Specialty Drugs: Getting What We Asked For

The cost of so-called specialty drugs has become a major health policy issue largely because of spending projections for new medicines for chronic hepatitis C infection and cancers.  Having worked on issues related to the development, approval, availability, use, and cost of medical treatments for more than 25 years, I’ve noted with concern and bemusement how cost and value issues are being discussed and presented in public debates and policy circles.

The Intense Debate About New Biopharmaceuticals Was Predictable

The introduction of significant new specialty medicines is reasonably predictable because information about biomedical research and the developmental status of new drugs and biologics is publically available from the FDA and company press releases. And while the specific list prices of new medicines can’t be precisely known before they are approved and launched, with a basic understanding of healthcare economics approximate price ranges are reasonably predictable. (Both of these are discussed below.)

So how does something that was predictable also become so contentiously inflammatory?  The intense debates and diatribes about the price and value of new biopharmaceuticals is not surprising because of the rancorous politics surrounding healthcare in the U.S., and the apparent lack of research and foresight by organizations involved with paying for medical care.  (Neither of these are discussed below.)

The overall situation seems to boil down to that, as a society, we’ve gotten what we’ve asked for in terms of new treatments based upon billions of public and private dollars invested in biomedical R&D, but we are now very upset with the result. An analogy might be someone who wins a new car on a game show, but is then very surprised and upset because they have to pay income taxes on the value of the car, pay to register the car, pay for insurance, pay for gas, pay for maintenance, etc.

To examine this situation more deeply, let’s step back and look a bit closer at what the new (so-called) specialty medicines are, how we’ve been asking for them, and why they are not generally the fiscal crisis many have been Chicken-Littleing about.

What are Specialty Medicines?

Specialty medicines are not a specifically defined category of medicine or medical therapy.  The FDA approves and regulates medicines for human uses in the general categories of pharmaceutical drugs (which are mostly small molecules), biologics (which are mostly proteins or other very large compounds produced in living cells), insulins, vaccines, and blood and tissue products. Across those categories the FDA recognizes orphan medicines as therapies for conditions that affect less than 200,000 people in the U.S. The FDA also has pathways for more rapidly approving new medicines based upon clinical need, as well as for expanding access to experimental compounds prior to FDA approval. There is no category for “specialty drugs.”  (And as an aside, there is also no category for “biotech drugs”. Biotechnology is a technology, process or method for conducting research or creating new molecules.)

Similarly, the Centers for Medicare and Medicaid Services (CMS) has extensive provisions for how medicines are covered and paid for under various parts of Medicare (Parts B, D, and C), and Medicaid, but none of those include specific requirements related to “specialty drugs” based upon their molecular structure, method of production, medical use or need, patient population, or any other clinical factor. However, many health insurance plans (including Medicaid programs and Medicare Part D plans), have tiers for expensive therapies labelled “Specialty Drugs.”  This bottom line perspective was aptly described in an article[i] in Health Affairs’ October 2014 themed issue on “Specialty Pharmaceutical Spending & Policy”:

“There is no uniform definition of specialty medications. However, there is a consensus that all of them are high cost (Medicare Part D uses a $600 per month threshold for the “specialty” designation), are relatively difficult to administer, require special handling, or require ongoing clinical assessment—or have some combination of these four characteristics. All of the characteristics are routinely used to define specialty medications. However, one recent survey indicated that cost is the dominant factor, with 85 percent of respondents at health plans rating cost as very or extremely important in their decision to assign the specialty designation to a medication.6

The medications that have received that designation are a heterogeneous group. They include small molecules that are produced on an industrial basis, such as dimethyl fumarate (Tecfidera), which is used in the treatment of multiple sclerosis; manufactured human proteins, such as growth hormone; and exquisitely designed monoclonal antibodies (such as trastuzumab) that target cancer cells or help control an inappropriately stimulated immune system (for example, infliximab).”

So the bottom line is the bottom line: Specialty drugs are expensive drugs for which health insurance plans are requiring patients to pay higher co-pay/co-insurance amounts. And those higher financial requirements may be in addition to health plans’ other utilization management requirements such as quantity limits, prior authorization programs, and step therapy (a.k.a. “fail first”) protocols.

Why Specialty Medicines are The Same as Older New Medicines, Only Different (and Potentially Better)

Specialty drugs are expensive medicines – more expensive than medicines approved 10, 20, or 30 years ago, e.g., Prozac®, Epogen®, Invirase®, Lipitor®, Gleevec®, Avastin®. But they are also more likely to be effective, and/or treat conditions that did not have very good therapies. These newer medicines are generally the result of the evolution of biomedical science that is producing more molecularly targeted therapies. This advancement has been supported by public policy to promote more basic and applied research at the National Institutes of Health, academic research organizations, and biopharma companies, which in the U.S. totaled about $120-130 billion in 2012. (Why was has there been longstanding broad political and public support for increasing the NIH’s budget if not to push forward to create new treatments?)

Below is a graphic from the late 1990s that illustrates how biomedical advances have led to newer treatments.

Process of Discovery & Development - (c) HealthPolCom Blog

We are now in that period beyond 2005 represented in the upper panel by the large red “?” and the cornucopia of capsules in the bottom panel. That is, we have gotten in the 2000s what we had been asking for and paying for in the 1990s and earlier: Better treatment options.

And to expand upon this picture, the graphic below illustrates the major types of organizations involved with biomedical research, and how they interact and influence each other through the exchange of information.

