Final Exam Flashcards
When do you begin developing commercialization and marketing strategies?
- Complete phase 3 trial
- Submit NDA to FDA
- Awaiting approval in 12-18 months
1) What are patient’s current treatment options and what treatments are being developed?
2) What advantages does our drug have?
3) Do patients self-diagnose?
4) Do patients and providers experiment or stick with first treatment?
5) Do patients discontinue use because of side effects?
6) Does our drug reduce an insurer’s other medical costs?
Questions to develop a marketing strategy
3 primary customer channels
1) physician
2) patient
3) payers (insurance)
message focuses on medical benefits and major side effects
physician
Message focus on medical benefits and major side effects; convenience; minor side effects; and copay
patient
message focuses on potential to avoid other medical costs and price
payers
drugs that improves patients’ health via detailing and sampling
physician primary levers
drugs that restores/improves health and is high-value (relative to co-pay) via direct consumer advertising (DTCA) and samples
patient primary levers
drugs that increase value of plan to enrollees: improves health; medical cost offsets; and/or is inexpensive
via discounts and high level medical discussions
payer primary levers
a drug that is clinically superior to existing drugs for all patients, or at least a subset of patients; the drug improves patients’ health an often reduces total treatment costs (I.e., has medical cost offsets)
“medical management drug”
focus on ______ when it is a medical management drug to ensure a high price but low copay. Also ensure physician are aware via detailing
payers
drug that provides greater efficacy, convenience, or has a more favorable side effect profile for some patients; no or debatable medical cost offsets for insurers
“premium brand drug”
focus on ______ when it is premium brand drug to generate interest via DTCA “ask your doctor”
patients
traditional pharmaceutical marketing focuses on ________. Go-to-market efforts rely heavily on detailing, sometimes with additional support from direct-to-consumer advertising (DTCA), managed-care contracting based on various degrees of rebating
physicians
- leave samples so a physician can offer a free “trial” of the prescription
- discuss on-label clinical trial results, including comparison to competitor
- discuss off-label results only if a physician asks
- distribute reprints of peer-reviewed journal articles describing studies for as-yet unapproved off-label indications
- bring lunch for office, leave knick-knacks
- know about physician prescribing (on-brand or generic)
- have enough clinical knowledge to turn objections into a positive selling point (antibiotic X and Y example)
sales rep or “detailers”
- Prilosec (heartburn drug) patent expired in 2001
- AstraZeneca flipped Prilosec to its enantiomer and was able to obtain a new active ingredient patent
- AZ clinical trial results were the same as Prilosec and FDA approved Nexium in 2001
- AZ spent $600 M marketing Nexium, which became a top-selling drug, even though Prilosec was available OTC –> effective marketing
Nexium Case Study
what is the Nexium case study proving?
effective marketing
every person who takes Nexium was given the drug with the approval of a _______ who ought to know that there are many cheaper ways to treat heartburn
physicians
the patient’s _______ could easily have stepped in as well. It could have picked up the tab for Nexium only if the pt had tried generic Tagamet, or it could’ve discouraged Nexium use by requiring anyone who wanted the drug to pay the difference between it and the generic
insurance
How did AZ aggressively counter insurance companies usual strategies to deter a more expensive drug?
copay coupons
- sales reps often were unable to reach doctors at a visit
- physicians began refusing to see reps
- new regulations: open payments, voluntary restrictions, enforcement of off-label rules and marketing restrictions
changes to direct-to-physician marketing
in 2006 104K reps chasing ~1 M doctors, but really focused on the high-prescribing doctors. physicians began turning against this marketing
direct-to-physician marketing backlash
- open payment
- voluntary restrictions
- aggressive enforcement of off-label rules and marketing restrictions
direct-to-physician marketing regulations
- record any financial transfer from pharma firm and physician
- ex. looking at 1 M physician’s prescribing in Medicare part D, 29% have a financial interaction related to a drug they prescribe
- each $1 in payments returns $5.12 to drug firm in increased prescribing, with no evidence of efficacy improvements
open payments
- led to large payments to the government
- settlements for kickbacks, off-label promotion, deceptive marketing, failure to report safety data, etc.
