12:00 AM
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Jul 20, 2015
 |  BioCentury  |  Strategy

Indications of value

How Express Scripts plans to do indication-based pricing for cancer drugs

Express Scripts Holding Co. is working with companies to test not only an indication-based pricing model for drugs approved to treat more than one cancer, but also a handful of new tools that tie clinical performance to the price the pharmacy benefit manager will pay.

Under a pilot, Express Scripts will pay different prices for a single drug depending on how it performs in different tumor types. The pilot will apply to a select group of oral and self-injectable cancer drugs on its National Preferred Formulary for plan year 2016.

Discussions with manufacturers about how to set indication-based prices will be guided in part by a tool developed by Peter Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center. Bach's Drug Abacus allows any user - whether a payer, a drug company, a physician or a patient - to calculate a drug's dollar value. The calculation is based on how much the user values additional survival provided by the treatment, and is then adjusted up or down depending on the importance the user places on toxicity and other factors (see "Components of Value," page 3).

Express Scripts also will get feedback from patients in public forums hosted by the Institute for Clinical and Economic Review, and use that information in its discussions with drug manufacturers.

The PBM also is evaluating use of a new drug value framework unveiled by the American Society of Clinical Oncology (see "Framing Value," page 7).

Because the tools the PBM plans to test rely on overall survival or progression-free survival to assess efficacy benefits, it may be difficult to quantify benefit for products with limited or immature data, such as those receiving expedited approvals. But Express Scripts has left the door open to opportunities for companies to eventually increase price if they collect additional data showing benefits on things like survival and/or quality of life.

Stakeholder solution

Before arriving at indication-based pricing, Express Scripts considered alternative pricing models and met with stakeholders.

"The pharmaceutical industry has been talking about value-based pricing for chemotherapy for a while. So we tried to study the field extensively to look at what programs worked, what didn't and why that didn't work," said CMO Steve Miller.

Miller said that many of the incentive- or risk-based contracts linked to patient outcomes didn't work because they were too complex to administer.

Additionally, companies were uneasy about the potential effect on Medicaid best price. Under Medicaid best price, companies must offer Medicaid either a 23% discount off the average manufacturer price (AMP), or the best deal it has offered to any commercial payer, whichever is lowest. With an outcomes-based model in which the company agrees to refund the cost of the drug in patients who derive no benefit, best price theoretically could be set to zero.

Finally, regardless of the pricing model used, both payers and drug companies were concerned about the lack of transparency in terms of the value the different parties placed on benefits and risks to arrive at a price.

"We found that for something to work, it has to be transparent, relatively simple to administer, and respect best price," Miller said.

Indication-based pricing ticked all of those boxes.

Miller said Express Scripts' specialty pharmacy, Accredo Health Group Inc., already has data on diagnoses and indication via the prior authorization process, which eases the administration burden.

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