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Peter Bach, MD, is heading the Evidence Driven Drug Pricing Project, a 3-year initiative that will pilot value- and indication-based payment structures for drugs, funded by the Laura and John Arnold Foundation.
Peter B. Bach, MD, MAPP
Numerous factors influence the rising cost of cancer drugs, from manufacturers pricing newer drugs higher and higher to the practice of selling vials of chemotherapy medication that are larger than necessary, leading to wasted product and an inability to get full value for the money spent. Now, Peter Bach, MD, director of Memorial Sloan Kettering Cancer Center (MSKCC)’s Center for Health Policy and Outcomes in New York, has been given a $4.7 million grant by the Laura and John Arnold Foundation (LJAF) to look for solutions to problems like these.
“There’s a lot that needs to be done to transform our system of drug pricing and reimbursement to something more sustainable that promotes innovation and patient access,” said Bach. He and his colleagues at MSKCC have been at the forefront of the effort to improve consumer and physician understanding of cancer drug prices versus value. Last year, Bach introduced the DrugAbacus, an online calculator meant to help consumers judge how much oncology drug value they are getting for their money.1
Developing Ways to Achieve Sensible Pricing
To further investigate the causes and possible solutions to the rising cost of cancer drugs, Bach is now heading the Evidence Driven Drug Pricing Project, a 3-year initiative that will pilot value- and indication-based payment structures for drugs, funded by the LJAF. The money is part of $7.2 million awarded to multiple institutions to support research and pilot projects that address the rising cost of drugs.2“Over the course of the next three years, Dr Bach’s work will help clarify the consequences of the policies that exist and the types of solutions that we need to test, evaluate, and implement change,” said Kelli Rhee, vice president of LJAF. “I believe that he will develop specific partnerships and pilots that describe policy in general terms and give specific examples of how to achieve sensible prices and access to cures while encouraging development of breakthrough treatments.”
LJAF investigates areas of inefficiency, lack of accountability, and lack of transparency that contribute to key societal problems,3 and Rhee stated that the rapid rise in drug costs has been a key focus of their foundation. “Much of our work is focused on areas where there is a market imbalance, and this is definitely true in the case of drugs,” said Rhee. She stated that a lack of competition among drug companies and an inability of payers to negotiate drug prices or understand how they are determined have contributed to drug price increases in disproportion to survival benefits, leading financially hardpressed patients to forego essential treatments.
LJAF awarded $5.2 million to the Institute for Clinical and Economic Review (ICER) in 2015 to launch a new drug assessment program that produces public reports of a drug’s comparative effectiveness, cost-effectiveness, and potential budget impact near the time of approval by the FDA.4
Wasteful Packaging Leads to Overcharging
In addition to MSKCC’s grant, LJAF’s other February 2016 awards include $1.6 million to the Center for Evidence-based Policy at Oregon Health and Science University to support pilot programs that test alternative purchasing models that link Medicaid reimbursement to improvements in patient health; $748,445 to Brigham & Women’s Hospital to evaluate the effect of federal regulatory programs and incentives on patient outcomes, drug approval times, and breakthrough therapies; and $200,000 to the National Academy of Sciences Institute of Medicine to create policy recommendations that improve patient access to effective, reasonably priced therapies while encouraging development of drugs that target critical healthcare needs.2In January, Bach and his colleagues published a study of the waste resulting from oversized chemotherapy drug packaging, which is often oversized in relation to a patient’s weight and required dosage, forcing doctors to use larger vials and discard unused medicine. Researchers calculated that the amount of leftover drug from single-use vials ranges from 1% to 33% of content.5 They estimated that in 2016 drug companies in the United States will earn $1.8 billion in extra revenue from leftover cancer drugs. That figure was based on the top 20 cancer drugs in the United States dosed according to patient body size and packaged in singledose vials (which account for 93% of sales of such drugs). Physicians who run in-house pharmacy also benefit from this waste through the markups they receive on drug purchases, the report stated.
Bach described multiple cases of revenue and market manipulation via practices such as splitting the vial contents between two patients and charging both for the content of the entire vials. Another type of exploitation involves spacing out doses of a drug in order to use more vials per patient and generate more drug waste, according to Bach. hat He stated that such easy manipulation has been largely unrecognized until now. In his most recent paper, he and his colleagues suggested waste-minimizing policies that would be relatively simple to implement, such as requiring manufacturers to provide efficient vial sizes, refund the cost of leftover drugs, and implement safe vial sharing practices—making unused content available to other patients—when possible.
Over the next few years, Bach plans to conduct more research on coinsurance and formularies, which he stated will be necessary to ensure that the theoretical models of value-based drug pricing translate to improved patient access in the real world. Both Bach and Rhee stated that developing methods for setting drug prices in a systematic manner will take time, and Rhee indicated the possibility of LJAF continuing a partnership with Bach beyond the three-year initiative.
Bach stated that the goals of the LJAF align well with his goals as an academic researcher. “One of the things that really struck me was the unshakeable belief that transparency, data, and the promulgation of ideas and their benefits, risks, and potential tradeoffs was something [LJAF] really wanted to see in public policy,” said Bach. “That resonated with how I hope the world can work. Academia is about getting data and understanding problems. No idea should go untested and no idea should persist. I expect some ideas to work and others not—that’s what research, idea generation, and testing is about.”