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Exclusive Life Science Feature diseases often having limited or exclusive product availability and distribution • treat therapeutic categories such as oncology, autoimmune/immune, and inflammatory that are marked by long-term or severe symptoms, side effects, or increased fatality. "Complex biological drugs require more sophisticated handling," Cohen explains. Complicated dosing regimens such as systemic application by infusion or injection or requiring physician supervision for administration are what Cohen describes as being high-touch interactions, which further add to the cost of these drugs. To address the high-touch needs of these patients, specialty pharmacies grew from a cottage industry to big business. "Specialty pharmacies realized they could provide an advantage over traditional retail for these patients," Cohen attests. In addition to providing better service than traditional retail pharmacies to these high-touch patients, specialty pharmacies and pharmacy benefit management (PBM) organizations gained popularity as a means of reducing drug costs. It is estimated that more than 200 million Americans receive drug benefits administered by PBMs, which are able to aggregate the buying clout of millions of enrollees and thereby lower prices through discounts, manufacturer rebates, and improved distribution efficiencies. "If you look at the evolving landscape, the boundaries have been totally blurred, because commercial payers own specialty pharmacies and PBMs that manage the pharmacy benefits for the reimbursement of companies," Cohen states. This blurring of boundaries results in a potential conflict of interest. "A specialty pharmacy owned by a large insurance company or payer wants to get contracts for manufacturers to distribute their drugs because that's how they get paid," he explains. "The reimbursement side may want to limit access to those specialty drugs because they cost a lot." According to Cohen, when it comes to reimbursing for specialty pharmaceuticals, "It benefits the payers to scrutinize and exert control." There are a number of ways insurance companies do this, such as specialty-tier structuring with significantly higher co-pays, prior-authorizations, and step edits. "It is just a thicket of regulations and requirements," states Cohen. "In some cases, the standards imposed by insurance companies don't make medical sense to practitioners because they are done in a highly variable way." This unwillingness of the system to pay for a drug is one of Cohen's biggest concerns. THE EU'S SHORTSIGHTED COST-CONTAINMENT POLICIES "The burden for paying for a pharmaceutical innovation is falling quite disproportionately on the United States' system," Cohen says. This is because of the pricing power available in the U.S. Cohen believes the extent to which insurance payers don't pay for specialty drugs has the potential to stifle U.S. pharmaceutical innovation. Take the EU as an example. "Europe, which has a government pay system, has taken the approach of squeezing pharmaceutical industry margins," he explains. "What you're finding is some of the bigger, multinational companies are now moving operations out of Europe. In some cases, these companies have decided not to distribute certain new drugs in Europe, because the price does not reflect the innovation or benefit of the drug nor the investment of the company to bring it to market." On a small scale, take Acorda's Ampyra (dalfampridine) extended release 10mg tablets, approved by the FDA for people with multiple sclerosis (MS) and marketed as Fampyra outside the U.S. through a license and collaboration agreement with Biogen Idec (NADAQ: BIIB). Acorda projects the drug will do between $285 and $315 million net sales this year. "Of that, we are going to spend $60 to $70 million in R&D;," he explains. "That's a pretty high percentage of our net sales." The CHIPPING AWAY AT PHARMA'S ABILITY TO INNOVATE One of Ron Cohen's biggest fears is that people in power and government who use the biopharmaceutical industry as a whipping post will continue to layer on more regulations to extract more discounts and payments from the pharma industry. "For example, the industry agreed to cover initially 50 percent of the 'donut hole' of Medicare and then increasing percentages over the ensuing years," explains Cohen, CEO of Acorda Therapeutics. "This is tens of billions of dollars of payments and discounts." According to Cohen, the industry did this with the understanding that the Affordable Care Act (ACA) would enable more people to have access to insurance coverage. "In effect, we're giving a substantial discount on the medicines, but we're getting more customers," he explains. This all changed with the June 28, 2012, Supreme Court decision ruling that the federal government could not force the states to accept the Medicaid expansion. "Now, it's unclear how many Medicaid patients are really going to come in under the expansion, because already 25 states or so have said they are not going to participate," Cohen says. "And they are pushing to extract still more discounts from the industry for Medicare dual-eligibles, subjecting them to the same 23 percent plus discounts Medicaid gets." Cohen describes these decisions as a continual chipping away at the financial health of the industry, and thereby, at its ability to innovate and provide society with the new medicines it needs. November 2013 LifeScienceLeader.com 27