Major Biomedical Resarch Stakeholders - (c) HealthPolCom Blog

How New Medicines Fit Into Clinical Care

With the newer targeted, molecularly based medicines, there is – by design – a greater match between the pharmacology and the patient’s physiology leading to better outcomes. This means there is a greater likelihood that the treatment will produce a good clinical outcome.  More precise matching of pharmacology to physiology also often means that the number of people who should be using the particular medicine is smaller than would have been the case for untargeted medicines developed when there was less understanding of physiology and pharmacology.

Below is a simple diagram (starting in the lower left corner) depicting how clinical decisions are made, and how more effective treatments can improve clinical outcomes.

Role of Therapeutics in Healthcare - (c) HealthPolCom Blog

Overall Value of Innovative Therapies

While any individual medicine may be innovative and provide value, as the “Process of Discovery & Development” figure above illustrates, these advances often involve treating a disease through a new mechanism of action, i.e., moving from one “therapeutic revolution” to the next.

Below is a simplified picture illustrating how the value of medical innovation can increase in several ways:

  • By developing a better medicine using an already targeted mechanism of action, e.g., a medicine with reduced or fewer side effects;
  • By developing a new medicine that targets a new mechanism of action, a.k.a. a new class of medicine to treat a disease; and
  • Research that discovers how an existing medicine can be used to treat another disease, e.g., methotrexate for autoimmune diseases.

The Value of Innovation - (c) HealthPolCom Blog

Discussed below is how a new medicine’s higher success rate for treating an illness often translates into a greater value and a higher price. Also discussed is why we shouldn’t be surprised that these medicines are expensive, and how our imperfectly regulated market-based healthcare system is responding.

Why Price and Cost of Specialty Medicines are of Concern, but Not Catastrophic

How are prices of medicines determined?  In much of the ongoing public debate, basic economic principles are often ignored: Prices in the United States are almost never determined by a product’s or service’s input costs. (The exception for this would be some commodities and highly regulated utilities like water and electricity – but I suspect not cable TV.) Rather, prices – particularly for research intensive products – are determined by fallible humans who model what markets will bear and how intersecting curves and equations parse out an answer for how to maximize short and long-term profits from a new product. This is sometimes referred to as the Net Present Value (NPV), which tries to capture the value of the product taking into account the expected changes in sales and price going forward along with the expected inflation rate and costs associated with production and sales etc. Those calculations include the expected effective life of the product in the market due to replacement by better versions (e.g., computers or cell phones), patent expiration, or, in the case of something unusual like new medicines that can cure chronic hepatitis C infections, the rapid decline in the number of people with the disease.[ii]

Those calculations for biopharmaceuticals are further complicated by the reality that there is no single price for a medicine in the U.S. where legally required discounts to government programs interacts with private sector rebates and reductions.  In addition, projected global prices – which may be linked to one another in various ways – must also be considered along with the volume of sales in various countries and regions.

So how is a “price” for “what the market will bear” determined? The calculations leading to a general range for this price (a.k.a. “list price”) includes:

  • How the condition is currently being treated or cured, and the price of those treatments (both pharmaceutical and non-pharmaceutical such as surgery), not only for an individual but for successfully treating one person in a population?[iii];
  • What other treatments and complications will be avoided, reduced, or encountreed with the new treatment?;
  • How many people are expected to use the new treatment?; and
  • The seriousness of the condition and how it impacts the lives of people, i.e., is it fatal or not? Does it seriously compromising their quality of life? etc.

All those factors (and others) are included in a description of “what is the value of the new treatment?”  That is, the greater the value (particularly compared to other treatment options) the greater the price for a course of treatment because competition between different treatment options does occur – it is just a particularly challenging assessment since it likely includes many personal issues and preferences related to both biology as well as life circumstances. In addition, because of Federal laws that limit price increases after launch, the initial prices for new medicines may be pushed to the higher end of the range described above.

The Good News, Bad News, Good News – and Other Good News Looking Forward

The good news for the health system is that as more targeted medicines with higher success rates are developed for smaller populations, the total cost is probably no more than if the medicine had been priced lower but used by more people – many of whom would have found it ineffective.  The corollary good news is that those new medicines are improving and saving lives. (If that wasn’t the ultimate reason for the spending billions and billions on biomedical research, then someone please tell me what it was.) The bad news is that because of the decades of investment in biomedical research, more and more of these new medicines are being developed and approved by the FDA – and the cumulative cost of those new medicines is increasing at a rapid rate compared to overall spending on healthcare and other medicines.[iv]

The other good news is that the increase in spending on healthcare overall has slowed dramatically in recent years, as has spending on medicines in general, which is not surprising since now more than 80% of medicines dispensed are generics. And the ongoing good news is that our imperfect healthcare system is working: As new medicines are approved they compete with their innovative predecessors for market share and on price. (An example of this for chronic hepatitis C started in late 2014 with the introduction of a new multi-pill regimen.)

Similarly, other good news (sort of) is that there is now a regulatory pathway being developed for approving biosimilar medicines that will compete with innovator biologics, which represent a large portion of the so-called specialty drugs.  The reason this is only sort of good news is that biosimilar medicines will likely cost 70-80% of the price of the original biologic medicine because biologics are expensive to produce since they are grown in living cells rather than chemically synthesized.

