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What Is Really Driving the High Cost of MS Drugs?
Four Biotech Executives Offer an Inside Look

Article In Brief

Publicly, biotech and pharmaceutical companies still insist that the price of multiple sclerosis therapies is in accordance with “the cost of research and development, the risk of developing new drugs. But a series of candid interviews with four biotechnology executives indicate otherwise.

Despite the growing number of approved disease-modifying therapies (DMTs) coming to market for multiple sclerosis (MS) treatment, the already high cost of these drugs continues to rise. Biotechnology and pharmaceutical companies have publicly claimed the price increases reflect research, development, and clinical trial costs. However, it has long been suspected that companies base prices on what competitors are charging rather than in response to research or innovation spending.

Now a Neurology study reports on confidential interviews with four executives who worked for businesses manufacturing DMTs about the internal considerations involved in determining these prices, offering a frank examination of this decision-making process.

The Neurology study captured statements that were “remarkably consistent” between the four executives, even though they had no knowledge of each other's statements, said the study authors in an email to Neurology Today.

“They all indicated that initial pricing decisions were made based on the pricing of competing drugs and were driven by the goals of maximizing revenue and corporate growth. Recouping drug-specific research and development costs was not a primary consideration in the pricing of the DMT,” said Dennis N. Bourdette, MD, FAAN, chair and Swank Family Research Professor in the department of neurology at Oregon Health & Science University, and Daniel Hartung, PharmD, MPH, associate professor at the College of Pharmacy at Oregon State University and Oregon Health & Science University.

This paper, published online on November 25, is the first inside look at how companies make these pricing decisions, they said, an issue that has come to greater light with the proliferation of new MS drugs.

“In 2015 my colleague, Dr. Daniel Hartung, and I published a paper in Neurology documenting the skyrocketing price of MS DMTs and the curious phenomenon that the introduction of new DMTs did not lower the prices but rather led to increases in all DMTs,” Dr. Bourdette said. Together with Dr. Hartung, Dr. Bourdette mapped this phenomenon of “shadow pricing” earlier this year in JAMA Neurology.

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“At KP, we do not have pharmacy middlemen so any co-pay a patient incurs is based on the discounted price, not the wholesale acquisition price,” which allows KP to pass these savings on directly to their patients.—DR. ANNETTE LANGER-GOULD

Publicly, biotech and pharmaceutical companies still insist that the price of their therapies is in accordance with “the cost of research and development, the risk of developing new drugs, the expense of clinical trials, and the cost of production,” Drs. Bourdette and Hartung said in a joint email to Neurology Today. This has always seemed disingenuous, they said, especially considering that the original three DMTs for MS—interferon beta-1b, interferon beta-1a, and glatiramer acetate, which were brought to market in the 1990s—have risen in price at the same pace as newer drugs.

“These companies have not only recouped their costs but have also generated huge profits in the years since,” they said.

“It will not come as a surprise that companies are interested in maximizing their revenues, but this is the first public evidence that the public position of biotechnology and pharmaceutical companies of what is driving prices upwards is a ruse,” Drs. Bourdette and Hartung said.

Interviews with Industry

The interviews with the executives were conducted confidentially by phone by Dr. Hartung as well as a trained expert in qualitative methods with no background in the pharmaceutical industry or drug pricing. The conversations lasted for an average of 30 minutes and were then professionally transcribed and anonymized. The four US-based participants reported a combined experience of nearly 30 years working specifically within biotech companies producing MS drugs, but no one was currently working for companies making these therapies.

When asked about initial pricing for MS DMTs at their former workplaces, all four respondents similarly mentioned the effort to match or exceed prices of competitors. One participant said, “The fact that a new therapy would come on the market and be darn close to the therapies that are already there should have surprised no one.”

Another executive noted that there was an incentive to outdo competitors in order to project greater competence: “We can't come in at less. That would mean we're less effective, we think less of our product, so we have to go more,” they said.

Questioned about the difference in drug costs between US and international markets, participants spoke candidly about the flexibility of higher pricing in the US versus Europe. One executive said, for example, “This is a system that is entirely elastic; in other words you can price a therapy at whatever you feel that you can get reimbursed at.” Another executive pointed out that, unlike in the US, in the rest of the world these prices would necessarily go down with respect to the number of years they were in the marketplace. Another participant stated that US consumers are effectively subsidizing the rest of the world with these high costs.

“The major questions that remain, Drs. Bourdette and Hartung said, “are the nature of the negotiations that take place among the companies that produce the MS DMT, the pharmacy benefit managers and the insurers. These negotiations, which determine what the drugs actually cost, are closely guarded secrets.”

It will be vital to understand these negotiations in order to see the full picture of rising MS drug costs, they said.

What Can Be Done?

So what can neurologists do in response to these alarming practices? “We believe that neurologists and the AAN should continue to speak out about the unfettered increase in MS DMT prices. The rising price of MS DMT adversely affects our patients directly as out-of-pocket expenses continue to rise, especially for patients with Medicare.

