Monday, April 24, 1995
It has been the talk of the Street for the past several weeks
that Eli Lilly's launch of ReoPro has been ramping up slowly. As the luck of
the draw would have it, Centocor Inc.'s anti-platelet antibody for use in high-risk
angioplasty seems to be serving as a guinea pig in the new health care environment:
it is coming under a variety of cost control pressures, quite apart from the
natural competition posed by the approval of stents 10 months ago.
Hospitals - and the health care system as a whole - are facing
a series of cross-cutting issues that boil down to the question of who pays
for new drugs versus who reaps the downstream savings generated by patients
with better long-term outcomes.
Robert Califf of Duke University, who was involved in the ReoPro
clinical trials, described the drug's introduction as "a bellwether study for
the fragmentation of the American health care system." Because the drug adds
to initial costs, while savings come downstream, hospitals are being asked to
shoulder costs that will result in savings to others.
The ethics of that situation are very clear, Califf said, "but
the reality of increasing hospital budgets to pay for benefits downstream is
difficult. In a totally managed care system it would be different."
CNTO President and CEO David Holveck said the major surprise has been the amount of economic analysis required to sell ReoPro, a task complicated by the fact that each institution has its own way of measuring the economic impact of the drug. That puts the onus on the sales force to tailor information to each hospital.
Essentially, the costs to hospitals may depend on how many of their patients are fee for service versus managed care. The drug can add upward pressure on budgets that hospitals can't recover from payors. This includes Medicare and Medicaid patients as well as privately insured patients for whom the hospital is paid a fixed sum for a given procedure, HMO patients for whom the hospital receives a fixed annual fee, and patients in similar types of insurance plans.
Because most hospitals are treating patients in the short term, it's hard for them to capture any long-term savings engendered by ReoPro due to the reduction in adverse events. At six months, the drug saves $1,100-1,200 per patient, while the drug costs $1,350. Right now, the savings may go to the insurer, HMO or managed care provider, but the cost of using the drug is borne by the hospitals.