The near-monopolistic control the De Beers corporation exercises is the primary reason diamonds cost so much. Diamonds are not rare, but the way De Beers restricts access to the supply keeps retail market prices high. In contrast, some health conditions are truly rare (i.e., they affect fewer than 200,000 people in the United States — a somewhat arbitrary line drawn by federal orphan drug-designation regulations), and payers’ efforts to restrict access are in response to the high price of treating them.
Go ahead — ask payers about rare conditions. You’ll likely hear about several common problems.
Paradoxically common
The likelihood that a payer will cover a large population of patients with a particular rare disease is low. But the likelihood that a substantial proportion of members will have one of the estimated 7,000 or so rare diseases is quite high. It’s been estimated that 25-30 million people in the U.S. have a rare disease — that’s at least 1 out of 13! Whether or not there’s a pharma, biotech, or medtech option — and, unfortunately, there is typically no option —payers have lots of patients with rare diseases, and this care is often complex and expensive.
Less evidence
Manufacturers studying potential tests, drugs, and devices for rare conditions have difficulties enrolling enough patients in clinical trials. One solution is to use ex-U.S. data, although some payers may question whether these results are generalizable to the U.S. market. U.S. payers prefer U.S. data. The small-numbers problem plagues all research on rare conditions and, over time, complicates payers’ efforts to make evidence-based market-access decisions. While a first-to-market product may bring welcome assistance and hope to patients, measuring the effect of latter entrants is more difficult because of the smaller pool of treatment-naïve patients. And as more options for a rare condition come to market, the challenges associated with isolating their effects increase because of their use in combination with other therapies. Ceteris paribus, more products translate into less evidence.
Greater risks
For payers, denying care to a very small, vulnerable population risks touching the proverbial third rail, a public relations disaster waiting to happen. And news like this can spread quickly through social media. Such denials tend to conflict with our collective sense of right and wrong. Payers must carefully balance the potential savings of a denial with the potential backlash from providers, patients, and patient advocacy organizations. Beyond negative PR, payers must also consider the costs of appeals, complaints, lawsuits, and scrutiny from regulators.
Higher prices
Payers are aware of the high cost of R&D for rare-disease products and accept that these products need to command premium prices to yield a return on investment that encourages innovation. Six-figure annual costs are now nearly a given. Of course, payers push back as the annual costs climb higher and higher. Payers expect (and want) innovation and build budgets and premiums with new technology in mind. While some rare-disease innovations occasionally take payers by surprise, even very high costs multiplied by very small populations result in costs that are merely budgetary rounding errors.
Faster pace
FDA regulations have certainly removed some friction associated with bringing new technologies to market. The Orphan Drug Act bestowed an orphan designation to qualifying drugs and biologics used to treat rare conditions and gave manufacturers incentives to develop them. On the device side, the Humanitarian Use Device designation provided a streamlined approval process for devices used to treat fewer than 8,000 people in the United States per year. Surely, these mechanisms helped drive the emergence of miraculous new products that, in many cases, filled a void that otherwise might have been overlooked. But both also resulted in unintended consequences involving patient subsets (e.g., a pediatric indication for an otherwise common condition). More recently, the FDA updated regulations to prevent abuses of these designations, and more efforts to close loopholes are on the horizon.
Still, manufacturers and investors remain focused on rare conditions, thanks to the market dynamics that can support commercial success with a relatively small patient population. This faster pace of rare-condition market entrants makes it challenging for payers to review and make, sometimes difficult, formulary and medical policy decisions in a timely manner.
More complicated
As manufacturers bring innovations to market, payers will have more products to review and, for each, will consider prior authorization criteria and other restrictions. When a particular rare condition has multiple tests or drugs or devices that can potentially be used sequentially or in combination (as a lucky few do), formulary and medical policy decisions can become much more complicated.
The nature of payers’ work
At a high level, the nature of payers’ work has not changed: Review the evidence, consider the unmet need, assess the clinical and economic value, and make market-access decisions. Recall, the decision to do nothing is also a decision. But the amount of time and money payers spend on rare conditions is increasing, and the context differs substantially from more prevalent conditions — namely less evidence, greater risks, and higher prices.
Manufacturers’ payer communications might be more effective if they considered the nature of payers’ work. For example, the logic and constraints that underlie trial design decisions, including sample size and inclusion and exclusion criteria, could be shared with payers. Doing so might reduce or even eliminate questions about whether the manufacturer cut corners or made reasonable, pragmatic decisions. And manufacturers might be viewed as partners if they proactively understand the need of payers to restrict access to appropriate patients, and possibly providers, by collaboratively developing reasonable PA criteria with all relevant stakeholders including payers, providers, patients, and patient advocacy organizations. Even if these restrictions recommended by manufacturers are viewed by payers as a diamond in the rough, they could help accelerate formulary and medical policy decisions.
Mining for payer insights is the best way to inform winning payer strategies. Done well, manufacturers can find some real gems.
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