“In addition, insurers restrict and control coverage of MS DMT based in part on the negotiated cost of the drugs and rebates that they receive. This limits decision-making on the treatments that we prescribe,” Drs. Bourdette and Hartung said.

They added that they support allowing Medicare to more aggressively negotiate for better prices for MS DMTs and for creating transparency regarding the prices they are paying for these drugs.

“Many states have passed legislation that seek to improve pricing transparency and other aspects of prescription drug affordability. For example, a few states have passed laws that require manufacturers to report price increases over a certain amount, and in some cases, take action in specific ways. We support these and other efforts and believe the federal government should take a more proactive role regulating this dysfunctional market” in order to enable reasonable company profit and incentivize drug development while making sure that unethical growth in prices does not go unchecked.

“Currently, there is no out-of-pocket maximum for individuals with Medicare Part D drug coverage and patients often face out-of-pocket costs in the thousands of dollars. We support reforms that seek to limit excessive patient out-of-pocket costs for these very high-priced medications,” Drs. Bourdette and Hartung said.

Figure

“It will not come as a surprise that companies are interested in maximizing their revenues, but this is the first public evidence that the public position of biotechnology and pharmaceutical companies of what is driving prices upwards is a ruse.”—DR. DANIEL HARTUNG

Figure

“The major questions that remain are the nature of the negotiations that take place among the companies that produce the MS DMT, the pharmacy benefit managers and the insurers. These negotiations, which determine what the drugs actually cost, are closely guarded secrets.”—DR. DENNIS N. BOURDETTE

No Surprises Here

In interviews with Neurology Today, MS and policy experts not involved with the current research said they were, unfortunately, not surprised by any of the statements made by industry executives.

Still, Nicholas E. Johnson, MD, FAAN, vice chair of research and associate professor of neurology at Virginia Commonwealth University in Richmond, said the anonymized and qualitative approach made for an interesting paper, which allowed for “a very different viewpoint” from what pharmaceutical companies typically offer.

The fact that there were only four people and that they were anonymous, however, also meant it was hard to know the extent of their firsthand experience or outside interactions. (Dr. Johnson, who chairs the AAN's Neurology Drug Pricing Task Force, said his comments represent his personal opinions and do not necessarily reflect those of the Task Force.)

Echoing the authors' statements, Dr. Johnson said the importance of the article comes from the inside look and corroboration of widely-held assumptions based on public data about MS drug costs increasing despite competition. “The manufacturers acknowledge the need to create a profit margin as one of the primary drivers of the wholesale acquisition price rather than the other alternative approach that these prices are somehow set to compensate for our complex drug distribution mechanisms or other research and innovation approaches.”

In fields such as MS, Dr. Johnson continued, where DMTs can have a significant positive impact on an otherwise devastating disease, “I think most neurologists would hope that they would have the ability to identify a cheaper therapy for their patients.”

He said that it would be “difficult to operationalize some of these findings in practice” right now “as is evidenced both in this article and other data—that there's limited ability to find a therapy that would somehow be cheaper while still being of equivalent efficacy. But it really speaks to our need to engage with these efforts” with legislative, regulatory, and policy initiatives, Dr. Johnson said.

Annette M. Langer-Gould, MD, PhD, regional lead for clinical and translational neuroscience at Southern California Permanente Medical Group/Kaiser Permanente, told Neurology Today that the interviews all pointed to one finding: The companies were out to maximize revenue at all costs. The most important conclusions, she added, were the ones the executives did not explicitly state: “They are not interested in what is best for patients or society; they do not consider what neurologists or MS experts think.”

Speaking from experience, Dr. Langer-Gould said when she served as the assistant medical director in charge of the rituximab development program at Genentech (Roche) more than 10 years ago, the company's concerns often mirrored those discussed in the Neurology paper.

“When the data came in from the relapsing-remitting MS phase 2 randomized control trial and we realized how highly effective rituximab was, how much money could be made, the company decided to switch to ocrelizumab to maximize profits.”

She added that neurologists need to recognize the power they hold in this conversation. “When will neurologists finally be fed up and cry foul? When will they realize that the drug company-sponsored dinners and the ‘experts’ that promote the company's products are nothing more than advertising? Most of the products are not innovations, they are just me-too drugs. Some, like daclizumab, were clearly less effective and more harmful that products already on the market!”

Dr. Langer-Gould expressed concern that relationships with industry and the convenience of prescribing certain drugs have more sway over prescribing practices than the cost of drugs.

What Next?

The neurologists all stressed the importance of having open and honest conversations with patients about affordable therapies as well as out-of-pocket costs. “It's reported that one in four patients have trouble affording the therapies they are prescribed. And one of the ways to mitigate that, or at least understand that, is to simply just ask patients whether or not they are having problems with this,” Dr. Johnson said.

