comparing cost, coverage and access to pharmaceuticals under australian and us policy frameworks...

Comparing Cost, Coverage and Access to Pharmaceuticals Comparing Cost, Coverage and Access to Pharmaceuticals under Australian and US Policy Frameworksunder Australian and US Policy Frameworks

Ruth Lopert Ruth Lopert Harkness Fellow in Health Care PolicyHarkness Fellow in Health Care Policy

Department of Health Policy Department of Health Policy George Washington UniversityGeorge Washington University

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Principal AdviserPrincipal Adviser Pharmaceutical Policy TaskforcePharmaceutical Policy Taskforce

Department of Health and Ageing, CanberraDepartment of Health and Ageing, Canberra

BackgroundBackground

Australian Pharmaceutical Benefits Scheme (PBS)Australian Pharmaceutical Benefits Scheme (PBS)− in operation > 50 yearsin operation > 50 years− objectives: equity, universality, affordability, objectives: equity, universality, affordability, − comprehensive but closed formularycomprehensive but closed formulary− fixed co-payments, capped out of pocket costsfixed co-payments, capped out of pocket costs− evidence-based formulary decision-makingevidence-based formulary decision-making− value for money a key considerationvalue for money a key consideration− monopsony “purchasing” power and regulated pricing => monopsony “purchasing” power and regulated pricing =>

prices generally much lower than in USprices generally much lower than in US

To the US pharmaceutical industry the PBS is a non-tariff barrier To the US pharmaceutical industry the PBS is a non-tariff barrier To (some) US policy makers Australia is a nation of “free riders”To (some) US policy makers Australia is a nation of “free riders”

BackgroundBackground

2002 TPA mandate to USTR2002 TPA mandate to USTR − to seek “..elimination of price controls and reference pricing” abroadto seek “..elimination of price controls and reference pricing” abroad− tested for first time in the AUSFTA, later in KORUS-FTAtested for first time in the AUSFTA, later in KORUS-FTA

AUSFTA Agreed PrinciplesAUSFTA Agreed Principles − “ …“ … promote timely and affordable access to innovative pharmaceuticals promote timely and affordable access to innovative pharmaceuticals

through transparent, expeditious, and accountable procedures”through transparent, expeditious, and accountable procedures”− “…“… recognize the value of innovative pharmaceuticals through the recognize the value of innovative pharmaceuticals through the

operation of competitive markets or … procedures that appropriately value operation of competitive markets or … procedures that appropriately value the objectively demonstrated therapeutic significance of a pharmaceutical. “the objectively demonstrated therapeutic significance of a pharmaceutical. “

Text reflects different understandings of what is “innovative”Text reflects different understandings of what is “innovative”− a mechanism to pressure Australia to increase drug prices?a mechanism to pressure Australia to increase drug prices?

BackgroundBackground Medicare Part D design features design features (prerequisites for GOP support)(prerequisites for GOP support)– limit overall spendinglimit overall spending– use competition to drive down pricesuse competition to drive down prices– offer a wide choice of drugs and plansoffer a wide choice of drugs and plans– rely on the private sector for the structurerely on the private sector for the structure– ““no interference”no interference” in price negotiation (=> a windfall to PhRMA ) in price negotiation (=> a windfall to PhRMA )

Standard benefit Standard benefit (in 2007)(in 2007)– $265 deductible plus 25% coinsurance up to $2400$265 deductible plus 25% coinsurance up to $2400– nil between $2400 and $5451 nil between $2400 and $5451 – 5% after $5451 ($3850 OOP) - but5% after $5451 ($3850 OOP) - but 5% of Gleevec is still $200-600/month5% of Gleevec is still $200-600/month

Providers establish individual formulariesProviders establish individual formularies– CMS regulations / US Pharmacopeia sets Model GuidelinesCMS regulations / US Pharmacopeia sets Model Guidelines– 2 drugs in each class / all drugs in 6 protected classes / 1 in each subclass2 drugs in each class / all drugs in 6 protected classes / 1 in each subclass– plus tiers, cost sharing, quantity limits, step therapy, prior authorizationplus tiers, cost sharing, quantity limits, step therapy, prior authorization

Research questionsResearch questions

Australian PBS and Medicare Part D Australian PBS and Medicare Part D − largely antithetical policy frameworkslargely antithetical policy frameworks

Key questionsKey questions− Are the programs comparable in terms of affordability, access, Are the programs comparable in terms of affordability, access,

coverage?coverage?