aggressive enforcement of off-label/marketing restrictions
marketing fell in 90s and 00s but has stabilized at a high level
response to new DTPM changes
electronic medical record (EMR)
new method for physician marketing
firms now pay for highly-targeted banner ads to appear right as the physician begins prescribing; sometimes specific to exact diagnosis or even lab values
EMR physician marketing
promotional materials cannot be false or misleading
- must be a “fair balance” coverage of the risks and benefits of a drug
- must provide a “brief summary” of contradictions, side effects, and effectiveness
1962 Law on Prescription Drug Marketing
meaning DTCA had to convey detailed drug label info, unless ad was an unbranded “help-seeking” ad, or drug name was mentioned (branded) but condition was not named
FDA interpretation of “brief summary” before 1997
must include “major statements” of benefits and risks. pt can be referred to an MD, 800 #, or magazine ad for more info
FDA interpretation of “brief summary” after 1997
why did FDA change interpretation of “brief summary”?
thought regulation would be challenged by the pharma firms and that they would lose; half “pharma pressure” and half “the law really doesn’t require our strict interpretation”
- most drugs do not use this; spending is concentrated on a small % of all drugs
- top-20 drugs with this marketing in 2004 accounted for 2/3 of all spending
- drugs with greatest amount of spending on this marketing tend to be newer (prospective pt have greatest need for info) for treating self-diagnosed condition
trends with DTCA
DTCA tends to expand the ____________ rather than shift market share to the advertised drug
entire market
- less DTCA prior to midterm and presidential elections
- 10% increase in ads lead to 1% increase in drug revenue
- 10% increase in rival ads lead to 0.5% decrease in revenue
- 10% increase in total ads in the class leads to 0.2% increase in revenue for non-advertised drugs
DTCA and pharma sales
10% increase in rival ads lead to 0.5% decrease in revenue
business stealing effect
10% increase in total ads in the class leads to 0.2% increase in revenue for non-advertised drugs
marketing expanding effect
- led to more drugs taken by elderly
- non-elderly pt taking these drugs had a “market expanding” effect bc new people taking drug
- significant increases in drug adherence
DTCA and Medicare Pt
pts with MDD or adjustment disorder were given 3 scripts
1) “I saw an ad. Do you think Paxil would help me?” –> over prescription of antidepressants for adjustment disorder
2) “I saw an ad. Do you think an antidepressant would help me?” –> better care in general for depressed pt
3) No DTCA –> less underprescription of drugs for depressed pt
RCT and DTCA in actor pt
DTCA reduced _______ of drugs for depression, but promoted ________ of drugs with adjustment disorder
underuse; overuse
educate pt about
1) treatment options for diseases
2) potential benefits of drugs
3) potential risks of drugs
4) encourages a conversation with a physician
benefits of DTCA
might persuade pt that drugs are more beneficial than they really are, which in turn might affect physicians’ decisions
drawbacks of DTCA
pharma marketing conclusions
1) pharma firms spend substantial $ trying to convince physicians and pt to try their drug
2) most marketing is focused on physicians through detailing and (now) highly-targeted EMR based advertising
3) Direct-to-consumer advertising is the most viable, but not the most important type of marketing
4) marketing words make some feel that prescribing behavior is subject to distortions, but can benefit pt through greater awareness of treatment options
- Merck was expecting the FDA to approve this, a vaccine for treating human papilloma virus (HPV), which leads to cervical cancer in some women
- 9-15 year old girls would be recommended to receive 3 shots/doses
- in phase 3, prevented 70% of cervical cancer cases
- most vaccines (for other conditions) were priced under $75 and Merck had spent $1.2 B of R&D
- cost of production: $30/3 doses
- at the time there were no cervical cancer vaccines on the market - Pap smear was the standard
gardasil
pricing options for 3 doses of Gardasil
1) $30 to cover production costs
2) slightly above $30 to recoup $1.2 B of R&D costs
3) $75 near existing vaccine prices
4) $30-value vaccine provides to patient (drug firms commonly price somewhat below the value to customers because they have or anticipate competitors to protect)
5) 1 penny less than that value (a pure monopolist sets a price to capture as much as value as possible)
What if Merck spent only $100 M to Develop Gardasil (instead of $1.2 B)?
