Pressed to rethink strategies in the era of healthcare reform, Express Scripts Holding Co. is readying to roll out an innovative new value-based pricing model in 2016. The idea is to price therapies at different values based on the drug’s effectiveness in treating the disease it’s prescribed to treat, rather than a flat rate for the product.
Take for example, the drug Tarceva, which works to extend life for several months in patients with lung cancer, but has also proven effective in extending life by several days when used to treat pancreatic cancer. Its value isn’t the same to the patient using it for pancreatic cancer, explained Express Scripts Senior Vice President and Chief Medical Officer Steve Miller during a CMS panel discussion in November
“The trouble for us as consumers is: Do you ever pay the exact same amount for something that works one-tenth as well?” he asked.
When Express Scripts implements its new system in 2016, it will be for a handful of drugs. Making it a successful endeavor will require an effort to help pharmaceutical companies be comfortable with the change.
“If it’s successful in (2016) we can expand this to a huge number of other drugs,” Miller said. “We can also expand it to categories outside of cancer, like inflammatory diseases and others.”
Third-party valuation experts will help Express Scripts discern alternative prices for different indications.
The movement toward indication-based pricing has some observers calling on CMS to rethink Medicaid regulations that require drug companies to charge the “best” price they negotiate with any buyer.
Miller mentioned that the best-price rule is an impediment when you’re using a value approach. If a drug is being sold at a $100 price for one indication and $10 for another, the best-price rule kicks in at $10, which may not be appropriate.
“The government, they won’t care if it’s just for pancreatic cancer,” Miller said.
To deal with it, Miller said the pharmaceutical manufacturers have agreed to accept a net discount that results in a blended rate for all patients.
“So all patients will benefit from the lower price even though it’s based on indication,” he said.
Dana Goldman, director of the Leonard D. Schaeffer Center for Health Policy and Economics at the University of Southern California would like to see value-based strategies implemented in lieu of the best-price rules.
Goldman said there exists a tension between patients, who want unfettered access to drugs, and health plans that want to limit access to expensive but effective medications.
“Indication-specific pricing is a good way to relieve the tension,” he said.