More good news looking forward is that biomedical science is still progressing and the future will likely see better and simpler medicines that will be higher value for patients and society.  Some of that value will be in better quality lives for people, and some of that value will be in reduced spending for other healthcare and related services. For example, a medicine that halted progression of Alzheimer’s disease – or any of the other neurodegenerative diseases such as Parkinson’s, ALS, or MS – (or prevented it from occurring, or cured it) would likely be expensive on a per person basis, but it would prevent the need for many other healthcare services, e.g., other medicines with limited effectiveness, services such as physical therapy, medical devices for physical assistance, and nursing and home care. (An historical example of this was how the polio vaccine dramatically reduced expected acute and long-term care costs.)

In addition, while biosimilar medicines are expected to be only 20-30% less expensive than the original biologic medicine, scientists are working on developing small molecule pill-type medicines that are targeted like biologics. (This is already happening for some conditions, such as certain cancers and rheumatoid arthritis, and one report indicated that over 50% of the specialty drugs in the pipeline are high-cost oral medications.[v])  While those targeted pill type medicines are expensive, because they are small molecule medicines, generic forms will eventually be available, which will be 80-90+% less expensive than the original medicine, i.e., significantly less than biosimilar medicines.  And of course, oral medicines have less delivery costs compared to injections or infusions – which sometimes require visits to a doctor’s office of clinic. So even if the patient can inject the medicine themselves, a pill also makes taking the medicine easier and eliminates the cost and hassle of disposing of used needles and other materials involved with the injection.  (Reducing the hassle – and pain – associated injections may also increase patients’ adherence to the medicine and thus increase its effectiveness.)

However, with the advancement of good news also comes some bad news. For example, with the new hepatitis C treatments, there are some people and programs that are initially in a no-win situation – and this is most clearly seen with people with chronic hepatitis C who are in jails and prisons. These individuals have a right to medical care, the rate of chronic hepatitis C infection in this population is very high (15-20%), and the risk of transmission from one person to another is higher than average (as is the risk of reinfection if someone is successfully cured). All those factors make strong clinical and public health arguments for rapid and universal treatment for all infected individuals in any non-short term corrections populations – as well as treatment for new inmates with chronic hepatitis C.  However, corrections organizations have limited and generally fixed budgets making the provision of this care for all the individuals in their facilities over a short time period a fiscal tsunami.

Corrections facilities that are privately run under contract with state and local governments face a particular challenge because, unlike government owned and operated corrections facilities, they are unable to negotiate much lower prices for the new hepatitis C treatments since those discounts wouldn trigger automatic price reductions for state Medicaid (and other ) programs that have legislatively proscribed best price requirements. This means that state and local governments that have contracted out the operations of their corrections’ medical facilities may actually be facing higher costs in the future – at least for medical care for the inmates.

Generating More Good News for the Future

The general relationship between how we pay for medicines today and what treatments and cures we end up with tomorrow is also often missing from debates and analyses of biopharmaceutical costs and treatments.  Below is a simple graphic illustrating some of those relationships.

Incentives for Innovation - (c) HealthPolCom. Blog

Appreciating these factors is important as we seek to translate basic research into new treatments, and is particularly salient because of the current situation with Ebola treatments – or the lack of them. Specifically, Ebola hasn’t been an illness in a geographic region where there has been extensive access to medical care or doctors, or a way for the people affected to pay for those treatments. (Bottom two items in the top portion of the graphic). Thus, until Ebola became a global and first-world health concern, there has been very low financial incentives for anyone (government or industry) to invest in discovering or developing new/better treatments for Ebola. (Third item in the bottom portion of the graphic).


  1. Specialty drugs should be called what they are: expensive medicines, treatments or cures.  Giving them a group name implies that they have some unique or differentiating characteristic – aside from price or cost – particularly with a word root indicating that these medicines are somehow “special.”
  2. Healthcare is complicated. Biomedical science is complicated. Healthcare economics is complicated – particularly when many health plans have five (or more) cost-sharing tiers for medicines.
  3. Biomedical research has produced some incredibly effective new treatments. (Thank you!) However, there are still many serious, chronic, and life-threatening illnesses with few (or zero) good treatment options.
  4. Prices and value in healthcare are as complicated concepts as biomedical science. And value assessments almost always involve personal factors. For example, would Steve Jobs have paid $1 billion for a cure for his pancreatic cancer? I think so.
  5. Society has invested billions in biomedical research and development (probably close to a Trillion dollars over the past 20 years), and received significant benefits. The ongoing challenge is how to maximize those and future benefits by making difficult financial, resource, clinical, and ethical decisions within our imperfect healthcare system run by fallible biological beings.



p.s. Sorry for the long post.

[i] “Specialty Medications: Traditional and Novel Tools Can Address Rising Spending on These Costly Drugs,” Lotvin et al., Health Affairs 33, No. 10 (2014) 1736-1744.

[ii] A similar situation happened in the early 1990s with the introduction of new flexible lenses for cataract surgery.  There was a tremendous upswing in the number of operations, which cost Medicare much more than expected, due to pent up demand. And after that surge, the number of people getting cataract surgery (and the costs) dropped to a much lower steady state – although one that continued to increase at a small growth rate because of the aging demographics in the U.S.

[iii] For example, if a new treatment successfully treats 50% of people with a serous condition, and the older treatment only successfully treats 10%, the clinical value would be 5-times as great, which would also translate into an economic value that is multiple times the older treatment. Other factors that would affect the value would be the route of administration, side effects, and other services and products required or avoided with the new treatment.

