Probability is the likelihood of something happening. When flipping a “fair” coin (i.e., one that has an equal chance of landing on one side or another), there are two possible outcomes — heads or tails. The probability of getting heads equals 1/2, or 50%, or 0.5.
CSL Behring set the list price of Hemgenix, a gene therapy for adults with Hemophilia B, at $3.5 million. This is the highest list price for a drug, ever. But that’s just a list price — not necessarily the price payers will pay. And there are at least 3.5 ways payers won’t pay $3.5M.
1. No coverage
Because of the high cost of gene therapies, some self-insured employers are not covering them. And due to the uncertain durability and cost effectiveness of gene therapies, some plan sponsors view them as too chancy. A small but growing number of plan sponsors have made or may make gene therapies an excluded benefit, a draconian restriction that makes these products ineligible for appeal and costs payers $0. Those that do not make gene therapies an excluded benefit and choose to not cover Hemgenix, however, run the risk of paying for it through a medical exception.
2. No utilization
Some payers will have no Hemgenix utilization and, as a result, pay $0. First, the prevalence of Hemophilia B in the US population is about one in 40,000 — fewer than 5,000 people in the United States have Hemophilia B. Because of this, it’s likely that thousands of self-insured employers do not have workers and dependents with Hemophilia B. Second, the severity of the condition can reduce participation in the labor market. One study found that people with severe hemophilia were more likely than the general population to be unemployed or in part-time employment. Third, slow uptake among providers and patients, especially early on before real-world evidence emerges, may also limit utilization. Some self-insured employers with a very small number of workers and/or dependents with Hemophilia B may have no Hemgenix utilization in the short term.
3. Negotiated discount
The bigger the payer, the greater the likelihood of a negotiated discount. What’s the probability that an 800-pound gorilla payer will pay the $3.5M list price? Not at all. ICER’s estimate that a fair price would be $2.93M to $2.96M gives large payers additional leverage when negotiating a lower net cost.
While employers and commercial insurers have discretion over coverage decisions of new FDA-approved therapies, state Medicaid programs do not. CSL Behring participates in the Medicaid Drug Rebate Program, so state Medicaid programs will be required to cover Hemgenix consistent with the FDA-approved indication and when medically necessary. That said, in any state Medicaid program where hospitals must separately bill for Hemgenix (i.e., Hemgenix reimbursement is not bundled in Medicaid’s hospital fee for the gene therapy admission), CSL Behring will pay the state Medicaid agency a substantial rebate — the greater between 23.1% of average manufacturer price (AMP) or AMP minus “best price.” If, for example, AMP equals $3.5M, then the rebate could reduce the cost to $2.7M. States may also pursue separately negotiated supplemental rebates or a value-based payment arrangement.
And because Medicaid will get a rebate, then the Department of Veterans Affairs will also receive a discount.
3.5. Price cut
The probability of something happening can range from 0 to 1, where 0 is “something will definitely not happen” and 1 is “something definitely will happen.” What’s the probability that CSL Behring cuts the price of Hemgenix?
The past is the best predictor of the future, and we’ve seen price cuts before:
- In 2015, Gilead offered deep discounts for Sovaldi and Harvoni after a review by the California Technology Assessment Forum, an ICER program, concluded that a list price for Harvoni or comparably effective drug regimen in the range of $34,000–$42,000 for an average course of therapy would be “high value.” Gilead’s deep discount followed the approval of Viekira Pak, a competing product made by AbbVie, and yielded an average price of approximately $40,000 for a course of treatment with Harvoni.
- In 2018, Amgen reduced the list price of its PCSK9 inhibitor, Repatha, by 60% after an ICER report suggested that the PCSK9 inhibitors should cost 85% less than their list price, and after Praulent, a competing product by Sanofi-Regeneron, cut a deal with Express Scripts.
Two conditions presaged price cuts in both of these high-profile cases: An ICER review informed the magnitude of the cut; then, competition led to action. For Hemgenix, the first condition (an ICER analysis) has been met, but the second condition (competition) has not. While the probability of a price cut in the absence of competition is extremely low, the probability of a price cut in the presence of competition is extremely high. So, for now, we can count this as a partial (0.5) way payers won’t pay $3.5M for Hemgenix.
Ways and means
Payers have 3.5 ways of not paying $3.5M for Hemgenix. Leveraging their purchasing power when negotiating a lower price is fair play. But this begs the question: How much should payers pay? What’s fair?
At a minimum, payers should pay an amount equal to the medical cost offset gained by Hemgenix. ICER’s methods of estimating a fair price seem fair. As per the ICER analysis, approximately $3 million might be a fair top price — approximately $500,000 less than the list price. Ideally, payers should pay a price that sufficiently rewards innovation but not simply line shareholders’ pockets.
Real-world evidence will reveal the durability of Hemgenix and, as a result, how cost effective it really is. Only then will we know the true cost savings and value of Hemgenix. Between now and then, we’ll have to guess whether Hemgenix is worth more or less than $3M — or we can simply flip a coin.
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