InterMune’s orphan drug for idiopathic pulmonary fibrosis (IPF), Esbriet, on July 23 became the second product to be priced within Germany’s new reimbursement system. The result: an almost 11% discount on the drug’s initial ‘free’ price in Germany (in place since September 2011), on top of the 16% mandatory rebate that for now affects all drugs in Germany.
Superficially, that looks like a clear win for payers. But it’s not entirely bad news for pharma either — particularly those developing orphan drugs. Indeed, Intermune management on a same-day conference call declared the net $33,000 per patient, per year price tag for the drug — published clearly for all to see — as “fabulous”.
How so? After all, Esbriet’s price in Germany — which used to top the drug price rankings — is now lower than that in at least half of the other six European countries for which prices have been set (in Iceland, Esbriet sells for $43,700 per patient, per year). Yet in fact, Esbriet, as the pioneer orphan within Germany’s hastily-implemented new system, has emerged relatively unscathed after a very rocky ride. In late 2011, it received the lowest possible ‘added benefit’ score from HTA body IQWiG, which advises the German reimbursement authority, G-BA. These scores, granted to new treatments according to their added-benefit over existing drugs, are supposed to underpin direct price negotiations between the manufacturer and the health insurers’ association, the GKV.
Fortunately for InterMune, G-BA vetoed IQWiG (for legal reasons associated with orphan drugs) and up-graded Esbriet’s added-benefit score from 5 (“none”) to 4 (“unquantifiable”), since such small patient populations limit evidence collection. But in the end, the score didn’t matter much in negotiations anyway, according to InterMune’s SVP and German country manager Markus Leyck Dieken. Apparently a score of 4 doesn’t mean inferior to 3, as one might imagine; rather it means the drug’s added-benefit could sit anywhere between 1 and 3, pending further data. Given this evidence-gap, and the fact that several analysts considered Esbriet’s initial launch price in Germany ($51,000 list) to be higher-than-expected, an 11% discount begins to look..well, reasonable.
Indeed, it even looks fair considering that AstraZeneca’s clot-buster Brilique, the pricing pioneer in Germany’s new system (AMNOG), in June 2012 took a 4% net price hit with an added benefit score of 2 (“significant”). (The actual price includes the 16% mandatory manufacturers’ rebate on top, which in theory may disappear but looks unlikely to in practice).
Cancer Sponsors Beware: Orphan Isn’t Enough, You Have to be a Soloist
So one might go as far as to suggest that so far, the German P&R system’s bark may be worse than its bite — at least for drugs that can show additional benefit and/or that fill an unmet need. (Several others, like Novartis’ Rasilamlo or Boehringer/Lilly’s Trajenta have been shredded up.)
But manufacturers claiming orphan drug status — including many of those with cancer treatments — shouldn’t get complacent. Leyck Dieken claims it was Esbriet’s status as a soloist (the first and only approved drug for IPF in Germany) that was “very, very important” in pricing negotiations. Many cancer drugs classify as orphans in Europe in terms of estimated target population size, but aren’t the only treatment available for a particular disease (and often have far more potential for expanded indications and off-label use than Esbriet).
Still, the front-runner oncology candidates including Yervoy, Jevtana and Zytiga have all scored 2 at IQWiG — on a par with Brilique. And Leyck Dieken suggests German authorities wanted Esbriet’s pricing — agreed well ahead of the September deadline — to send a positive signal to others investing in treatments for rare diseases, and to show “how well the system is working.” Some of the early cancer drugs to emerge from the process may, for similar reasons, escape relatively unscathed too — though as more treatments crowd into individual cancer spaces, payers will push on price. (Esbriet’s final price-tag is slightly higher that of oral, specialist cancer drugs such as Iressa, Tarceva or Tyverb (Tykerb in the US), none of which have been through AMNOG.)
Prices May Go Up As Well As Down
And there will be plenty of opportunity to re-price: Esbriet’s will hold for two years, until September 2014, or until the drug’s total cost to the healthcare system reaches E50 million in any 12 month period. At that point, the added-benefit scoring, and the price negotiations, will begin again.
And while hitting the E50 million mark may send red flags to the payer in volume terms, the new evidence (both on safety and efficacy) that InterMune’s likely to have accumulated by then gives the drug a good chance of achieving a higher added-benefit score, and thus a higher price. Indeed, suggests Leyck Dieken, if the system wants to encourage data-gathering, it’s hardly going to be seen to push prices down as more evidence emerges.
Rather than seeing Esbriet’s German price as the trigger for a downward spiral in international reference pricing, then, InterMune’s CEO Dan Welch described it far more bullishly as “a watermark”– a heavily-negotiated price, agreed within what’s now one of the toughest markets in Europe — that will “have a positive effect on our negotiations with other major [European] countries.”
That may be wishful thinking: discussions with France, Italy and Spain are due to conclude in the fourth quarter of 2012, and none of these countries have money to spare (unlike Germany’s health funds, which, unusually, are boasting significant surpluses). It may suit them to continue to view Germany’s prices as setting the high water mark.
With an estimated 3000 new cases of mild-to-moderate IPF patients in Germany each year, Europe’s largest market is significant for InterMune — certainly worth the 11% discount. And while the US biotech may have given up some of its premium, it gained something perhaps more important: exemption of the drug from prescription budgets for all office-based doctor and outpatient clinics reimbursed by sick-funds. That takes the financial pressure off individual doctors’ prescribing decisions.
It’s still early days for Germany’s AMNOG. But Esbriet’s story brings some hope for pharma: a) prices aren’t being slashed as fiercely as they might b) there are other ways, besides price alone, to encourage uptake.