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Amgen’s Comments on ICER’s Price Increase Draft Protocol

Amgen appreciates the opportunity to comment on ICER’s Draft Protocol for their first Unsupported Price Increase Report.  We agree that it is important to optimize the value of health care expenditure, and we have concerns with the proposed approach as outlined below. We are hopeful that ICER will make the appropriate changes to enable more meaningful results. 

OVERALL POSITION

ICER is pursuing an extraordinarily complex issue and there are many factors that need to be considered for this report.  Prescription drug expenditure in the US accounts for a relatively small percentage of overall healthcare spend. Singling out one component of healthcare rather than viewing the system holistically, and focusing only on the highest impact drugs rather than all drugs, distorts the underlying cost drivers in the US healthcare system. It also contradicts comments made by ICER in recent value framework updates:

“ICER does not intend to target any particular interest group or organization. There are many areas in which the US health system fails to serve patients well, in which access to care is suboptimal, waste and inefficiency pose major problems, and costs to patients and the health system fail to align with added value. ICER believes that only through collaborative efforts, built upon a foundation of civil discourse and honest consideration of evidence on effectiveness and value, can lasting progress be made on behalf of patients today and those of the future.1

Moreover, the extensive methodological challenges to reliably calculate net price should not be underestimated. Challenges with the data utilized by SSR Health, LLC to derive net price include transparency, subjectivity and uncertainty in evaluation of both the quality and magnitude of evidence to support price. The proposed analysis is unlikely to have meaningful impact given the inherent limitations and challenges. Ideally, we believe ICER should expand the remit of this report to include all healthcare expenditures. By doing so, ICER would take on the greater opportunity of tackling fundamental healthcare issues and address 1). the architecture and causes of meaningful national health expenditure drivers and 2). general price transparency of healthcare services, medical equipment and treatments, which currently makes informed decision-making difficult. However, if this is not an option, then at the very least, we suggest ICER expand the remit of this report to include all drug price changes, increases and decreases, that impact net expenditures in the entire pharmaceutical sector.

Healthcare systems are plagued by inefficiencies in how care is delivered and paid for.   With hospital care and professional services being dominant drivers of healthcare spending2, drug spending accounts for only 14% of total U.S. healthcare costs.3  Healthcare service prices continue to grow: a majority of the growth in payments for inpatient and hospital-based outpatient care was driven by growth in hospital prices.4  The highest growth rates in US national expenditure in 2019 will be taken by government administration (10.2%), healthcare professional services (6%) and home healthcare (6.7%) in contrast to pharmaceuticals, which in 2019 are only expected to grow by 5.6%: this is close to the average for all healthcare expenditure of 5.2%.5  The proportion of national expenditure from drugs at 14% is a fraction of hospital and professional (e.g., physician) services which account for more than half.6, 7  US net prices for drugs rose only 1.5% in 2018 which is lower than the rate of inflation; and this is projected to grow only 0-3% annually over the next five years.8  CMS projections further establish that pharmaceutical expenditure is not the highest growth area or portion of expenditure. Also, drug prices fall over time, in contrast to medical services continuing to rise due to increases in administration costs and the rising trend of provider consolidation with proven effect on prices.9, 10, 11, 12 Over the past decade, generics dropped the price of pharmaceuticals after loss of exclusivity by 51-57% in the first and second year. In the next five years, generics and biosimilars are expected to reduce the sales of branded drugs by $121 billion.13

Amgen understands that prescription drug cost is a concern for many people and we strive to price our medicines responsibly, in a way that ensures patient access and affordability.  It is however important to differentiate between list (WAC) price growth and net price (i.e., price net of rebates and discount) growth.  For 2019, the weighted average list price increase across Amgen’s entire U.S. portfolio of products is less than 2.0%, which is below the projected inflation rate of 2.4% for the year. In addition, net prices for several Amgen products have declined.14 This situation is echoed in recent ESI data, one of the nation’s largest PBMs that revealed spending on medicines in commercial plans grew just 0.4% in 2018 net of rebates and discounts, the lowest in 25 years.15  For many Amgen medicines, there are no price increases. We are also committed to delivering new solutions that tie payments to performance (e.g., lowering the cost of medicine if it does not meet identified performance targets.)  With many stakeholders in our healthcare ecosystem, we, like others, have a role to play in making healthcare affordable so patients can access the medicines they need.  Amgen is committed to taking a fresh look at how we can partner to test new ways to improve access and deliver more affordable care. 

