If Tuesday afternoon fireside chats with the CEOs of some of the world’s largest healthcare companies is anything to go by, value-based care isn’t just a buzzword, but a sensible business practice.
Novartis CEO Vas Narasimhan spoke with J.P. Morgan analyst Richard Vosser at the J.P. Morgan Healthcare Conference in San Francisco as part of a series of discussions titled “Drug Pricing and Access in a Rapidly Evolving Healthcare System.”
“I think there’s good initiatives around the world, including in the US, to demonstrate the value of value based care,” Narasimhan said. Still, it’s one thing to talk about value-based care, but another to actually implement it. Doing so will likely be a challenge, he suggested. “We’ve had a lot of learnings when we look at value-based pricing,” he said.
Putting value-based pricing in place in heart failure, for example, turned out to be incredibly complicated for Novartis. For example, methods need to be implemented to monitor how patients are doing over time, and it requires significant investment, particularly in database systems. Last year, the Centers for Medicare and Medicaid Services quietly pulled out of an outcomes-based reimbursement arrangement for Novartis CAR-T cell therapy, Kymriah (tisagenlecleucel), in pediatric acute lymphoblastic leukemia.
Another important aspect of value-based care is independent organizations to assess value, Narasimhan said, in response to a question about them from Vosser that alluded to the National Institute for Health and Care Excellence, or NICE, in his native UK. “Having independent arbiters helps the story in the long run and helps explain for us as an industry why drugs are priced the way they are,” Narasimhan said. Indeed, he said one of the biggest things he has learned in the past year was how little understanding there was among the public of the concept of value versus the upfront price of drugs, adding that the industry would need to do a better job at educating people.
Last year, the Trump administration spoke to that lack of understanding when it proposed that advertisements for drugs should be required to include list prices. The proposal, in October, elicited concern from experts because it could create confusion among consumers that could harm health outcomes, particularly given the complexity of drug pricing. For example, while the first Food and Drug Administration-approved gene therapy, Spark Therapeutics’ Luxturna (voretigene neparvovec-rzyl) for a rare form of blindness, costs $425,000 per eye, Spark Chief Business Officer Dan Faga pointed out in a panel discussion at the Biotech Showcase that patients with private and government health coverage did not have to pay anything out of pocket for it. Novartis is marketing Luxturna outside the US.
While NICE is an official government body that recommends new therapies to the National Health Service based on whether or not they are cost-effective – keeping to a benchmark of 30,000 pounds per quality-adjusted life year – similar, private organizations also exist in the US. A prominent player is the Institute for Cost-Effectiveness Research, or ICER. Still, while acknowledging that his company had “some bones to pick” with ICER and the way its formula works in a subsequent discussion, Eli Lilly & Co. CEO Dan Ricks also said there is a place for such organizations. Ricks spoke alongside CVS/Caremark CEO Larry Merlo, with J.P. Morgan analysts Lisa Gill and Chris Schott.
Merlo pointed to improvements in medication adherence as a way to improve value-based care in the context of traditional pharmacy. However, he also said the retail pharmacy chain and pharmacy benefit manager’s $68 billion acquisition of health insurer Aetna in August could create opportunities for new pricing models, particularly in the context of high-cost treatments.
Photo: Alaric DeArment, MedCity News