Rare Diseases and Orphan Products Accelerating Research and Development (2010) / Chapter Skim
Currently Skimming:
6 Coverage and Reimbursement: Incentives and Disincentives for Product Development
6 Coverage and Reimbursement: Incentives and Disincentives for Product Development
Pages 179-204
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 179... ...
If, however, a company can set a price that is high enough to recover its costs and generate profits because enough public and private health insurance plans and patients and families will pay that price, then a manufacturer may not be deterred by a small target market. Some orphan drugs are among the most expensive drugs in the world, costing as much as $400,000 per year.
|
From page 180... ...
One is that private health plans generally have little leverage in negotiating prices for expensive biotechnology drugs, many of which are orphan drugs. Even the Kaiser Permanente system in California, which is large and accustomed to negotiating prices, has noted that "opportunities are limited" in this arena (Monroe et al., 2006)
|
From page 181... ...
Manufacturers can also often expect that advocacy groups will be active in spreading information about new treatments. Notwithstanding examples of profitable orphan drugs, companies considering the development of a drug for a disease that affects a small population must evaluate prospects for each potential product individu 2 Forstate Medicaid programs, which paid approximately $1 million in 2007 for some 100,000 prescriptions of the drug (most likely for treatment of gout)
|
From page 182... ...
Recent trends in the design and management of prescription drug benefits already include high patient cost sharing for some drug categories, especially expensive drugs. An extensive literature on the effects of patient cost sharing indicates that it reduces both needed and unneeded use of
|
From page 183... ...
Although variation is introduced by the contractors that administer various elements of the Medicare program, it is a single program in contrast to the 50-plus Medicaid programs and the thousands of private health plans for which systematic information is limited. The chapter includes brief discussions of Medicaid, private health plans, and company assistance programs and reviews some provisions of recent legislation that may make insurance more available and moderate some limits on coverage, for example, lifetime caps on benefits.
|
From page 184... ...
MEDICARE AND MEDICAID COVERAGE OF FDA-APPROVED DRUGS Responding to the growing availability of effective medical services and the difficulties that older people faced in paying for these services directly or obtaining health insurance, Congress created Medicare in 1965 to cover people age 65 or over, regardless of income or health status. Today, Medicare also covers people who qualify for SSDI, although they must generally wait 2 years before they are eligible for Medicare.
|
From page 185... ...
provides Medicare beneficiaries opportunities to enroll in private health plans.4 In 2003, Congress created a Medicare outpatient prescription drug benefit (Part D) , which was implemented in 2006 and is available only through private plans.
|
From page 186... ...
Medicare Part B Medicare Part B covers physician services, hospital outpatient care, certain home health services, certain clinical laboratory services, some preventive services, durable medical equipment, and certain drugs. Covered 5 Although not a part of Medicare decision making as such, hospital formularies -- like the formularies of private prescription drug plans -- reflect hospital financial and quality management judgments and have economic implications for pharmaceutical companies.
|
From page 187... ...
, a treatment for Maroteaux-Lamy syndrome, a rare metabolic disorder. Likewise, Part B typically covers certain orphan drugs that are administered at home using equipment that is covered by Part B
|
From page 188... ...
Part D benefits are offered through stand-alone prescription drug plans and through Medicare Advantage plans that cover all Medicare benefits including medications. Congress also specified that drug coverage for all individuals dually eligible for Medicare and Medicaid would shift from the Medicaid program to the Part D benefit.
|
From page 189... ...
For companies making orphan drugs or considering development of an orphan drug, several features of Part D plans could significantly affect beneficiary access and costs. These features -- which include "tiered" cost 6 However, recent legislation codifying the requirement that plans must list "all or substantially all" drugs in these six classes allows CMS to establish exceptions that permit plans to either exclude a drug in the protected classes from its formulary or impose utilization restrictions (CMS, 2009d)
|
From page 190... ...
