Perspectives

Cures, drug pricing, and collaboration are red-hot topics at summer life sciences conferences

Health Care Current | June 20, 2017

This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory, and legislative changes.

My Take

Cures, drug pricing, and collaboration are red-hot topics at summer life sciences conferences

By Greg Reh, Vice Chairman, US and Global Life Sciences Leader, Deloitte Consulting LLP

Two of the nation’s largest life sciences conferences are being held this week – and there definitely is no shortage of topics to dig into this year. The Biotechnology Innovation Organization’s (BIO) International Convention is taking place in San Diego, while the Drug Information Association’s (DIA) conference will be in Chicago. Several of my colleagues plan to share some of the industry’s latest thinking in sessions and meetings…and probably during informal coffee break chats, too.

“Breakthrough” is the theme of this year’s BIO meeting, which brings together leaders across the biopharma industry. Life sciences thought leaders will be conferring on a wide range of topics including funding strategies for small biotech companies, drug pricing, and the Food and Drug Administration’s (FDA) new administrator.

In the Windy City, “driving insights into action” is the theme for the DIA 2017 Annual Meeting. The conference will include more than 160 sessions and will host more than 450 exhibitors. The sessions will examine the evolving regulatory environment, including the potential impact of the 21st Century Cures Act (Cures) will have on the industry, pharmacovigilance (the monitoring of drug effects to identify and evaluate adverse reactions), and other issues tied to safety analytics.

I suspect much of the conversation at these two events will revolve around three broad topics:

  • Drug pricing, value, and market access
  • Real-world evidence (RWE) and the shifting regulatory landscape
  • The growing importance of industry partnership and collaboration

Breakthrough treatments that don’t break the bank

At BIO, my colleague Tom Yang is participating in a panel where he will offer his perspective on how biopharma can align breakthrough treatments with innovative reimbursement models to improve value. Ralph Marcello, who leads our BioPharma segment, will also offer thoughts on the drug-pricing debate. He’ll explain how biopharma companies could use value-based contracting – backed by data and evidence – to tie higher prices to higher efficacy. The timing for this discussion could not be better, as the White House discusses plans for a possible executive order on drug pricing. At DIA, several sessions will touch upon 21st Century Cures. My colleague Asif Dhar, MD, will take part in a session that will look at how the Cures law helps lay the ground work for innovation through the adoption of a more patient-centered focus to inform the assessment of benefit and risk.

The Cures law, enacted last December, is already beginning to help alter the regulatory landscape. As the industry strives to meet the evolving needs of stakeholders – patients, providers, and health plans – the regulatory flexibility outlined by Cures will likely be imperative to driving both regulatory approval and market access. Cures, and related FDA guidance, can offer additional flexibility for companies to communicate economic evidence. This could lead to greater adoption of value-based contracting agreements.

Cures, RWE are already helping alter regulatory landscape

Cures includes several provisions intended to modernize drug-development and approval processes. Many provisions build upon existing initiatives and investments at the FDA, which can help create avenues for innovation and regulatory flexibility.

As Cures requires FDA to evaluate the use of RWE to help support faster drug approval of a new therapeutic indication for a previously approved drug, many life sciences companies are evaluating their strategies to integrate RWE into their value chain. Some firms, for example, are targeting the use of RWE to support research and development in areas such as trial design and patient recruitment.

The inclusion of RWE in the new law signals that we may see additions to the traditional gold standard of randomized controlled trials for testing drugs and devices, helping provide opportunities for the industry to innovate.

The plethora of health care data now available to life sciences companies has commonly become an invaluable asset in improving patient outcomes. Traditional data are often being combined with RWE to detect, assess, understand and help prevent safety-related issues and potentially uncover benefits that can lead to better results for patients. Life sciences companies could benefit from identifying ways to eliminate, automate, and simplify operations to help increase compliance, improve productivity, and shift resources from case processing to safety analysis and insight. Deloitte’s 2017 RWE benchmarking study, Getting real with real-world evidence, found that many biopharma companies are starting to invest in RWE capabilities and are exploring a number of use cases.