KEY COMMENTS ON ICER’S APPROACH

ICER should consider assessing price and net expenditure changes in the entire healthcare system, since this is an under researched area and is consistent with ICER’s broader mission.  If ICER insists on limiting its focus to medicines, the current proposal to focus only on the price for a handful of medicines with the highest system impact is inherently biased and will not meaningfully shed light on the reasons for changes in price or impact on overall healthcare expenditures. At a minimum, the report should look at all drug price changes that impact net prices in the entire sector.  In a health system with constant innovation, robust and changing competition, frequent price collapses due to patent expiry, and other events which impact the competitive environment for medicines, ICER’s currently proposed approach misses opportunities to help promote better understanding of this complex area.  Prioritizing drugs for review according to those that by virtue of high numbers of patients (volume) who receive them, even sends a negative message about the impact of the most innovative drugs for the largest populations.16  Additionally, this could create a higher bar of pricing scrutiny for drugs that most likely have the biggest positive impact to society because their value is actually increasing. Drug prices are reflective of the value drugs bring, demonstrated in studies linking greater expenditure on drugs to reduced healthcare costs in other areas.17, 18, 19, 20The Congressional Budget Office (CBO) estimates that every 1% increase in the number of prescriptions filled by beneficiaries causes Medicare’s spending on medical services to fall by roughly one-fifth of 1%.21  In a recent Health Affairs Study, drugs were recently shown to have a material effect on reducing Medicare spending.  For Medicare beneficiaries sixty-five and older, spending has declined since 2005 with half of spending attributable to slower spending growth in cardiovascular disease with roughly 50% due to medications controlling cardiovascular risk factors.22

One cannot determine whether a price increase is justified without looking at both the value being delivered and extrinsic effects that may have resulted in a price increase.  There are many factors beyond the value of a drug that can explain price increases.  The evidence base both in traditional clinical data and real-world evidence continues to evolve together with the addition of new indications, changing patterns of use, clinical care innovations, biomarkers and better understanding of patient sub-groups.  In addition, various exogenous shocks to the market supply and demand curves can drive changes in the price. In unusual circumstances, this has sometimes included changes in prices for material costs and demand constraints from a given manufacturing plants capacity.23, 24 The current draft protocol misses an opportunity for ICER to shed light on the reasons for price changes. 

ICER should remove the term ‘unsupported’ from the title of the report.  The use of the term ‘unsupported’ automatically suggests that all drugs in the assessment have unsubstantiated prices even before the analysis is performed.  ICER can demonstrate greater impartiality and fair balance by starting with a title that does not make assumptions as to what the results of the report may be.

METHODOLOGICAL RECOMMENDATIONS

Net prices are difficult to discern given the complexity of the current system; should ICER decide to proceed with the analysis, it should account for uncertainty in the results.  The walk from the wholesale average cost (WAC) to the actual price that manufacturers receive is exceedingly complex within a given payer, but this complexity grows in magnitude when taking into account over 800 different payers in the US, all with different processes and payment mechanisms.25, 26  Significant uncertainties accompany the move from the WAC to the net price with fundamental shortcomings inherent in the data sources used, wide variations across different diseases, drugs, delivery, payers, and methodological challenges for evaluating evidence and the subjective nature by which the value of this evidence is determined.  These complexities require a robust and externally validated approach for reducing uncertainty.