[iv] Studies have estimated that per year spending growth for non-specialty medicines is now less than 4% range, while annual spending for “specialty” medicines is growing in the 10-15% range.

[v] “The Growth of Specialty Pharmacy: Current trends and future opportunities, “ UnitedHealth Center for Health Reform & Modernization, Issue Brief, April 2014, citing: Atheer Kaddis and Stephen Cichy, “Payer Tactics to Manage High-Cost Specialty Drugs in the Pipeline,” AIS Webinar – Specialty Pharmaceuticals, September 2013.

Improving Cancer Care in Medicare

This week’s AMA News includes an article about how cancer care for Medicare beneficiaries has improved because of a provision in last year’s Medicare Improvements for Patients and Providers Act (MIPPA).  The provision of interest clarified that Medicare Part D plans need to pay for off label uses of medicines to treat cancer when there is supportive evidence in the peer-review literature.  This changes became effective January 1st, and for at least one patient, it has improved their care. (See the Medicare Rights Center’s press release about the coverage appeal they won for a client because of the new law.)

However, as I noted in an interview with the American Medical News ReachMD Radio-XM 160, (See MP3 audio file below), because the change only applies to cancer treatments, patients with other serious and life threatening illnesses may still find their treatment options limited.  That is, under current law, for non-cancer illnesses, Medicare Part D plans can still limit coverage to only the off-label uses listed in the standard compendia.

American Medical News ReachMD Interview May 5, 2009 - Off Label Coverage by Medicare Part D Plans
American Medical News ReachMD Interview May 5, 2009:
Off Label Coverage by Medicare Part D Plans

I had recommended that the MIPAA change go beyond cancer to include serious or life-threatening conditions – terminology that is somewhat imprecise, but widely recognized, including by the FDA. However, I suspect that because of cost concerns, this broader expansion of off-label coverage was not included in MIPPA.  I find this interesting for two reasons.  First, in these times of record government spending, even MIPPA’s limited coverage expansion for off-label cancer treatments raised some concerns about cost increases – which I wrote about in January.  And second, that restricting coverage of treatments in this way seems philosophically opposite to the intended benefits of Comparative Effectiveness Research – which is all about using the best research findings to improve the quality of care.  Of course, with the size of our health care system, I’m sure this won’t be the last time the left and right hands are not perfectly in sync.

Juggling Balls

New Challenges for Life Sciences Companies to Communicate Value

Life sciences companies have always faced challenges communicating the clinical and economic value of their products and services to different groups of stakeholders.  These challenges arise from the technical nature of research information, the different perspectives of various groups, (e.g. clinicians, payers and patients), and marketing regulations.  However, with costs continuing to rise, political, business and advocacy leaders are all agreeing that health care spending is growing out of control. Therefore, no matter who wins the White House in November, “cost containment” will be the embodiment of “change” for health care in 2009 and beyond – and the current economic downturn and expanding government deficits will only fan those flames.


Payers Will Demand More Proof of Value
Life science companies will face requests for new levels of evidence from payers and others who are looking to control health care spending. For example, programs like “pay for performance” and denial of payment for “never” events that physicians and hospitals are now facing, will be extended to life sciences companies.  These new schemes will require life sciences companies to present more sophisticated demonstrations of the value of their products – particularly new treatments and diagnostics. In 2009, companies will see more payers moving forward with more aggressive risk sharing and reimbursement proposals – including arrangements that have lower entry pricing with the potential for subsequent increases based upon demonstrated value.

Marketplace Changes
Marketplace changes will compound these challenges for life sciences companies:

  • New generic forms of successful previously branded medicines will be setting a higher value bar for new therapies
  • The aging of the baby boomer generation will make cost containment a growing force for many years
  • Improved electronic information systems will enable clinical and financial analyses to be done faster and closer to real time, which will permit payers to implement more aggressive cost containment and utilization management programs

Communicating and Demonstrating Value
To meet this new challenge, life sciences companies will need to change the way they demonstrate and communicate the value of products and services to key audiences, including payers, clinicians, patients, investors and other stakeholders:

  • Demonstrating value will require more quantitative methods, such as the often maligned “cost effectiveness analyses” (CEA)
  • Communicating the results of these assessments to key audiences will be an essential second step, because each of these groups has different perspectives and concerns
  • Consistent with this movement towards delivering more sophisticated information, the personal relationships of sales and marketing will need more capabilities – both internal and external – for analytical evaluations and targeted group communications
  • And lastly, life sciences companies will benefit by developing stronger and more positive relationships with stakeholder and customer groups – which will help companies develop and deliver their value messages in the process of creating shared visions and collaborations for quality improvement and cost containment

Pfizer Exiting Heart Disease Research – What about Heart Failure?

It was reported yesterday that Pfizer will stop doing research and development in heart disease, anemia and osteoporosis to concentrate in other areas such as cancer, diabetes, and immunology/inflammatory diseases.

This is interesting since Pfizer has (and had) a large number of products in heart disease, including Lipitor, and pharmaceutical companies have typically continued to do research in areas where they have had products because they have established sales people who are knowledgeable about the disease area and have relationships with clinicians in those areas.  The countervailing force is that many effective medicines to treat heart conditions (like high blood pressure and high cholesterol) are available in generic forms and thus the value bar (benefit/cost ratio) that new medicines must reach to be competitive is much higher than when they competing against other non-generic medicines.