− Is it possible to deliver comparable coverage under fundamentally Is it possible to deliver comparable coverage under fundamentally different policy frameworks?different policy frameworks?

− How / to what extent do the two systems identify and reward How / to what extent do the two systems identify and reward pharmaceutical innovation?pharmaceutical innovation?

MethodsMethods

Semi structured interviews with Part D providers Semi structured interviews with Part D providers – TopTop 10 providers = 72% of enrolments in 200610 providers = 72% of enrolments in 2006– Interviews with 6/10 so far, 2 outright refusalsInterviews with 6/10 so far, 2 outright refusals

Contextual interviews Contextual interviews – with US Pharmacopeia, CMS, pharma companies, AHIPwith US Pharmacopeia, CMS, pharma companies, AHIP

Data collectionData collection– Part D data: plan design, premiums, formularies, drug prices, OOP Part D data: plan design, premiums, formularies, drug prices, OOP

costs, tier arrangements, UM tools – costs, tier arrangements, UM tools – very difficultvery difficult– no aggregated pricing data availableno aggregated pricing data available– PBS data: in public domain, easily accessiblePBS data: in public domain, easily accessible

Methods (2)Methods (2)

Compare characteristics, costs across specific drugsCompare characteristics, costs across specific drugs– comparisons across different therapeutic areascomparisons across different therapeutic areas– comparisons based on sample regimens / scenarioscomparisons based on sample regimens / scenarios– comparisons of innovative drugs identified using FDA and Canadian comparisons of innovative drugs identified using FDA and Canadian

criteriacriteria

Volume of data problematicVolume of data problematic– no substantive differences in prices or formularies across different no substantive differences in prices or formularies across different

regions (though some differences in premiums)regions (though some differences in premiums)– solution to use price and formulary data based on NY state planssolution to use price and formulary data based on NY state plans

Results (1)Results (1)

Part D PBS Multiple providers Single provider



Emphasizes, choice, market based competition, individual rights.

Equity, timely access, affordability, universality and (limited) choice


Part D PBS Multiple providers Single provider Emphasizes, choice, market based competition, individual rights.


Broad formularies (but not necessarily greater access)

Restricted but generally comprehensive formulary







Confidential formulary decision-making, driven by cost and CMS rules?

Transparent evidence based formulary decision-making









Individual coverage determinations and rights of appeal (real or imagined?)

No individual coverage determination or right of appeal











Unstable, unpredictable benefit Affordable, stable, predictable benefit











Unstable, unpredictable benefit Affordable, stable, predictable benefit

High and unstable prices; high, unpredictable OOP, variable co-payments and co-insurance

Prices variable to payer, but low and predictable OOP for consumers; fixed, flat co-payments and stop loss protection


Part D PBS Multiple providers Single provider Emphasizes, choice, market based competition, individual rights.








Unstable, unpredictable benefit Affordable, stable, predictable benefitHigh and unstable prices; high, unpredictable OOP, variable co-payments and co-insurance

Prices variable to payer, but low and predictable OOP for consumers; fixed, flat co-payments and stop loss protection

Government exp. per capita$1,690 in FY 2006

Government exp. per capita$1023 /$528 in FY 2005-06

Results (2) – CostsResults (2) – Costs Drug/doseDrug/dose Median Full Price NY PDPs Median Full Price NY PDPs * PBS Dispensed Price**PBS Dispensed Price**

alendronate70 mg $73.39 $25.44

atorvastatin 10mg $75.43 $33.23

citalopram 20 mg $11.04 $23.28

clopidogrel 75mg $125.91 $72.75

coumadin 5mg $26.24 $9.25

donepezil 5 mg $148.24 $25.44

esomeprazole 40 mg $136.31 $25.44

levothyroxine 100 mcg $8.39 $2.91

metformin 500mg $11.74 $3.77

nifedipine ER 90 mg $65.38 $25.44

ramipril 5mg $46.01 $14.87

rosiglitazone 4mg $93.81 $53.49

simvastatin 20mg $111.51 $38.62

*Prices for 30 day supply **Exchange rate USD 1.00 = AUD 1.20694 as at 1 May 2007 (www.oanda.com)

Results (3) – CostsResults (3) – Costs

Example RegimenExample Regimen Medicare PartPart D PBS

donepezil 5 mgenalapril 10 mgalendronate70 mglevothyroxine 100 mcgesomeprazole 40 mgnifedipine ER 90 mgcitalopram 20 mg

