: employers often provide health insurance for their employees, using commercial insurers; a few are self-insured. Government payer: National health payer e.g. National Health Service (UK) or, in the US, the Centers for Medicare & Medicaid Services (CMS). HTA: Health Technology Assessment that systematically examines the safety, clinical efficacy and effectiveness, and cost-effectiveness of a health technology. Health Maintenance Organisations (HMOs): organisations that arrange or provide care on a pre-paid basis for insurance plans or individuals. Pharmacy Benefit Managers (PBMs): administrators of prescription drug programmes similar to government insurance (e.g. Krankenkassen in Germany, Express Script in US). Statutory health insurers: non-profit bodies providing legally enforced health insurance in Europe

Pricing Differential pricing: Drug prices adapted to the purchasing power of consumers in different geographical or socio-economic segments. Differential pricing is regarded by some as an effective way to improve access to medicines in low and middle-income countries. Its use is applied most frequently to vaccines, anti-retrovirals and contraceptives. International/External Reference Pricing (IRP): The use of the price (or prices) of a drug or therapy in one or several countries to set or negotiate a price for the same product in another country. The number of countries included in any nation’s reference ‘basket’ varies widely, from 1 to more than 30. The most widely-referenced countries are France, followed by Germany and the UK. IRP can result in manufacturers maintaining a high public “list price” (official price, before any discounts or rebates) in commonly referenced markets such as Germany or the UK and explains why these discounts are often confidential. IRP can affect drug firms’ willingness to engage in initiatives towards fairer, more value-based pricing in particular markets, for fear of a wider, downward price spiral. Reference pricing: A reimbursement system used to control costs that involves grouping drugs according to some equivalence criteria, and setting a reference price for each group. The group criteria may be defined narrowly (e.g. chemical equivalence) or more broadly (e.g. all drugs treating a given condition). Payers then reimburse no more than the reference price for any drug in that group. Tiered pricing: Sometimes used interchangeably with ‘differential pricing’ – e.g. selling the same medicine at a different price in different countries, according to ability-to-pay. In the US, tiered pricing is used to refer to different levels of patient co-pay required for drugs covered by insurance. Tier 1 drugs generally include generic medicines, and have the lowest co-pay; Tier 2 is a higher co-pay and includes ‘preferred brands’ – e.g. branded drugs that are prioritised due to their effectiveness, a favorable price deal or both; Tier 3 drugs require the highest co-pay and may be non-preferred brands or new medicines whose safety and effectiveness are uncertain.

Elements that Contribute to Definition of Value Biomarkers: Traceable substances that provide a measurable indication of disease state or of pharmacological response to a particular drug. A well-known example is Prostate Specific Antigen (PSA), used as a proxy for prostate size. Not all diseases have reliable biomarkers, but where available, they can be used as a measure of a drug’s effectiveness. Comparative Effectiveness (CE): The relative effectiveness of two (or more) types of treatment for the same disease. Comparative effectiveness research compares the results of one treatment approach with those of another – e.g. two different drugs, or drug treatment vs. surgery, for example. Cost-Effectiveness (of a treatment): The comparison of the cost of a treatment to its health effects. CE analysis helps find ways to allocate limited resources to achieve maximum benefit to a particular population. It is used to determine whether a drug or intervention provides value-for-money, including by Health Technology Assessment agencies on behalf of national health systems. Efficacy (of a treatment): How well a drug or treatment works under the best possible conditions – i.e. when taken properly among a pre-selected group of patients. Effectiveness (of a treatment): Whether and how well a treatment works in real life – when taken in normal, every-day life circumstances as opposed to part of a controlled clinical trial. Incremental Cost-Effectiveness Ratio (ICER): The ratio of the change in costs to the incremental benefits of a treatment. Cost-effectiveness in the UK is expressed by NICE as “cost-per-QALY”. For instance, the ICER for Sovaldi, as estimated by NICE, ranges from £9415 per QALY gained to £109,526 per QALY gained, depending on the patient sub-group. Quality-Adjusted Life Year (QALY): A commonly used measure of outcome or effect, the QALY is designed as a gauge of disease burden, including both quantity and quality of life lived. It’s based on the number of life-years that a treatment would add, with years weighted according to disease burden (from 1=perfect health to 0=dead). Patient Reported Outcomes (PROs): Information and data about a particular treatment which are collected directly from a patient, typically via questionnaire or interview. The questions typically cover symptoms, functioning/disability, quality of life and general health status and perceptions. PROs are used as part of clinical trials. Several validated, reliable PRO tools exist often covering health-related quality of life and /or healthcare evaluations, and may be included in drug approval submissions. Real World Evidence (RWE): Data and information gathered from a real-world setting, rather than generated under controlled, clinical trial conditions. It encompasses many different types of data, from a variety of sources. RWE may come from disease registries, insurers’ claims data, electronic medical records, or be generated via pragmatic clinical trials, patient surveys, questionnaires or observational studies. RWE is valuable because it provides information about actual treatment outcomes, and thus can help improve those outcomes. Standard of Care (SOC): A description of the diagnostic and treatment process that a clinician should follow for patients with a particular condition. It varies by country and/or health system, and is used somewhat loosely, without a precise medical definition. Standard of care is typically understood to correspond to (or at least derive from) clinical guidelines supported by evidence-based medicine, though the link is informal, and some argue that the term should as a result be used with more caution. Surrogate endpoints: A replacement for clinically meaningful endpoints (such as a major CV event, or death) when endpoints are difficult to measure or ethically inappropriate. Biomarkers are sometimes used as surrogate endpoints in clinical trials. (Trial) endpoints: Target outcomes that a clinical trial is trying to measure; e.g. reduction (of a pre-defined size) in blood sugar levels or in sustained viral load.

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