However, one common and very expensive heart condition where better medical treatments are needed is heart failure – often called congestive heart failure (CHF).  According the the National Heart Lung and Blood Institute, 5 million Americans have heart failure, and 300,000 die from it each year.  The costs for these patients are very significant: Total costs for treating heart failure in the US are estimated to be $34.8 billion in 2008, and Medicare spent $4.7 billion for hospitalizations related to CHF in 2006.

The chart below from the Centers for Disease Control and Prevention shows the rate of hospitalization (per 1000 people) for heart failure in the US by age group over the years 1979-2004 – clearly a growing problem.

 Hospitalization Rate (per 1000 people) by Age Group for Heart Failure

CHF Hospitalization Rates

So what does this mean for better treatments for CHF? According to the pharmaceutical industry’s web site database, there are currently 35 therapies in clinical trials for heart failure or congestive heart failure – including 3 based upon stem cell therapies, 1 based upon cell transplantation, and 1 using gene therapy.  (This compares to the 105 therapies in development for cancer, and 81 for pain.)  So I guess there will continue to be new treatments developed for heart failure, just probably not by Pfizer.  But, recognizing that there are lots of medical problems and limited resources need to be prioritized, will this be OK for current and future patients with heart failure?

Companies allocate and prioritize research and development resources according to three fundamental factors:

  1. Unmet Medical Need
  2. Scientific Opportunities and Discoveries
  3. Market Potential

It is this last one that apparently Pfizer has decided has decreased, so they will be putting their resources into other areas where the combination of all three factors looks more appealing.  As long as all the research-based biopharma companies don’t make those decisions in the same direction (i.e. into and out of the same diseases), then research resources will likely be allocated in a reasonable way to meet societal needs. In that way the needs of people with heart failure will be balanced against those with cancer, chronic pain, diabetes, neurological diseases and immune dysfunctions – which is what society and patients really should want, since people often have multiple diseases or medical problems, so they should want new and better treatments for all of them.

Addendum: The memo from Pfizer’s R&D leadership about their strategic realignment has been posted by Forbes – click here.

Digesting Medical Progress

One of the challenges for improving the healthcare system is creating a vision for what is achievable in a timeframe of months or years.  The first step for creating such a realistic vision is to understand how progress has been made in the past.

A microcosm of such progress was described in a recent article in The Economist.  This article describes advances in our understanding of stomach ailments – one of my favorite areas of biomedical progress because in the last several decades dramatic changes have occurred in our basic knowledge about this area, and so many people can relate to stomach problems.

The most significant change occurred in 1982 when two Australian scientists disproved the dogma that because of its very acidic pH the stomach was sterile.  They showed that the H. pylori bacteria could live in the stomach and cause the stomach inflammation associated with an upset stomach.  Subsequent research showed that H. pylori could be the cause of ulcers and stomach cancer. Following those discoveries, medicines were developed to change the pH of the stomach to treat the stomach inflammation and eliminate the H. pylori.

H. Pylori

While lowering the acidity of the stomach with medicines would often improve symptoms, it also raised the question about what bacteria might be able to live in the stomach under less acidic conditions?  This question is more intriguing because it has been observed that when people taking medicines to lower their stomach’s acidity stopped taking these medicines, they have a resurgence in their symptoms.  This could be because their stomach had become accustomed to the less acidic conditions and then reacts to the renewed acidity; Or it could be because the bacteria that were living in the less acidic stomach are not happy with the greater acidity; Or perhaps the H. pylori that had been struggling in the less acidic stomach multiply very happily with the return of the acidic conditions.

H. pylori – Obesity and Asthma
The Economist article discusses some even more interesting ideas about the role of H. pylori in the stomach.  For example, they cite researchers who speculate that the elimination of H. pylori from the stomach may be linked to rising rates of obesity and cancer in the esophagus. These researchers at NYU School of Medicine also found that children who had not been infected with H. pylori were more likely to have asthma.  The article summarizes these observations with the speculation from NYU’s Dr. Blaser that perhaps H. pylori should be viewed not as a pathogen, but rather as a symbiotic organism “that is sometimes helpful and sometimes harmful.”

One of Dr. Blaser’s key observation is that H. pylori appears to not just be a passive resident of the stomach, but may actually regulate the stomach’s acid levels to keep the stomach’s pH in a range the bacteria prefer.  However, the substance that H. pylori secretes to get the stomach to produce less acid may be toxic to the stomach and result in ulcers and local cancers.  Thus, while eliminating the H. pylori would eliminate the toxic source of ulcers and cancers, it can also allow the stomach to produce too much acid – which can lead to cancer of the esophagus, as well as “acid reflux disease,” a.k.a. “heartburn.”

The H. pylori-obesity link is based upon the possibility that the bacteria modify the secretion of certain hormones effecting how people feel hungry, and the H. pylori-asthma link is based upon the effects the bacteria may have on children’s developing immune system.  (See The Economist article for more information about these areas.)

These findings lead to the conclusions that perhaps treating stomach ailments and preparing peoples’ stomachs for healthy lives should be based upon their genetic makeup, and seeding children with strains of H. pylori that don’t produce the toxins that can lead to ulcers and stomach cancer, could benefit them without doing harm in the long run.

Overall, this is a great example of how once more knowledge is obtained about a disease and the relevant human physiology, scalpel-like treatment and prevention strategies can be developed and implemented.  Of course, educating clinicians, patients, payers and others about these advancements – and why they are important – are also important challenges, because improving health care treatments and our healthcare system involves not just determining what should be done, but also how to actually accomplish those things.