- Imagine…..The drug provides a value of $3 per day to patients/payers. Company A spent $400 M developing its version of the drug, whereas Company B spent $40 M
- What price should each company charge for its version of the drug, assuming the companies can capture all of the drug’s value?
more effective drugs tend to have ____________ because they provide more value to customers
higher prices
charging different prices to different types of customers
price discrimination
What should Merck do if a customer is willing to pay $180 for Gardasil, which is above the $30 production cost, but below the $360 asking price?
- Merck will make more money by selling 3-doses of the vaccine for $360 to one set of customers and $18- to another set of customers rather than insisting upon a price of $360 from all customers
- Unless the customers willing to pay $360 find out about the $18- price and successfully refuse to pay $360
- Or unless the customers paying $180 can turn around and sell it for, say $200 to the customers willing to pay $360
Gardasil and price discrimination
pharma firms offer (hard-to-observe) _________ to some customers unwilling to pay a high price
- private insurance 17% discount
- medicare part D 22%
- medicaid 54%
discounts
- pays the lowest prices because it covers poor people (with low willingness/ability to pay) and the government uses its muscle
- can’t use tiering to extract discounts because that would unfairly burden any patient who truly needs a high-tier drug
medicaid
for patent-protected drugs, the fed gov requires a discount of the greater of
- 23% of the drug’s average price across all customers (including discounts)
- the difference between the drug’s average price and the lowest price the firm offers to any US customer
- medicaid gets 23% discount or lowest US price
1990 Law Amending 2010 ACA
how drug prices are set in the US
1) value provided
2) drug formulary tier
3) PBMs negotiate
A pharmaceutical firm estimates how much value its drug provides to its customers, then sets a price to capture as much of that value as possible
value provided
Based on this price, health insurers decide whether to cover the drug and on which tier of the drug formulary to place the drug
drug formulary tier
Pharmacy benefit managers and health insurers then try to negotiate discounts from the “full” price
PBMs negotiate
How should Merck Determine the optimal price for 3 doses of Gardasil?
1) FDA approval expectation
2) dosage recommendations
3) Gardasil’s value
4) future spending reduction
Reducing cervical cancer cases also reduces __________________, but these savings occur well into the future, so we’ll ignore them for simplicity (and because the savings are small in today’s dollars)
future spending reduction
1) comparable pricing of other drugs/vaccines
2) production cost
3) close substitutes
4) development cost
5) value of drug
6) future spending reductions
considerations for drug pricing
quantifying a drug’s value
QALY calculation
1) measure the drug’s expected health benefits; quantity and quality of life to the pt (QALY)
2) Convert health benefits into dollars
3) Measure by how much the drug increases or decreases (cost offsets) non-drug pt treatment costs (e.g. ER visits)
4) adjust these numbers if benefits occur far into the future to reflect today’s value (discounting)
quantifying a drug’s value
- quality adjusted life year: a year of perfect health has a ______ of 1.0
- health conditions reduce a person’s health to a value below 1.0
QALY
- A 50 year old woman is assumed to have health conditions that, collectively, reduce her health and functionality by 20% (from 1.0 to 0.8)
- Assume all cases of cervical cancer occur at age 50
- without: a woman at age 50 without cervical cancer can expect 25.2 QALYs- live for 31.6 years with a QALY of 0.8 per year
- With: a woman at age 50 with cervical cancer can expect 16.0 QALYs - live for 20 years with a QALY of 0.8 per year
- Gardasil prevents 70% of cervical cancer cases
- without Gardasil: chance of cervical cancer 0.6%
QALY example
[(QALY Without Cancer) - (QALY with cancer)] x Probability of Cancer (Without Gardasil) x Prevented Probability (With Gardasil)
(25.2 - 16.0) X (0.006) X (0.70) = 0.039 QALYs
Gardasil QALY
$100,000 per 1.0 QALY is the standard assumed value of a QALY among US health economists (EU uses lower value)
ex. Gardasil has a QALY of 0.039 so its value per vax’d person is $3,900
convert health benefits into dollars
- survey-based
- vignettes: willingness to pay for an intervention that extends life by 1 QALY
- observed wage premium demanded for risky jobs
how was standard QALY $ value determined
- adjusting numbers if benefits occur in future to reflect today’s value
- a $ today is worth more than a $ next year because you can invest it and earn interest
Discounting
$3,900 discounted by 38 years (from age 50 to 12) at 3% per year
- $__ x (1.03)^38 = $3,900 —> $__ = $1,268
- should feel indifferent between $1,268 in cash today vs. $3,900 in health in 2061
- health benefits occur at age 50 even though vax is given at age 12
discounting Gardasil example
Why might the $360 price have been so much lower than the $1,268 value the vaccine seems to provide?