Life sciences firms will likely expand collaborations

Collaboration between life sciences companies, health care providers, and health plans are likely critical, and will likely continue to evolve. As I noted in a blog post early this year on our 2017 US Life Sciences Outlook, I expect 2017 will be a year of tighter collaboration among health care stakeholders. Consider this: Our data indicates that about 9,000 new biopharma research and development (R&D) partnerships formed between 2005 and 2014 – at an annual growth rate of 4 percent during that 10-year period. The 9,000 new biopharmaceutical R&D partnerships formed between 2005 and 2014 are more than double the number created (approximately 4,000) in the preceding decade (1995-2004). The consortium model, a more open-source approach to innovation, alone saw a nine-fold increase between 2005 and 2014 versus the prior decade, with 334 new consortia formed, versus just 34 from 1995 to 2004.

Many pharma, biotech, and medtech companies are building new business models and are developing operating strategies based on broad collaborations with other industry players, as well as regulators, academic centers, and small enterprises where new ideas and potentially game-changing innovations are being developed.

If themes for this year’s industry conferences are any indication, 2017 will likely be a landmark year for the life sciences industry. We’re apt to see new groundbreaking therapies as well as innovations in other areas such as drug reimbursement models, value-based contracting, and collaborations. For our industry, “driving insights into action” and “breakthroughs” are themes that will likely resonate long after the summer conferences end.

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In the News

SCOTUS decision gives biosimilar manufacturers increased flexibility

On June 12, 2017, the US Supreme Court unanimously ruled that a biosimilar manufacturer filing an abbreviated Biologics License Application (aBLA) does not need to give its manufacturing information to the reference product sponsor. The case (see the April 18, 2017 Health Care Current) questioned whether biosimilar manufacturers need to provide the reference product sponsor a copy of the aBLA and/or a pre-launch notice before the FDA would approve the biosimilar product.

The Supreme Court upheld the decision of the US Court of Appeals to give more flexibility to biologic product developers. The case hinged on two key issues:

CMS: 10.3 million individuals paid their premiums after open enrollment

Of the 12.2 million people who enrolled during the 2017 open enrollment period, 10.3 million had paid their first month’s premium, according to new data from the US Centers of Medicare and Medicaid Services (CMS).

Individuals select a health plan during open enrollment but some of them are unable or choose not to pay their premiums. In 2016, the number of individuals with an active policy – those who paid a premium in the first month – was 10.8 million at the beginning of the year but dropped to 9.1 million by the end of the year.

Most people who enroll through the exchanges qualify for financial assistance. Out of the 10.3 million individuals who paid their premiums, 8.7 million (or 84 percent) got advance premium tax credit (APTC) subsidies. In addition, 5.9 million (or 57 percent) had assistance through cost-sharing reductions (CSRs). The percentage of individuals who qualify for financial assistance CSRs has remained stable. However, the average amount of APTC funding enrollees receive per month has risen 28 percent this year compared to 2016 ($371.46 vs. $290.08).

Consumers who canceled or terminated exchange-based coverage in 2017 cited cost as a primary reason. Those who faced higher premiums or did not qualify for financial assistance were most likely to drop coverage. Most of the group that terminated their plans after one month gained coverage elsewhere – 58 percent of these consumers indicated they obtained employer-sponsored insurance. Individuals who had the option of remaining in the same plan they had in 2016 were more likely to purchase and maintain health insurance coverage compared to those who did not have the same plan offered in 2016 (77 vs. 70 percent).

(Source: CMS, “2017 Effectuated Enrollment Snapshot,” June 12, 2017; CMS, “The Health Insurance Exchanges Trends Report,” June 12, 2017)

CMS projects that all clinicians under advanced APMs will receive the 5 percent bonus payment

CMS expects that all clinicians who participate in advanced alternative payment models (advanced APMs) under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) will receive a bonus payment; the bonus is 5 percent of the clinician’s Medicare Physician Fee Schedule payments. The 2017 performance year establishes 2019 payments. CMS looked at claims from January 1, 2016 to August 31, 2016 in making its projection.