Changing Life Sciences Communications Environment for 2009

Cost containment is becoming an increasingly powerful force in shaping the environment for life sciences companies – as well as other parts of the healthcare system.  In addition, more sophisticated tools for analyzing and demonstrating the clinical and economic value of medical treatments are making it more challenging for life sciences companies to communicate the value of their new products to all types of audiences, including clinicians, payers, patients and regulators.

These new tools and the changing environment are requiring life sciences companies to think about developing more sophisticated messages to reach these audiences. I recently recorded a short 6 minute discussion about these topics with Jeff Sandman, CEO of Hyde Park Communications – where I am also a Senior Counselor.  Click on the icon-link below to listen to our discussion.


And as always – if you have any comments on this topic – please feel free to share them.

Questions and Answers About Pay-For-Performance (P4P)

An article in the July/August Health Affairs about Massachusetts health plans implementing Pay-for-Performance (P4P) incentives for physicians raised more questions than it answered.

The study found that P4P programs from 5 private sector payers “wasn’t associated with greater improvement in quality” compared to the overall upward trend in the factors measured.  But the study didn’t address some overarching questions and basic realities about P4P, such as:

  • How the payers P4P incentives to the physician groups was actually translated into incentives for the individual physicians – or smaller groups of physicians inside the larger groups?
  • How the P4P incentives compared to the other financial incentives the physicians are facing?  For example, seeing more patients or doing more procedures could increase their income more than meeting the P4P standards. (The Health Affairs article states that P4P incentives for Massachusetts physician groups averaged 2.2% of their income.)
  • The quality measures used in the study were all performance based, rather than actual outcomes, e.g. cholesterol screening rates rather than patients’ actual cholesterol levels, HbA1C screening rates in diabetics rather than their actual HbA1C levels, or asthma medication use for children ages 5-17, rather than ER visits or hospitalizations for these same children.  What impact does that has on physicians’ behavior, and the value of changing their actions to meet these process standards?  Would physicians be more responsive to incentives tied to clinical outcomes?

Making Incentive Programs Successful:
While the study concluded that the P4P incentives program instituted in 2002 may not have produced dramatic changes in the HEDIS process measures, that does not mean  they were ineffective or that P4P is not a useful tool.

First, while collecting process measures data is easier, since clinical outcomes are what patients (and their physicians) should really care about, shouldn’t P4P incentives be based upon actual clinical outcomes? Process measures are easier to monitor by using billing data, but as the prevalence of quality electronic medical records systems grows, collecting and analyzing data about clinical outcomes will become much easier.  In addition, measuring a small set of any factors – process or outcome – presents the pitfall of driving physicians to focus on those diseases and measures to the exclusion of other important things.  For example, in the Health Affairs study, there are a number of preventive services in the process measures, but what about flu vaccinations, colonoscopies or smoking cessation?  This “managing what is being measured” behavior is why the number of factors used for P4P incentives should be as broad as possible.  (But this does not mean that they all have to be measured at every interval, or for every compensation period.)

Second, as any psychologist (or parent) will attest, the time between the actions and the reward (or penalty) is very important for changing behaviors. The Health Affairs article indicates that the bonuses are paid to the physicians groups annually.  Having the incentives paid annually, (or even quarterly), would be unlikely to provide adequate feedback to physicians to prompt them to change their behaviors.  An alternative blended methodology would be to provide physicians feedback on their actual performance against many of the possible measures on a weekly or bi-weekly basis, while making the P4P payments on a monthly or quarterly basis.

Third, many large companies structure their bonuses for their senior managers around a minimum of 20% of compensation.  If incentives for P4P programs only represent a small percentage of physicians’ income, then it would be unlikely to change their behaviors – particularly if they can make up for any lost income by increasing volume.  However, if physicians are being paid a fixed (capitated) amount per month to provide a certain set of services to a patient group – either primary or specialty care – then the volume part of the equation disappears, and P4P programs could be much more effective, even at a lower fraction of their potential income.

And lastly, and most simply, the insurers would not be spending time and money developing and implementing these programs if they didn’t think they provided some benefit – even if it is only financial – so they must be getting some benefits, or at least learning some things to make these programs beneficial in the future.

18 years ago I wrote a book chapter that focused on structuring incentives for physicians.  Since then it has been hard to move payers and clinicians toward using more focused financial incentive systems.  But the P4P concepts are important, and to be successful they need to be implemented in a way that works for payers, physicians, and patients.  Unless these and other stakeholder groups buy-in to the purpose and practice of such incentives systems, they are unlikely to have the desired effects.  And the result will be more of the same – rising costs, variable quality, and limited access for many patients.

Canada’s Proposal for Subsequent Entry Biologics

After writing about Follow-On Biologics in a recent posting, I saw a notice about Health Canada’s proposal for how they would approve biologic products that are similar to already approved biologics whose patents have expired. They call these products Subsequent Entry Biologics (SEBs), and the proposal is open for public comment from March 14, 2008 until April 16, 2008.