“In this day and age, when drugs are $80-100,000 a year, if patients have to pay even 5 or 10 percent of that,” that can be prohibitive, said Mitchell Wallin, MD, MPH, FAAN, director of the Department of Veterans Affairs (VA) MS Center of Excellence-East. “Many health insurance plans are passing on these high medication costs to enrollees through larger copays.

“In the VA health care system, we offer a full spectrum of MS care for those that have served in the military including all FDA-approved MS disease modifying therapies. We receive a reduction off the market price (approximately 25 percent) in the VA system—and while that's a sizable difference in terms of overall cost, it's still high,” Dr. Wallin said.

At Southern California Permanente Medical Group, where Dr. Langer-Gould works, they have coordinated with Kaiser Health Plan and Kaiser Permanente (KP) Pharmacy to develop a treatment algorithm that ensures patients with relapsing MS who have increased “risk of imminent disability get immediate access to highly effective DMTs (rituximab, natalizumab, fingolimod) and at the same time prioritizes the lowest price glatiramer acetate or interferon-beta product for those who do not need a highly effective DMT.”

This system, she said, significantly reduces the use of the most expensive DMTs.

“At KP, we do not have pharmacy middlemen so any co-pay a patient incurs is based on the discounted price, not the wholesale acquisition price,” she continued, which allows KP to pass these savings on directly to their patients. With the patients who still cannot afford their co-pay, Dr. Langer-Gould speaks openly about the price of MS drugs, the availability of generic options, “and the potential for financial toxicity incurred by MS DMTs. We check what they can afford based on their coverage plan (this is easy to look up in our electronic health record) and we decide together what is best for them.”

The commentators agreed, that on a national level, it is importance to allow Medicare to negotiate prices. Dr. Johnson said the AAN has taken an active role in advocating for fair drug prices and has a comprehensive position statement, which focuses on several areas, including the need for negotiation of prices in federal insurance products like Medicare, increased transparency around drug pricing, and the possibility of reimportation of prescription drugs from Canada as potential ways of reducing high MS therapy costs.

Dr. Langer-Gould also suggested building cooperative alliances between neurologists and health insurance companies “to agree upon risk-stratified, cost-sensitive treatment algorithms as we have done at Southern California Permanente Medical Group. At the very least, neurologists need to realize their power in all of this—we write the prescriptions! Why write for brand name Copaxone when Mylan, the generic is available and far more affordable?”

There needs to be more truth in advertising regarding MS therapies and better patient education about available options and who would benefit most from each one—including rehabilitation therapies which can be cheaper and sometimes as effective, Dr. Wallin said. In addition to enacting price controls legislatively, especially for older drugs, allowing generics to be put in more widespread use across the board would be an important step, he noted.

Neurologists need to advocate for their patients by continuing to respond to action alerts from the AAN and becoming active participants in Neurology on the Hill and the conversation about drug pricing, Dr. Johnson said.

Disclosures

Drs. Bourdette and Wallin report no relevant disclosures. Dr. Hartung serves as a consultant for MedSavvy and receives research support from AbbVie. Dr. Langer-Gould serves as a voting member on the California Technology Assessment Forum, a core program of the Institute for Clinical and Economic Review. Dr. Johnson has received research support from AveXis Therapeutics, Sarepta Therapeutics, Fulcrum Therapeutics, the National Institute of Neurological Disorders and Stroke, the Myotonic Dystrophy Foundation, the Muscular Dystrophy Association, and the Coalition to Cure Calpain 3. He has served as a consultant for Asklepios BioPharmaceutical, Dyne Therapeutics, ML Bio, Sarepta, Vertex, and Dyne Therapeutics.

Link Up for More Information

• Hartung D, Alley L, Johnston K, Bourdette D. Qualitative study on the price of drugs for multiple sclerosis: Gaming the system https://n.neurology.org/content/early/2019/11/24/WNL.0000000000008653. Neurology 2019; Epub Nov 25.
    • Hartung DM, Bourdette D. Editorial: Addressing the rising prices of disease-modifying therapies for multiple sclerosis https://jamanetwork.com/journals/jamaneurology/fullarticle/2748919; JAMA Neurol 2019; Epub 2019 Aug 26.
      • AAN Priority Issues: Drug Pricing: https://bit.ly/2ObI4lh
        • Butcher L. How the Institute for Clinical and Economic Review assesses cost effectiveness https://journals.lww.com/neurotodayonline/Fulltext/2019/04180/How_the_Institute_for_Clinical_and_Economic_Review.11.aspx; Neurology Today 2019;19(9):51–52.
          • Hartung DM, Bourdette DN, Ahmed SM, et al. The cost of multiple sclerosis drugs in the US and the pharmaceutical industry: Too big to fail https://n.neurology.org/content/84/21/2185.long. Neurology 2015;26:2185–2192.
          • Bourdette DN, Hartung DM, Whitham RH. Practices of US health insurance companies concerning MS therapies interfere with shared decision-making and harm patients https://cp.neurology.org/content/6/2/177. Neurol Clin Pract 2016;6:177–182.