Given extensive variability, ICER should provide greater detail on how it derives net price.  There can be significant variation between net price and list price and the data used in this analysis will not account for this. Also, this approach is in contrast to how manufacturers capture these data.27

To enable a more fair-balanced assessment, ICER should also capture price changes in generics and biosimilars in addition to branded drugs.  Some generic and biosimilar drugs have seen significant price growth, which is equally important in the U.S.28, 29  Including these types of products in this pricing assessment enables a more accurate picture of historic U.S. price change.

ICER should consider evidence for all indications regardless of population size.  An indication may not reach 10% of a drug’s use but may be 100% of the use in the indication, and as such, should be included due to its value in that indication.  This would rule out certain populations. Pediatric evidence which provides valuable data for HCPs would likely fall under the 10% threshold.  Identifying indications that form 10% or more of a drug’s use can be difficult in some areas such as oncology, which have multiple tumor types, combinations and lines of therapy; this is also a significant issue in inflammation where one drug can have as many as 6 different indications.

In addition to clinical data, ICER should include factors that determine price and other determinants of patient value.  Amgen continues to invest in clinical trials, new indications, new formulations, new delivery methods, disease management programs and other ways to improve the patient experience. Continuous innovations like these require significant ongoing investment, which should be reflected in ICER’s report.  ICER should include wider components of benefit including improvements in disease-based patient life impacts, work productivity, and product enhancements to advance patient-centered care and improve utilization.  These encompass better quality of life, adherence, unmet need, severity of disease, value of hope, ability of a treatment to extend life to give time for the development of a cure (real option value), scientific spillover and other contextual criteria that form the basis of a drug’s benefit.30, 31  These data should have: a). equal weight to clinical data, b). form a central part of the consideration of data and evidence that substantiates price, and c). be directly reflected in the determination of price substantiation.

ICER should ensure a robust, methodologically sound and impartial method for grading the quality of evidence and the magnitude of net health benefit.  It is currently unclear from this draft protocol, how ICER will rate the quality of the new evidence and the level of additional net benefit. We suggest ICER adopt a 3-step process for this.
 

  1. Identify a governance board to optimize credibility and validation of this process. To complete this analysis, the public should elect a governance board of impartial experts that will monitor and control the process of this assessment.  ICER’s press release states consultation with a multi-stakeholder advisory group but there is little information on membership and governance.
  2. Rate the quality of new evidence (low, moderate, or high) using an external peer-review process to validate the methodology and application to this analysis. Subsequent to this, reviewers should report their findings publicly, subject to validation by the governance board.
  3. Rate the additional net health benefit (none, small, or substantial for evidence that has been rated as of ‘moderate’ or ‘high’ quality from above):
    • The draft protocol should outline the criteria to determine ‘small’ versus ‘substantial’ benefits. 
    • We recommend identifying a group of independent experts primarily from treating clinicians, experts in the relevant disease and affected patients.  This group should be chosen by members of the public, industry and academic experts to ensure impartiality.  This group and the criteria they will use to differentiate between ‘small’ and ‘substantial’ should be validated in a transparent manner by the governance board.

To help minimize bias, ICER should remove the three additional subjectively chosen drugs.  The addition of these extra products based on subjective criteria will compromise the scientific integrity of the work, invalidating the methodology and leaving the report open to criticism.

We recommend ICER apply best practices in transparency and make their methodology, evidence model, data and data sources publicly available and replicable.  Specifically, ICER should give greater detail as to the methodology for more complex areas that are open to interpretation and assumption, including greater detail in the methodology for the evaluation of evidence and benefit.