While the draft guidance is lengthy, it does strike an overall well-balanced tone:

  • “SEBs are not ‘generic biologics'”
  • Approval of an SEB does not mean it can automatically be substituted for the original biologic that it is “similar” to
  • Comparative studies will be required to generate data showing similarity to the original biologic in terms of quality, safety and efficacy

In many ways, the draft guidance is similar (no pun intended) to the process the US FDA used to approve some generic drugs prior to the 1984 Hatch-Waxman Drug Price Competition and Patent Term Restoration Act. (This was the law that created the abbreviated new drug application (ANDA) process which allowed generic drugs to only demonstrate bioequivalence, and obviated the requirement that they replicate the original drugs safety and efficacy trials.) By referencing published studies about the innovator drug as proof of safety and efficacy, these so called “Paper-NDAs” allowed generic companies to be approved much faster and more cheaply.

Health Canada’s “paper biologic licensing application” like proposal, would allow them to rely on published information about the original biologic, while also handling each SEB application individually to decide what additional studies need to be done to demonstrate quality, safety and efficacy of the SEB.

As I pointed out in my previous post, there are many levels of structural and biological complexity with biologic treatments, so Health Canada’s draft approach seems very appropriate and reasonable.

What do you think?

Safety, Costs and Quality of Medicines

I’ve been trying to figure out how to write something meaningful about the many reports over the last several months about the safety, costs and quality of medicines. I finally concluded that rather than a too lengthy blog post, a series of snapshots would create a good description of the situation – sort of like a slide show rather than a feature film:

Safety of Generic Drugs: A recent LA Times article discussed patients who had adverse reactions when switched from a brand name to a generic medicine. This article includes physicians’ experiences with several types of generic medicines, e.g. for epilepsy, depression, high blood pressure, irregular heart rhythms, and to prevent rejection of organ transplants. Aside from epilepsy, these are different types of medicines from “narrow-therapeutic-index” (or NTI) medicines which have a small dosage range which produces the desired clinical effects before causing known side-effects. Also, the current safety concerns are not related to what happened in the early 1990s, when some generic companies where caught submitting false safety data — they used the brand name medicine for the bioequivalency testing required by the FDA instead of actually testing their generic versions. (Yes, people went to jail.)

Safety of Medicines Imported into the US: Medicines imported from other countries have raised safety concerns because of lack of quality oversight and the murkiness of the chain of custody. These concerns have recently been highlighted by the contamination problems of herparin from a factory in China, and reminds me of how the head of the Chinese State Food and Drug Administration was convicted last summer of taking bribes in exchange for approving generic drugs that hadn’t had the required testing. (They sentenced him to death, and actually hanged him shortly after he was convicted.)

Fake Medicines: Whether produced in the US or someplace else, there is a growing market in fake medicines. The economic incentives are huge, and unlike illegal recreational drugs, the risk of your customer to violently come after you for selling substandard products is very low. There have been cases of fake medicines made here in the US, and the World Health Organization estimates that up to 30% of medicines in some parts of the world are fake.

Fake antibiotics are of particular concern: Fake antimalarial medicines sometimes contain tylenol or asprin which lowers the malarial fever without actually treating the infection – so people think they are getting better while they continue to spread the infection. And subpar medicines that only contain a fraction of the antibiotic promote the spread of resistant strains of bacteria. So fake or substandard antibiotics may actually be worse than no pills at all.

Even the New York Times editorial board recognized the global dangers of fake medicines in a December 12, 2006 editorial.

Follow-On Biologics: There has been a lot of interest in new versions of biologic treatments. These have many names: generic biologics, biogenerics, biosimilars, and follow-on biologics. One of the great confusions with this issue is that drugs and biologics are different categories of treatments. Because of their different chemical natures they are covered by different parts of US law, and until recently they were regulated by separate divisions of the Food and Drug Administration.

While drugs and biologics are both made up of atoms, drugs are much simpler, generally much more stable, and produced by chemical reactions starting from raw chemical ingredients or from a natural compound purified from a plant or animal source. Biologics on the other hand are much larger compounds (often proteins), and are generally made by living cell cultures (or in some cases whole animals), with the active drug is purified from that source.

The different structural complexities of drugs and biologics is because small molecular drugs are based upon a limited number of configurations of their atoms – usually 1, or 2, or sometimes 4 variations that are either mirror images of each other, or forms that exist in a predictable equilibrium. Biologics on the other hand have 2 or 3 more levels of structural complexity beyond that found in small molecules. (See here for a description of the primary, secondary, tertiary and quaternary structures of proteins.) Printing is a good an analogy to the structure of drugs and biologic, with a drug being like a sentence, where the series of letter and punctuation defines it. Conversely, a biologic is a like a book, where the construction of the paragraphs and chapters are its secondary and tertiary structures, and the footnotes, references, bibliography and appendices are the quaternary structures. Obviously it is easy to copy a sentence to look like the original, but replicating a book, with the same pagination and structure is much more complicated.

As a semi-avid baker, another analogy I like for the difference between drugs and biologics is a comparison between baking powder and eggs. Baking powder is a combination of chemicals designed to produce a chemical reaction to yield the right chemical/baking effect when used in the right amount. It is generally stable, and lasts for a long time when not exposed to air. Eggs on the other hand, can easily spoil (particularly if the shell is cracked), and have two major parts – the yolk and the white. The whites are mostly protein, and yield very different results depending upon how they are used. For example, adding raw egg whites to cake batter produces a very different result than if they are heated first and then added. (Think about the difference between an angle food cake and a quiche.) Egg yolks are mostly fat are are nicely separated from the whites. Mixed with the whites they cook up one way, and separately are used in pudding, custards, etc.