CMS confirmed the payment models that will be advanced APMs for 2017 and added two more. The models added are the Oncology Care Model (OCM) - Two-Sided Risk Arrangement and the Comprehensive Care for Joint Replacement Model (CJR) – Certified electronic health record (EHR) track. The agency did not predict how many clinicians will be in these models.

Related: Last week, the Medicare Payment and Advisory Committee (MedPAC) issued its second annual report to Congress; the June report features topics on the health care delivery system. One chapter of the report covers MedPAC’s thinking around MACRA implementation. In its analysis of the Quality Payment Program under MACRA, MedPAC found that there are many challenges facing implementation. MedPAC raised concerns that the Merit-Based Incentive Payment System (MIPS) may not help beneficiaries effectively choose clinicians, help clinicians change practice patterns, or pay clinicians based on value.

MedPAC proposed CMS alter MIPS in several ways. One is to use a payment withhold instead of the current payment bonus. Under a withhold, a clinician would get money that had been withheld if he or she met certain conditions. MedPAC also supports basing quality measurement on outcomes, such as potentially preventable admissions, healthy days at home, and relative resource use, rather than on process measures, which MedPAC says the existing system relies on too much. Measures would be calculated based on claims data and surveys, removing much of the burden for clinicians to report data.

Finally, MedPAC supports changing the incentive structure to encourage more clinicians to join advanced APMs by creating a sliding scale that provides more funds to clinicians receiving more funds through advanced APMs. Today, in the first performance year, qualifying clinicians must have at least 25 percent of their revenue under an advanced APM to receive the bonus. This means that a practice with 24.9 percent of their revenue under an advanced APM would not receive the bonus, while a practice with 25.0 percent would receive it. MedPAC discussed changing the structure of the bonus payment to be proportional to the amount of revenue a practice receives through an advanced APM. This would mean that any revenue a clinician receives under an advanced APM would receive the 5 percent bonus, but the more revenue they have under an advanced APM, the greater the bonus.

(Source: MedPAC, “Report to the Congress: Medicare and the Health Care Delivery System,” June 2017)

HDHP enrollment continues to grow in employer-sponsored coverage

More than one-third of adults, ages 18-64, were enrolled in an employer-sponsored high-deductible health plan (HDHP) in 2016, according to the Centers for Disease Control and Prevention.

Preliminary estimates from the 2016 National Health Interview Survey show that the percentage of adults in employer-sponsored HDHPs increased, from 24.0 percent in 2011 to 34.9 percent in 2016. During the same period, the share of adults enrolled in more traditional employer-sponsored plans decreased, from 67.2 percent to 54.0 percent. In 2016, a HDHP was a health plan with an annual deductible of at least $1,300 for self-only coverage ($2,600 for family coverage), according to the National Center for Health Statistics.

In 2016, the percentage of families having trouble paying medical bills was significantly higher for those with an employer-sponsored HDHP than those with a more traditional employer-sponsored plan (15.4 vs. 9.0 percent). In addition, the percentage of adults who did not receive or delayed medical care due to cost was significantly higher for those with an employer-sponsored HDHP (8.5 percent) compared to those with a more traditional employer-sponsored plan (4.1 percent).

(Source: Cohen and Zammitti, “High-deductible health plans and financial barriers to medical care: Early release of estimates from the National Health Interview Survey, 2016,” June 2017)

Senate holds hearing on drug pricing

Last week, the Senate Committee on Health, Education, Labor and Pensions (HELP) held a hearing on the rising cost of prescription drugs, examining how the drug delivery system affects what patients pay. The committee invited industry, academic and industry consulting leaders to testify on ways to limit the cost growth of prescription drugs.

