Indication-Specific Pricing Headed to a Formulary Near You

A novel approach to establishing the preferred status for prescription drugs could give new clout to agents previously relegated to several rounds of step therapy. Pharmacy Benefit Managers (PBMs) and insurers are increasingly experimenting with indication-specific pricing (ISP), under which drugs are priced differently depending on subpopulations the drugs treat.

Indication-specific pricing holds promise for autoimmune drugs, which has a few preferred agents, numerous drugs used as second and third line therapies and will see the introduction of multiple biosimilars through the end of the decade.  In this crowded class, only a few drugs break out of the pack, namely Humira, Enbrel and to a much lesser extent Remicade.

For autoimmune drugs, ISP has the potential to break up formulary tiering among its many indications as seen in a recently published Access & Reimbursement Report. ISP already has some powerful supporters in PBMs Express Scripts and CVS Health, which both implemented ISP initiatives in the past two years, building ISP into formularies. With two big players involved in ISP, the model is likely to move to other players in short order, especially among DRG-surveyed insurers, who say ISP can be rolled out in less than a year and a majority who have not adopted ISP plan to adopt it within the next five years.

Autoimmune diseases, including rheumatoid arthritis, psoriatic arthritis, Crohn’s disease, ulcerative colitis and related conditions. For example, a drug that proves more effective for Crohn’s disease could gain preferential tiering as a first-line Crohn’s therapy while remaining a second-line for RA or PsA.

ISP implementation faces several steep hurdles, from the necessity of providing education to entrenchment of market-leading autoimmune drugs.

Humira and Enbrel are the go-to autoimmune drugs; it could be tough for new agents to surmount their dominant share of the market when they are generally seen as first-line options for treating autoimmune conditions. The recent introduction of biosimilars has not reshaped the market in the same way that traditional generics impact small-molecule drugs.

However, cost pressures could force payers to give ISP a hard look. Autoimmune drugs are among the most expensive therapeutic classes, costs several thousands of dollars per month. PsA could hold more promise for ISP than RA, in part because most psoriasis agents are also approved for PsA.

But the ability to implement ISP will rely on factors such as rebates, more than half of surveyed MCOs want additional rebates for preferred formulary placement under ISP, and whether data shows effectiveness. Most surveyed providers, even the wary, are willing to try ISP despite the promise quick implementation, ISP will require that MCOs bridge their providers’ information and technology gaps.

If ISP can lower costs for expensive therapeutic classes and boast better outcomes, the concept could migrate to other therapy areas, especially those with multiple high-cost agents.

For more  DRG insights on ISP in rheumatoid arthritis and psoriatic arthritis, please visit our report.

For more insights and analysis on U.S. market access, follow @BillMelvilleDRG.

 

About Access & Reimbursement

DRG’s Access & Reimbursement module helps you understand the access and reimburse­ment environment so you are better equipped to develop strategies that help you over­come potential barriers to access and help your brands thrive. With DRG’s Access & Reim­bursement module, you can stay up to date on restriction policies: gauge payer and prescriber attitudes toward specific therapies; identify opportunities where brands can capture patient share through market access, and maximize opportunities for emerging therapies by learning how predecessor brands gained favorable reimbursement, or why they stumbled. Find out more: Access & Reimbursement.


Contributors: Bill Melville: Principal Analyst, U.S. Market Access Insights
Published on: 27 September, 2017