WellCare Classic Monthly premium $14.90 Gap costs $506.77

Annual OOP $4,678.80* Annual OOP $877.43

ramipril 5mgcoumadin 5mgfrusemide 20mgslow-K 10 Meqatorvastatin 10mglansoprazole 30mg ER

AARP MedicareRx PlanMonthly premium $27.40Gap costs $329.18 **


rosiglitazone 4mgcarvedilol 6.25mgglyburide 5mglisinopril/HCTZ 20/25 mgmetformin 500mgclopidogrel 75mgsimvastatin 20mg

Humana PDP Complete Monthly premium $82.10Gap costs $422.84


* Total annual OOP including monthly premiums ** Plan provides gap coverage for generics with $5 copay

Results (3) – CostsResults (3) – CostsExample RegimenExample Regimen Medicare PartPart D PharmacyDirect (Aus)***

donepezil 5 mgenalapril 10 mgalendronate70 mglevothyroxine 100 mcgesomeprazole 40 mgnifedipine ER 90 mgcitalopram 20 mg

WellCare Classic Monthly premium $14.90 Gap costs $506.77

Annual OOP $4,678.80* Annual total cost $3,372.64 ramipril 5mgcoumadin 5mgfrusemide 20mgslow-K 10 Meqatorvastatin 10mglansoprazole 30mg ER

AARP MedicareRx Plan Monthly premium $27.40Gap costs $329.18 **

Annual OOP $2,828.90* Annual total cost $1,170.33

rosiglitazone 4mgcarvedilol 6.25mgglyburide 5mglisinopril/HCTZ 20/25mgmetformin 500mgclopidogrel 75mgsimvastatin 20mg

Humana PDP Complete Monthly premium $82.10Gap costs $422.84

Annual OOP $3,548.66* Annual total cost $2,578.67 * Total annual OOP including monthly premiums ** Plan provides gap coverage for generics with $5 copay*** Online retail pharmacy, prices for private prescriptions

Results (4) - Comparing the valuation of innovative drugsResults (4) - Comparing the valuation of innovative drugs

* As a proportion of Part D price **S100 item – price excludes wholesale margin ***Ex PBS – funded under separate program

Proprietary Name

INN Quantity Indication Median Price NY PDPs

Dispensed Price PBS

Difference (PBS - Part D)*

Actimmune interferon γ-1b

2MU, 12 Chronic granulo-matous disease

$1,340.03 $2,125.48** 59%

Alimta pemetrexed 500mg, 1 NSCLC $2,314.20 $1,369.16 -41%

Cerezyme imiglucerase 400 units Gaucher’s Disease $1,588.54 $2,047.55*** 29%

Emtriva emtricitabine 200mg, 30 HIV $328.41 $247.26** -25%

Enbrel etanercept 25mg, 8 RA, PsA, etc $1,329.48 $1,489.49 12%

Fabrazyme agalsidase β 35mg Fabry’s Disease $4,512.93 $4,981.60*** 10%

Fuzeon enfuvirtide 90mg, 60 HIV $2,171.83 $1,870.97** -14%

Gleevec imatinib 400mg, 30 CML, GIST $2,994.89 $3,125.53 4%

Iressa gefitinib 250mg, 30 NSCLC $1,810.25 $3,165.10 75%

Pegasys pegif’n α-2a 180mcg, 4 Hepatitis C $1,673.21 $1,167.74** -30%

Remicade infliximab 100mg RA, PsA, etc $591.08 $758.24** 28%

Rilutek riluzole 50mg, 60 MND / ALS $870.86 $586.55 -33%

Taxotere docetaxel 80mg, 1 Breast,ovarian,NSCLC $1,409.17 $746.14 -47%

Viread tenofovir 300mg, 30 HIV $514.54 $434.25** -16%

Results (5) – Access and coverageResults (5) – Access and coverage

Access and coverage are multi-dimensional − direct comparisons complex− breadth of Part D formularies generally wider than PBS − but difficult to assess availability of individual drugs and access not

guaranteed from year to year− impact of tiers and utilization management tools difficult to establish − higher OOP a potential barrier to access (is breadth of formulary less

important?)− unclear whether individual coverage decisions and appeal

mechanisms improve access− will future efforts to increase Part D competition lead to trade-offs on

access?