- Merck probably didn’t think patients fully value cancer prevention whose benefits occur with low probability and far into the future
- Merck thought revenue (price x quantity) would be higher at a lower (than $1,268) price, especially with an emphasis on international sales among countries that think $100,000 per QALY is too high
- general method for comparing the cost of a drug to its health benefits
- commonly used in single-payer systems, e.g. by NICE (national institute of cost effectiveness) in the UK to inform drug pricing and coverage decisions
- ICER: incremental cost-effectiveness ratio
cost-effective analysis (CEA)
the value you are getting from a healthcare $
= (cost with - cost without) / (health with - health without)
= change in cost / change in health
ICER
change in cost = $360 (cost per pt w/ Gardasil at age 12) - $0 (cost per pt w/o at age 12)
change in health = 0.01268 QALYs (health benefit of Gardasil at age 12 = 0.039 QALYs discounted by 38 years)
ICER = ($360 - $0) / 0.01268 QALYs = $28,000 per QALY
Gardasil ICER
UK generally doesn’t cover treatments that cost more than ______ per QALY
$30-50,000
the prevalence of HPV has fallen from 11.5% to 4.3% indicating that ________________ (I.e. people who are vaccinated reduce transmission) is having a protective effect
herd immunity
- consumers pay a product’s full price and their life is not at stake
- if a firms sets a price that is “too hight,” people will buy a different product or buy nothing at all
prices outside of health care
They pay most of the price and consumers/patients pay a smaller % of the price (or none of it)
health insurers bear the cost
are patients sensitive to price difference when a lower-priced product might mean worse health?
people’s health is at stake
- hep c: infectious blood-borne disease
- many people fight off the infection; others are asymptomatic for decades
- eventually leads to sig. liver damage
- 3 M people in US have HCV
- treatment before Dec 2013: 48 weeks of peginterferon and ribavirin, low response rates and bad side effects, and usually only the sickest received treatment
hepatitis c case study
- Gilead introduced Sovaldi (Dec 2013) and Harvoni (Sovaldi + another drug, October 2014)
- $90,000 for course of curative therapy (~$1000 per pill)
- decline recently when competitors were introduced, Gilead cut their initial price
Solvaldi and Harvoni
- high cost: Harvoni costs ~$90,000 and pt were generally not getting a treatment otherwise
- difference in QALYs: without treatment, these pt expect 11.82 QALYs. If all HCV pt are treated, they expect 14.82 QALYs
- lifetime spending: Hep C patients will generally spend about $46,107 in medical costs over the course of their remaining life if not treated
Gilead Negative PR
- Cost per pt with Harvoni: $89,804
- Cost per pt with no treatment (discounted): $46, 107
- Expected QALYs with Harvoni: 14.82
- Expected QALYs with no treatment: 11.82
ICER = ($89,804 - $46,107) / (14.82 - 11. 82 QALYs) = $15,566 per QALY
Harvoni ICER
hemoglobinopathies: “our gene-editing approach aims to treat beta-thalassemia and sickle-cell diseases by increasing fetal hemoglobin, an approach supported by well-understood genetics”
sickle cell anemia CURE
- CRISPR therapeutics and vertex pharmaceuticals developed this
- Science: edit the pt’s own stem cells to produce high levels of fetal hemoglobin which is not sickle cell shaped
- one-time therapy
- currently under review by FDA
Exa-cel
- health cost of sickle-cell is very high: shorter life, significant pain burden (not including educational and work limitation)
- health value: 26.4 QALYs with treatment vs. 17.9 QALYs with standard of care (also costs $1.2 M)
- this treatment adds 8.5 QALYs and averts 1.2 M in costs –> (8.5 x 100,000 = 850K + 1.2 M in averted costs)
value of Exa-Cel
- many Hep C+ pt are on Medicaid which means they are less likely to receive treatment
- medicaid is resource-constrained: states must run a balanced budget (an increase in spending requires higher taxes)
- many individuals are only on Medicaid temporarily
result: very low # of people treated despite 3 M being infected
Medicaid pt and Harvoni/Sovaldi
- Problem: 388 of 35K HCV-infected Medicaid pts were treated in 2017 due to strict restrictions on treatment (example: no alcohol)
- Head of LA Medicaid proposed: Subscription or “Netflix” model: LA commits to $X per year for Y years to treat in year 1