Adverse Drug Events and Medical Errors in Hospitals: There have been many studies about medical errors in hospitals and how many of those relate to adverse drugs events because the patient received the wrong medicine or the wrong amount of the medicine. These studies clearly point out the value of electronic medical records which avoid handwriting mistakes, and can automatically check for drug-drug interactions. Another important organizational feature of hospital care is the integrated medical team that includes experienced pharmacists and nurses. Such teams ensure rapid and accurate communications about treatment issues among the clinicians writing the prescription and those dispensing it or delivering/administering it to the patient.

Conclusions: Medicines are extremely potent, they can be very complex, and they are central to one of the mantras of clinically and cost effective care: “The right treatment, to the right patient, at the right time.” Electronic medical records and electronic prescribing systems certainly can help achieve that goal, while substituting non-identical medications, or enabling the distribution or use of substandard of fake medicines undermines movement towards that goal.

Evidence Based Medicine – NICE or Nasty?

The US Medicare Payment Advisory Commission (MedPAC) recently released a report on “Creating a Center for Evidence-Based Medicine” that was prepared by an outside analysis group. Before dissecting the MedPAC report, let me just lay out some of the more controversial aspects of evidence-based medicine (EBM):

  • How are the results of EBM research used for coverage or payment?
  • Are the EBM conclusions based upon reviews of prior studies or on research done specifically for the EBM analyses?
  • Are the EBM conclusions relevant only for a clinical research situation, or do they reflect real-world practices?
  • All medical practices evolve and “best medical practices” are reflected last in textbooks….. after they appear in journals….. after they have been presented at meetings….. after research has been done to understand these practices. How do EBM analyses account for this timeliness factor and include the latest advances?
  • How does the EBM analytical process question the validity of its own assumptions – particularly the perceived benefit by patients, or calculations about the “value” of the outcomes from a treatment?
  • And related to the previous question – Do the EBM analyses reflect only the benefits to the individual patient or spending by the health plan, or do they include benefits to other parts of society, i.e. families, employers, etc.

Overall, the question is, how does EBM research translate information about the outcomes produced by various medical treatments into better medical practices? When I was in medical school, this was the purpose of textbooks and professors. If national (or global) EBM organizations can accelerate this process and make it more accessible (possibly using new information technologies), then that’s probably fine. But if its functions are subordinate to the cost reduction agendas of healthcare payers, (and this leads to rationing of healthcare services and products based more upon cost than real value – which has been the case with virtually all existing EBM organizations), then a US Center for EBM will become another part of our healthcare system’s problems rather than a step towards solving them.

Below is some commentary on the MedPAC report and some of the existing EBM organizations it discusses:

The MedPAC report outlines several layers of functions for the proposed Center for EBM:

  1. Practice Identification and Review
  2. Dissemination (of information and conclusions)
  3. Training and Technical Assistance
  4. Practice Adoption (via education and working with stakeholders)
  5. Clinical Outcome Review

Clearly #4 is the key to making EBM research findings useful, and the report cites three critical issue for the voluntary adoption of practices found to be beneficial via EBM research:

  1. Credibility
  2. Stakeholder Involvement
  3. Viable Economic Incentives

Of these, #3 is the most contentious, and the report notes that, “Since economic incentives often represent a threat to opponents of creating a centralized organization of the type described here, it may be desirable to leave that implementation to policy makers rather than treating it as the role of the organization.”

As noted above, a major controversy about “Evidence-Based Medicine” (EBM) is how it is used to make coverage and reimbursement decisions. The report recommends that EBM research and these decisions be kept separate, but the experience with EBM organizations in other countries, and in US health programs like Medicaid and the VA, has been that this is often not followed in practice. On one end is the Department of Veterans Affairs Medical Advisory Panel (MAP) which – as part of the VA’a National Formulary development process – is tasked with performing evidence-based reviews of therapeutic drug classes “that may or may not lead to national standardization contract initiatives.” While this sounds like a rationale and analytical process, my experience with this process is that the MAP does analyses to justify the inclusion of the least expensive medicines on the VA’s formulary.

Because the VA is only about 5% of the US healthcare market, it doesn’t have a sweeping impact on medical care in the US. However, it often goes on the record saying that its methodologies should be adopted by Medicare and private insurers – something that would have much greater implications.

The MedPAC report also talks extensively about the National Institute for Health and Clinical Excellence (NICE). This is one of the most studied EBM-type organizations. While unlike the VA’s MAP, NICE is not technically part of the UK’s National Health Service (NHS), it is created and funded by the British government – so just as two brothers are not the same person, they receive their allowance from the same parents. While the MedPAC report generally praises NICE, the real world experience of patients and companies is somewhat different, and in the global discussion of healthcare policy and economics, it is often cited as a classic fourth hurdle for accessing treatments, i.e. it has become the NHS’s de facto rationing resource.

And one final note of concern. In a previous post, I discussed the very low attendance at a session on Comparative Effectiveness (a type of EBM research) at the annual meeting of the American Association for the Advancement of Science (AAAS). If at a meeting with thousands of researchers, almost none were interested in this topic, what does that portend for the ability of a national EBM organization to conduct independent and analytically driven research without undue political and financial influences?

Have you seen payers pushing clinical practice recommendations under the guise of EBM when they were clearly financially driven initiatives to limit access to certain treatments (a.k.a. rationing), and would produce lower quality care for patients or just chew up the clinician’s time trying to navigate the additional barrier to getting the best care for patients?

What are your thoughts?