Reimbursement – the final frontier

Author: Guest, 07/06/17

Patrick Bedford is the Senior Manager of Clinical Translation and Regulatory Affairs at CCRM. He holds a Master’s Degree in Bioethics and Health Law, and a Regulatory Affairs Certificate. Patrick has spent over 11 years applying federal regulations to emerging biotechnologies in Canada. Follow him on LinkedIN.

Although I’m officially CCRM’s “regulatory guy,” I’ve been talking a lot about reimbursement lately. From this pricing and reimbursement article I authored, to this cost-effectiveness modeling course I attended, to participating in an international workshop on “Risk-sharing Models to Advance Payer Paradigms for Precision Medicines,” my thoughts have been headed in a new direction.

As I write this, I am on a flight back from the aforementioned workshop and it struck me many people might ask why we are talking about reimbursing cell and gene therapies while the vast majority of these products are still at the early stage of clinical development. The answer is simple: This is the best time to have these important discussions.

Not everyone has the chance to participate in the learning opportunities I have had recently so I would like to pass along 10 key points and personal observations relating to reimbursement:

  • The nascent field of cell and gene therapy relies on investments. Investments come from public and private funds. If you will forgive an oversimplification, these funds have different primary motivations: Public funds are generally awarded to researchers to enhance the public good, while private funds are generally given to companies and intended to obtain a return on investment. The development of cell and gene therapies will increasingly rely on private funds. That funding will only be available if investors have a reasonable expectation of returns, which are dependent on reimbursement decisions (i.e. someone choosing to pay for individuals to access a drug en masse).
  • Drugs may be sold in Canada once they have been authorized by the federal regulator; however, expenditure reimbursement is determined afterwards by provincial governments or private insurance companies that conduct their own clinical and economic evaluations. Provincial governments generally reimburse for hospital drug expenditures, while private insurance generally reimburses for pharmacy dispensed drug expenditures.
  • Both public and private insurance companies have a finite budget, and any expenditure out of this budget impacts other spending decisions. Expenditures for one person’s health care needs will prevent expenditures on another’s. Insurance groups have tough decisions to make.
  • We can express the benefit of one treatment over another using an economic calculation – the Incremental Cost Effectiveness Ratio or “ICER”– which subtracts the benefits/costs of one treatment from another. This will help to inform whether one treatment is more economically desirable, at least from a utilitarian payer’s perspective.
  • Various methods of evaluating “Quality Adjusted Life Years” or “QALYs” are used by health economists to express the expected benefits (degree and duration of health) per dollars spent. The calculation of QALYs is based on the best available evidence that is adjusted for uncertainty (using statistical methods), and done through a rigorous process that carefully spells out assumptions. Blogger Mark Curtis outlines some of the pricing options in this post.
  • Various groups in Canada use $30,000 per QALY gained as a general threshold for approval. This threshold can change based on willingness to pay, which can be modified for normative reasons. For example, people are generally more willing to pay for severe diseases, for diseases with catastrophic costs, and for diseases that are not treated with available alternatives.
  • Different jurisdictions in Canada and abroad will adopt different thresholds, and may have different special categories such as for oncology drugs or orphan products.
  • Cell and gene therapies will be expensive for various reasons I will not address here. For example, Strimvelis costs £594,000 in the UK. It is safe to say that, once authorized, high priced drugs will only be accessible to most Canadians when they are listed on public (provincial) or private (insurance) formularies. These drugs will need to have significant long-term benefits to meet QALY thresholds.
  • Ongoing efforts to use investments wisely, and manufacture cell and gene therapies more efficiently, can lead to cost reductions that might translate into viable treatments that can qualify for reimbursement.
  • Expensive drugs have typically garnered public attention, and companies that produce them have sometimes been demonized by the media. Innovative cell and gene therapies will be expensive. We should begin to set expectations now and explore how payers value cell and gene therapies, and to better understand the degree of benefit required to justify reimbursement. This will best be done by remembering that it’s not just money paying for novel treatments, it is also someone’s health.

As I sit in my tiny airplane seat, reflecting on these points and scrolling through media coverage of U.S. political debates about Medicaid, I think changes are on the horizon in the U.S. and internationally. The hype of cell and gene therapies is calming, while the broader discussion of reimbursement is growing. People currently working on cell and gene therapy manufacturing, development and regulatory challenges will need to keep reimbursement issues in mind, and start to engage in reimbursement discussions so that they can achieve our common goal of getting access to safe and effective treatments for patients.

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Guest

Signals accepts guest blog posts on topics relevant to stem cells and regenerative medicine, as well as submissions for its Right Turn Friday feature. See http://www.signalsblog.ca/about/ for more information. The opinions, accuracy, completeness and validity of any statements made in guest posts are the responsibility of the author only and not the editor of Signals or CCRM, publisher of Signals. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with the author.
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