CONCLUSIONS

ICER should expand the remit of this report since the current limited focus on drug pricing will not address the wider cost architecture of healthcare services and provision that drives U.S. healthcare expenditure.  Net prices for medicines are lower than the general rate of inflation and this is projected to continue over the next five years.32 This report’s scope necessitates including all price increases across the healthcare system.  Should ICER decide to proceed with this analysis without making these changes, we have additional methodological concerns centered on the inherent complexity in calculating net prices and evaluating justified price increases.  ICER should provide extensive detail on the calculation of net price and address uncertainties in their conclusions.  It should ensure that it captures price changes in generics and biosimilars and remove the three additional subjectively chosen drugs.  Assessing whether a price increase is justified requires a more comprehensive examination of value to encapsulate the extrinsic effects that may have resulted in a price increase.  ICER should account for: market shocks to drug supply, the need to incorporate evidence regardless of population size, and include not only clinical data but other determinants of patient value.  ICER should mandate a process for grading the quality of evidence and the magnitude of net health benefit that is methodologically sound and impartial and then apply best practices in transparency, making the methodology, evidence model, data and data sources publicly available and replicable.   These changes will improve the general validity of the report but will not fix the uncertainty in the conclusions nor will they address the narrow scope of the report. We strongly suggest that ICER consider a more holistic approach that better aligns with their mission. 

 