Witnesses noted that drugs dispensed through pharmacy and medical benefits account for an estimated 13 percent of total US health care costs. Net spending on pharmaceuticals has increased 42 percent since 2006, with two-thirds of that growth occurring between 2013 and 2016. Over the past five years, net prices for drugs in the Medicare program’s six “protected” classes (which the program is required to cover) have increased by 6.1 percent, while list prices have increased 11.5 percent. The difference between these figures, witnesses noted, is due to rebates and other discounts provided by manufacturers.

The public is increasingly concerned about drug prices as the health care industry trends toward higher deductible health plans, and enrollees become increasingly exposed to the cost of drugs. Additionally, the development of innovative, specialty drug products, including biologic products, may mean more high-price drugs will be coming to market. While a small share of the population uses high-cost specialty products, they account for more than 40 percent of drug spending.

Witnesses recommended Congress consider the following ideas to reduce drug prices:

Related: In a policy brief released last year, the Deloitte Center for Health Solutions explored what policies are on the table to manage drug prices, including value-based contracting, and what the impact of these policies could have on the future of prescription drug pricing.

OIG: CMS may have made $730 million in improper EHR incentive payments

CMS may have made an estimated $729 million in inappropriate incentive payments to clinicians participating in the meaningful use (MU) program, according to a new report from the US Department of Health and Human Services (HHS) Office of the Investigator General (OIG). The report, which audited electronic health record (EHR) incentive payments made by the agency from May 2011 through June 2014, cited improper payments as the primary risk to the integrity of EHR incentive programs, and sought to determine whether CMS oversight of these programs was sufficient.

Of a sample of 100 eligible practitioners (EPs) participating in the incentive program, OIG found 14 EPs who did not meet the MU program requirements but received $291,222 in incentive payments. According to the report, if this sample reflected the overall experience, an estimated $729 million of improper payments went to clinicians.

OIG also found that CMS paid $2.3 million to 471 EPs for the wrong payment year. Most of these errors occurred due to IT systems that could not determine whether EPs participated in the incentive program through Medicare or Medicaid. EPs might have received payments through both programs simultaneously or for the wrong year.

OIG recommended CMS:

  • Recover the $291,222 in payments made to the 14 sampled EPs that did not meet MU requirements
  • Review MU EP payments for the audit year and attempt to recover the estimated $739 million in improper incentive payments during that period
  • Review a random sample of supporting documentation provided by EPs through their self-reporting process to identify weaknesses in the verification process
  • Reach out to EPs to offer education and technical support on collecting and submitting proper documentation for the programs
  • Recover the $2.3 million made to EPs either through the wrong program or for the wrong incentive year
  • Review and reconfigure the EP reporting methodology to ensure that an EP does not receive payments under both EHR incentive programs (Medicare and Medicaid programs) for the same program year

CMS concurred with recommendations one, four, five, and six, committing to provide OIG with its action plan to address the recommendations. CMS partially concurred with recommendations two and three, stating that the agency had already implemented a targeted risk-based audit program to improve the incentive program’s integrity. However, OIG maintained that risk-based audits would not capture the errors identified in the report, and restated its support of the specific actions in recommendations 2 and 3.

Background: The Health Information Technology for Economic and Clinical Health (HITECH) Act established the Medicare and Medicaid EHR incentive programs to encourage EHR adoption and improve the safety and efficiency of EHR technology. To receive an incentive payment, EPs attest that they meet program requirements by self-reporting data through an online CMS system. However, EPs may not receive incentive payments from both the Medicare and Medicaid programs in the same year, although organizations may switch between the incentive programs on a yearly basis. Both the Medicare and Medicaid EHR incentive programs, as well as the MU incentive program, will be consolidated into the Advancing Care Information EHR incentive program under MACRA for the 2017 program year.

Iowa proposal is intended to prevent ACA collapse

Iowa submitted a 1332 waiver proposal to provide a stopgap plan to keep 72,000 Affordable Care Act (ACA) customers from losing coverage options in the exchange. The proposal requests $352 million in federal funding to restructure the ACA’s premium subsidies, establish a new health plan with standardized benefits, and create a reinsurance program to offset costs for expensive patients.