. Although the incentives in tiered formularies for beneficiaries to use generic or preferred drugs can provide leverage for plans to negotiate discounts with drug manufacturers, both the lack of competition for many orphan drugs and the small number of users for these drugs, as noted above, weaken the negotiating position of plans.
|
From page 191... ...
Structuring Coverage: Utilization Management In addition to patient cost sharing features, Part D plans also employ a variety of utilization management strategies to control the use of drugs and overall costs as well as to promote medication safety in some instances. These include prior authorization, step therapy, and quantity limits.
|
From page 192... ...
For example, a drug approved for use with a common disease may be used off-label for a rare condition, and physicians likewise may prescribe an orphan drug for either a common indication or a rare indication other than the indication(s) for which it has been approved.
|
From page 193... ...
However, as noted above, to the extent that private health plans, including Part D plans, are able to "move market share" across drugs in a class using such financial incentives, then plans have the potential to negotiate sizable rebates or discounts from
|
From page 194... ...
, the analysis found Part D prices declined by 3 percent over the same period. Analysis of Part D Plan Coverage of Orphan Drugs Appendix C presents the results of a commissioned analysis of Part D plan coverage of orphan drugs as reported in the January 2010 CMS Prescription Drug Plan, Pharmacy Network, and Pricing Information Files.
|
From page 195... ...
The number of drugs that fall into each coverage rate category in the analysis is 99; therefore, the numbers and percentages of drugs are identical and percentages have not been included in the table. SOURCE: January 2010 CMS Prescription Drug Plan, Pharmacy Network, and Pricing Information Files; FDA list of orphan drugs as of December 2008.
|
From page 196... ...
, which was not the case before 2010. Overall, the rebate provisions make orphan drugs more affordable for state Medicaid programs, although very expensive drugs remain very expensive.
|
From page 197... ...
Although not specific to orphan products, these policies would affect orphan drugs and the patients who use them. PRIVATE HEALTH PLAN COVERAGE OF FDA-APPROVED DRUGS As of 2008, approximately 65 percent of nonelderly individuals had private health insurance (KFF-SHF, 2010)
|
From page 198... ...
of private health plans had an out-of-pocket maximum specifically for prescription drugs in 2009, which limits an enrollee's financial risk for medication costs. Effective in 2010, the Affordable Care Act prohibits individual and employer health plans from setting lifetime limits on the dollar value of coverage, and it permits annual caps on coverage only as allowed by the Department of Health and Human Services.
|
From page 199... ...
In this way, public and private health plans and insured individuals who pay for the drug support some of the cost of company assistance. Company assistance programs may require considerable financial information from individuals seeking assistance, for example, tax returns, bank statements, and W-2 forms.
|
From page 200... ...
Some individuals will remain uninsured, and some of those with insurance will continue to have difficulty with out-of-pocket payments. PUBLIC AND PRIVATE HEALTH PLAN COVERAGE OF CERTAIN COSTS IN CLINICAL TRIALS In some cases, health plans may cover certain costs of care for patients involved in clinical trials, thus reducing the burden on participants in the trial and potentially easing recruitment challenges for sponsors, including sponsors of trials of orphan drugs.
|
From page 201... ...
Health plans are not required to cover the cost of the investigational item. RECOMMENDATIONS As discussed in Chapter 3, the Orphan Drug Act provides significant incentives to companies to develop drugs for rare diseases.
|
From page 202... ...
More information on the policies and procedures of other health plans would also be desirable to gauge the effects on people who depend on orphan drugs. RECOMMENDATION 6-1: The Centers for Medicare and Medi caid Services or the Medicare Payment Advisory Commission should study how the implementation of prior authorization requirements by Medicare Part D and state Medicaid plans affects beneficiary access to orphan drugs.
|
From page 203... ...
.) RECOMMENDATION 6-2: The Agency for Healthcare Research and Quality or a similar appropriate agency should undertake a pilot proj ect to develop an evidence-based compendium to inform health plan decisions on both orphan and nonorphan drugs that may have indica tions for rare conditions that have not been evaluated or approved by FDA.
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.