Results (6) – Part D formularies and innovationResults (6) – Part D formularies and innovation

Significant homogeneity in provider responsesSignificant homogeneity in provider responses− high degree of adherence to USP Model Guidelineshigh degree of adherence to USP Model Guidelines− P&TCs find comparing treatments difficult, so often don’tP&TCs find comparing treatments difficult, so often don’t− no specific consideration of “innovation”no specific consideration of “innovation”− formulary design largely driven by cost - not valueformulary design largely driven by cost - not value− USP Model Guidelines and CMS Rules constrain price negotiation for new USP Model Guidelines and CMS Rules constrain price negotiation for new

drugs …drugs …− … … and “negotiated” prices don’t preclude increases through the yearand “negotiated” prices don’t preclude increases through the year

Conclusions – Answers to key questionsConclusions – Answers to key questions

Costs:Costs: substantially higher costs to Government under Part D substantially higher costs to Government under Part D– coupled with much higher out of pocket costs coupled with much higher out of pocket costs – prices generally lower for “me-toos” and generics under PBS prices generally lower for “me-toos” and generics under PBS – prices for some innovative medicines higher prices for some innovative medicines higher

Coverage and Access: Coverage and Access: difficult to assess due to multi dimensionality difficult to assess due to multi dimensionality – non-uniform Part D benefit, differences in timing of registrationnon-uniform Part D benefit, differences in timing of registration– access under Part D not guaranteed from year to yearaccess under Part D not guaranteed from year to year– uncertain effect of higher (and rising) out of pocket costsuncertain effect of higher (and rising) out of pocket costs

Valuation of innovation: Valuation of innovation: non explicit and non uniform under Part Dnon explicit and non uniform under Part D– not really a competitive market not really a competitive market – objective measurement of therapeutic significance, if it occurs, does not objective measurement of therapeutic significance, if it occurs, does not

directly drive pricedirectly drive price

Conclusions -Conclusions - Implications Implications for US Policy Makersfor US Policy Makers

Problems inherent in Part D structure Problems inherent in Part D structure – – complexity / excessive choice / instabilitycomplexity / excessive choice / instability– high OOP, coverage gap, no stop loss protectionhigh OOP, coverage gap, no stop loss protection– structure institutionalizes risk selectionstructure institutionalizes risk selection– formulary selection driven largely by cost => inappropriate utilization, formulary selection driven largely by cost => inappropriate utilization,

higher costs elsewhere in Medicare?higher costs elsewhere in Medicare?– limited capacity to negotiate prices; drug prices too high and risinglimited capacity to negotiate prices; drug prices too high and rising– limited competition, may decline with consolidation and lessening of risk limited competition, may decline with consolidation and lessening of risk

protectionsprotections– efforts to increase competition may reduce accessefforts to increase competition may reduce access

Not a rational model Not a sustainable modelNot a rational model Not a sustainable model

Conclusions - Implications Conclusions - Implications for Australian Policy Makersfor Australian Policy Makers

PBS a more transparent, stable, equitable and affordable PBS a more transparent, stable, equitable and affordable benefitbenefit

– albeit with less emphasis on individual rightsalbeit with less emphasis on individual rights

Prices in regulated markets not always lower Prices in regulated markets not always lower – but evidence based assessment of therapeutic significance may offer but evidence based assessment of therapeutic significance may offer

more explicit recognition of innovationmore explicit recognition of innovation

PBS shows greater adherence to AUSFTA “Agreed Principles”PBS shows greater adherence to AUSFTA “Agreed Principles”– – a defensible position against any future claim to the contrary?a defensible position against any future claim to the contrary?

Acknowledgements and ThanksAcknowledgements and Thanks

Professor Sara Rosenbaum, George Washington UniversityProfessor Sara Rosenbaum, George Washington University

Dr Marilyn Moon, American Institutes for ResearchDr Marilyn Moon, American Institutes for Research

Dr Kosali Simon, Cornell UniversityDr Kosali Simon, Cornell University

Professor Bruce Stuart, University of Maryland, BaltimoreProfessor Bruce Stuart, University of Maryland, Baltimore

Professor Lloyd Sansom and Dr Libby Roughead, University of South AustraliaProfessor Lloyd Sansom and Dr Libby Roughead, University of South Australia

Commonwealth Fund, Robin Osborn and International Fellowship Program staffCommonwealth Fund, Robin Osborn and International Fellowship Program staff

comparing cost, coverage and access to pharmaceuticals under australian and us policy frameworks...

Documents

comprehensive formulary

limited choice slide

formulary data

timely access

canberra slide

accessible slide

individual rights

market based competition