The state seeks to offer flat premium subsidies based on income and age, and also looks to eliminate cost-sharing subsidies. These changes could increase premiums for residents living in higher-cost areas, and raise deductibles and co-pays for low-income consumers. CMS is reviewing the proposal. If CMS denies the waiver proposal, the state requested it be considered for emergency regulatory relief under the Executive Order, Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal, which was signed in January.

No carriers have agreed to sell 2018 coverage in Iowa, so the state could be the first to lose all insurers on an ACA exchange. Missouri, Ohio, and Washington State have no carriers in some of their counties.

Related: The May 23, 2017 Health Care Current featured the latest on CMS’s new checklist for states preparing 1332 waivers. Statute requires that such proposals provide coverage “at least as comprehensive” as ACA-mandated coverage and cover at least as many people as would be covered under ACA rules.

Nevada governor vetoes plan for Medicaid buy-in

Last Friday, Sandoval vetoed a proposal to allow Nevadans to “buy-in” to the Medicaid program, regardless of their income. The bill would have allowed the Nevada Medicaid program, Nevada Care, to be sold as a public option qualified health plan on the public exchange, and allow for individuals eligible for premium tax credits under the ACA to use those credits towards purchasing Medicaid coverage instead. Even if the Governor had approved the measure, the state’s Department of Health and Human Services would be required to apply for a federal waiver from CMS to enact the plan. The proposal was passed by the state legislature two weeks ago (see the June 13, 2017 Health Care Current).

Breaking Boundaries

On the cusp of a tiny revolution – scientists work to overcome barriers to microscopic medicine

Many scientists are designing microscopic devices that can move through the body to diagnose conditions, carry drugs, or perform surgery. These devices are made of synthetic rods, tubes, helices, spheres or cages, sometimes as small as a cell. To date, these experiments are being studied in vitro, in conditions very different from the human body. While scientists are making progress in the petri dish, they are finding that the devices are much more difficult to control in the mix of proteins and cells that flow through the human body.

This month’s issue of Nature provides an update on these tiny devices. Microbiotics researchers are trying to figure out how to see and control the tiny devices well enough to test them in clinical trials. Current imaging techniques are not yet adequate to overcome this hurdle. The devices also need to be biocompatible and be able to be removed or stabilized after use. The materials need to be safe for humans, and the devices must be able to perform a wide range of tasks, such as detecting and responding to their environment, and storing and delivering molecules or cells when stimulated by physical cues or by certain molecules, disease biomarkers, temperatures, or levels of acidity. Imaging techniques, such as radiology, ultrasound, infrared and magnetic resonance imaging, are not sensitive enough to track these tiny devices in the body. Researchers are making progress in manipulating light, sound, and electromagnetic waves to minimize blurring, and in the application of chemical agents that darken the devices or cells so they will be easier to see.

Regulatory agencies have some experience testing and evaluating these materials and devices. For example, silver nanoparticles are used as antibacterial wound dressings. Some professionals in the field say that the imaging techniques might be good enough in the next two years to begin testing these devices in live animals. With a coordinated effort, these devices could introduce an era of non-invasive therapies within the next decade.

Analysis: The Deloitte Center for Health Solutions’ paper, Top 10 health care innovations: Achieving more for less, features biosensors including rapidly shrinking wearables and medical devices as innovations that will help the health care system achieve “more for less” in the coming years. These biosensors have the potential to allow consumers and clinicians to monitor and track more aspects of patients’ health, enabling earlier intervention – and even prevention – in a way that is much less intrusive to patients’ lives. While many of us rely on smart phones and smart watches to monitor our exercise, nutrition, sleep, and certain vital signs, these next generation devices could track changes in the human body such as medication levels, blood, hormone, protein levels, and device performance. Increased biosensing could improve patient engagement, medication adherence, disease monitoring and, ultimately, health outcomes. The collected data could be used by clinicians to intervene earlier and more often, and by researchers to better understand treatment effectiveness.

(Source: Mariana Medina-Sánchez and Oliver G. Schmidt, Medical microbots need better imaging and control, Nature, May 24, 2017)

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