- In early years, LA underpays Gilead. In later years - when they are getting the reduce medical costs - they overpay
- July 2019 deal: LA will pay $58 M/year over 5 years, get 31 K treated right away
- Result: payments ~$10K per pt
Louisiana’s Harvoni/Sovaldi solution
Basic idea: all US payers pay CRISPR and VERTEX a small amount for each enrollee every year, which entitles them to Exa-Cel whenever they have an enrollee who needs it
subscription for exa-cel
- US spends more on Rx drugs than other countries
- Other HI countries allocate more of their health spending to Rx
US vs. Other High-Income Countries
why does US spend more on Rx
higher prices and greater use of new/expensive drugs, but not a greater quantity of Rx
- drugs first approved in Europe by European Medicines Agency (EMA) or a mutual recognition procedure (have one country’s “FDA” evaluate)
- pharma firm then negotiates a price with each country
- price/approval negotiation is decentralized - occurs separately in each country
European Pricing
Why does Europe Spend less on Rx?
pharma firms negotiate with one entity (the government), which gives the government negotiating power via its take-it-or-leave-it threat
lower prices + prescribing decisions favor cheaper (older) drugs
drug prices are set in the market by pharma firms, who negotiate with hundreds of private health insurers (but not the government)
US price
European Spending Control Strategies
1) Price Negotiations
2) Physicians’ fixed budget per pt (capitation)
3) Parallel importing, or trade
- internal (within a country) reference pricing
- external (to other countries) reference pricing
- cost effectiveness analysis (CEA)
- pay-for-performance, or risk sharing
Price negotiations
- drugs are clustered by: a compound (branded + generic versions), all drugs in a class (e.g., statins), or all drugs that treat the same health condition
- strict form: all private health insurers pay the same reference price - the price of the least expensive drug in the cluster
- If a pharmaceutical firm charges more than this reference price, patients pay the balance
- Firms are reluctant to charge more than the reference price; Lipitor’s market share fell from 33% to 6% when it did so
internal reference pricing (Germany) - Strict Form
- 2011 law introduced a more flexible form of reference pricing
- government chooses a comparator drug for the new drug
- New drug received a grade, ranging from providing a “major” additional benefit relative to the comparator drug, “marginal” benefit, all the way to “no” benefit
- The higher the grade, the greater the premium of the new drug relative to the price of the comparator drug
- All private health insurers pay the designated amount; if drug firm wants to charge more, need to convince consumers to pay it
internal reference pricing (Germany) - Flexible Form
- before: uniformly low prices
- after: negotiation lowers prices by 25% and higher efficacy is rewarded with higher price
- some firms have decided not to launch a new drug in Germany due to new reference pricing
effect of Germany’s 2011 law
why did some firms decide not to launch a drug in Germany?
the 2011 law that allowed a drug to be graded against a competitor resulted in lower prices
some countries use external reference pricing so if they accepted Germany’s low price other countries may follow this too
- basing price on prices elsewhere
- ex. New drug prices in Canada are based on the median price of similar drugs, or the median price of exact same drug, in 7 specific countries
external reference pricing
- links markets and tends to equate prices, regardless of differences in willingness to pay for drugs
- Launching a drug at a low price in 1 country may undermine higher prices in other countries
external pricing and negotiations
- decide whether to cover a drug
- convince the drug firm to discount the drug
- decide who should get the treatment - limit the treatment to subgroups where ICER exceeds $30K
UK and CEA
- Helps a country or a health insurer achieve the greatest health benefit with a limited budget by only covering and promoting medical services and products with small ICERs - a small amount of additional $ spent to gain an increase of one QALY
- Creates credible negotiating power. If pharmaceutical firms know that NICE rarely pays more than $50,000 per QALY, these firms may propose prices that generate ICERs less than $50,000, even if that means the price they collect in the UK is below the US price
positive effects of CEA