REFERENCES

  1. Institute of Clinical and Economic Review (ICER). Overview of the ICER value assessment framework and update for 2017-2019. Page 3. Link
  2. Centers for Medicare & Medicaid Services (CMS). National Health Expenditure Data. Link
  3. Roehrig C.  Projections of the Prescription Drug Share of National Health Expenditures Including Non-Retail.  Altarum. May 2018. Link.
  4. Cooper Z, Craig S, Gaynor M, Harish NJ, Krumholz HM, Van Reenen J.  Hospital Prices Grew Substantially Faster Than Physician Prices For Hospital-Based Care In 2007–14,  Health Affairs. 2019 Feb 1; 38 (2).
  5. CMS. Table 02 National Health Expenditures Amounts and Annual Percent Change by Type of Expenditure. 
  6. Op. cit. Roehrig. Link
  7. Op. cit. CMS. Table 02.
  8. IQVIA. The Global Use of Medicine in 2019 and Outlook to 2023 Forecasts and Areas to Watch. Institute Report. January 29, 2019.  Link
  9. Capps C, Dranove D, Ody C. Physician practice consolidation driven by small acquisitions, so antitrust agencies have few tools to intervene. Health Affairs. 2017 Sep 1;36(9):1556-63. Link
  10. Parys JV. ACA Marketplace Premiums Grew More Rapidly In Areas With Monopoly Insurers Than In Areas With More Competition. Health Affairs. 2018 Aug 1;37(8):1243-51. Link
  11. Fulton BD. Health care market concentration trends in the United States: evidence and policy responses. Health Affairs. 2017 Sep 1;36(9):1530-8. Link
  12. Sun E, Baker LC. Concentration in orthopedic markets was associated with a 7 percent increase in physician fees for total knee replacements. Health Affairs. 2015 Jun 1;34(6):916-21.  Link
  13. Op. cit.  IQVIA. 
  14. Amgen.  Amgen Reports Fourth Quarter and Full Year 2018 Financial Results.  Link (Accessed 2-11-2019)
  15. Express Scripts 2018 Drug Trend Report, Link.  accessed Feb. 6, 2019.
  16. Acemoglu D and Linn J.  Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry.  The Quarterly Journal of Economics, vol. 119, issue 3(2004), pp 1049-1090. Link
  17. Stuart BC, Doshi JA, and Terza JV. Assessing the Impact of Drug Use on Hospital Costs.  Health Services Research, vol. 44, no. 1 2009: pp. 128–144. 
  18. Chandra A, Gruber J, McKnight R. Patient Cost Sharing and Hospitalization Offsets in the Elderly. American Economic Review, vol. 100, no. 1 (2010), pp. 193–213.  Link
  19. Christopher C. Afendulis et al., The Impact of Medicare Part D on Hospitalization Rates. Health Services Research, vol. 46, no. 4 (2011). pp. 1022–1038.  Link
  20. Gaynor M, Li J, Vogt WB. Substitution, Spending Offsets, and Prescription Drug Benefit Design.  Forum for Health Economics and Policy, vol. 10, no. 2 (2007), pp. 1–31. Link
  21. Congressional Budget Office.  Offsetting Effects of Prescription Drug Use on Medicare’s Spending for Medical Services.  November 2012. Link
  22. Cutler DM, Ghosh K, Messer KL, Raghunathan TE, Stewart ST, Rosen AB. Explaining The Slowdown In Medical Spending Growth Among The Elderly, 1999–2012. Health Affairs. 2019 Feb 1; 38 (2).
  23. Elsevier Clinical Solutions (2015).  White Paper:  The Impact of Rising Generic Drug Prices on the U.S. Drug Supply Chain. Elsevier Clinical Solutions. Link  Accessed February 7, 2019.
  24. The Street. Trump’s China Tariffs Could Hurt Generic Drug Companies and Increases Prices.  April 4, 2018. Link Accessed February 7, 2019
  25. From Dusetzina et al., 2017 How rebates work:  “In the United States, the net price received by the drug manufacturer can differ substantially from the sale price at the pharmacy. Figure 1 provides an overview; at the top of the figure is the net price zone, where the price that the manufacturer receives is reduced when it gives a rebate to the payer. In Medicare, the payer is the Part D plan sponsor and the pharmacy benefit manager working on its behalf. The pharmacy sale occurs in the list price zone. The pharmacy pays an acquisition price when it purchases the drug and then receives a negotiated price from the payer (inclusive of payment from the patient) when it dispenses the drug. Although the negotiated price and the list price differ, they are usually reasonable approximations of each other. Regulations define the wholesale acquisition cost of a drug as the list price from a manufacturer to a wholesaler or another direct purchaser without discounts or rebates. For branded prescription medications with no direct competitors, acquisition prices for pharmacies are typically within a few percentage points of the wholesale acquisition cost. Source: Dusetzina SB, Conti RM, Nancy LY, Bach PB. Association of prescription drug price rebates in Medicare Part D with patient out-of-pocket and federal spending. JAMA internal medicine. 2017 Aug 1;177(8):1185-8.  Link
  26. Insurance Information Institute.  Facts+ Statistics: Industry Overview. Insurance Industry.  Link
  27. Net prices are a census (no ambiguity as reported by manufacturer), Symphony data is extrapolated from a sample.  Reliability is wholly dependent on the representativeness of the sample chosen by Symphony (including products which go through channels that are under-represented).  Also, SSR methodology for net sales captures various accounting adjustments including patient assistance programs, free goods, ex-factory wholesaler adjustments, etc. The disconnect that requires greater attention is the disparity between the net sales and net units, largely that the units data from Symphony is customer-based purchase units versus the ex-factory reported net sales figure. This combined with SSRs’s method to average out variations in product packaging compositions and non-linear unit of measure conversions will likely cause variations in data.
  28. Congressional Research Service.  Insulin Products and the Cost of Diabetes Treatment. November 19, 2018.  Link.
  29. Court, E. Why did these generic drugs’ prices jump as much as 85%? Market Watch. June 29, 2017. Link.
  30. Lakdawalla DN et al. Defining Elements of Value in Health Care – A Health Economics Approach: An ISPOR Special Task Force Report. Value in Health 21 (2018):131-139.
  31. Real option value: Patients also face uncertainty about when and how future advances in medicine will occur. Thus, extending life provides patients with an option to enjoy these uncertain future benefits. This “real option value” is generated when a health technology that extends life creates opportunities for the patient to benefit from other future advances in medicine [35]. Previous economics literature has identified real option value as an additional element of value that may be relevant for specific medical products [36,37]. This element is not generally captured or reflected in the intervention-specific projections of QALYs gained, which account for a combination of expected survival and the health-related utility at any point in time during the remaining lifetime.” From Lakdawalla et al.,
  32. Op. cit.  IQVIA.