Can oncology weather the ‘perfect storm’ of drug cost blowouts?

A ‘perfect storm’ of spiraling oncology drug costs will require pragmatic and perhaps radical changes to pharmaceutical reimbursement systems such as the PBS, an Australian forum has been told.

Experts have warned that oncologists may be unable to access the many high cost treatments coming out of drug company pipelines unless there are changes to assessment criteria that discourage reimbursement of combinations of new and current therapies.

The roundtable meeting of regulators, industry representatives, academics and clinicians was held in Sydney under ‘Chatham House’ anonymity rules to encourage open and frank discussion.

It was told by independent health economists from the UK that a key issue for oncology is the ‘simplistic’ cost effectiveness and pricing formulas currently used to assess new drugs for subsidy by drug reimbursement agencies in many countries.

Problems arise when oncologists wish to add a new drug to current reimbursed standard of care treatments. For prices, the combination may be a case of 1+1 = 2, but for outcomes the result may be 1 + 1 = 1.3, the economist said.

So while the combination may be 30% better than current therapy, the reimbursement agency’s rules do not allow it to pay 100% more in price.

And when additional costs such as supportive care for a patient’s longer survival are factored in, the new drug would have to be given away free for the combination to meet the government agency’s cost effectiveness criteria, he pointed out.

“So what we really need to discuss is how to improve patient access to clinically effective combinations – what can be done to address the pricing evaluation challenges?”

One solution proposed by an industry representative was for price cuts to be imposed on older established treatments as part of a blended and flexible pricing policy to free up funds for newer treatments.

He said the problem needed to be addressed because oncology was already seeing a glut of ‘me too’ PD1 drugs in the pipeline. Companies had more financial incentive to launch ‘me too’ products that can more easily gain reimbursement based on equivalent efficacy rather than take a risk with an innovative add-on drug, he said.

However as others at the meeting noted, another major issue for flexible pricing of combination oncology treatments is that the constituent drugs are often marketed by different companies and they are prohibited by anti trust trade laws from talking to each other on pricing deals for their products.

One of the participants, PBAC chair Professor Andrew Wilson, agreed to speak on the record to the limbic.

He said the PBAC was seeing a trend towards new oncology combinations where one of the constituent agents is on patent and is therefore high price. But it is sometimes difficult to evaluate them because older treatments lack cost effectiveness data.

“The point that 1 + 1 doesn’t necessarily equal 2 and how you value that remains challenging,” he said

“And it’s particularly challenging when you have one drug [where] the price is just disproportionately higher than what you already have.

“But at the end of the day we as the PBAC have to make a decision, and say this new drug when added to the combination is cost effective, or not. And the meeting has provided some useful discussions as to where those inflexion points might be and how to conceptualise that,” he said.

The meeting was organised by Bellberry Limited, a not-for-profit Australian group that provides scientific and ethical guidance on the running of clinical trials. It was chaired by  former PBAC chairman Professor Lloyd Sansom, a director of Bellberry.

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