June 2013, Vol 2, No 4

← Back to Issue

Personalized Medicine and Value: The Intersection of Science and Financial Viability

John Hennessy, CMPE


Mr Hennessy is Vice President of Operations at Sarah Cannon.
Ms Morris is Director, Syndicated Research at Zitter Health Insights, a research firm focusing on the impact of payers on the use of life science products.
Dr Vogenberg is a founding principal of Bentelligence and a principal of its affiliate, the Institute for Integrated Healthcare.

The successes we have witnessed in personalized cancer therapies have caused healthcare system professionals to question whether they have traded the problem of incurable acute diseases for the responsibility of long-term maintenance therapy at unsustainable cost levels.

This would present the healthcare system with a dilemma instead of a solution, since healthcare operates under the fundamental “Iron Triangle” of value: the balance of cost, quality, and access. Therefore, for personalized medicine to be regarded as progress in cancer care, it must also demonstrate value rather than just quality. And gathering, categorizing, and understanding new and old categories of data makes the personalized medicine challenge no less than the greatest medical challenge ever to face the scientific, clinical, business, public, and policy healthcare community. To address the challenges presented to payers, Personalized Medicine in Oncology sat down with John Hennessy of Sarah Cannon, Pamela Morris of Zitter Health Insights, and Randy Vogenberg, PhD, RPh, of the Institute for Integrated Healthcare to talk about cost/value issues: drug/diagnostic pricing, the impact of the Affordable Care Act (ACA), and the fear of bankrupting the healthcare system.

PMO We would like to thank you all for meeting with us. To start our discussion, we’d like to bring up the notion of value. Value is more than costs – it is the balance of cost, quality, and access. While personalized medicine already “pays dividends” clinically, how long will it take for it to begin paying dividends economically and become attractive to payers by showing value?

Mr Hennessy Personalized medicine will translate from something costly to something providing value as we start understanding how it can help us make better choices earlier in the treatment protocols for patients.

Every patient would like to have the right care at the right time. It’s obvious that spending a couple of dollars today to get on the right path sooner equates to fewer dollars being wasted going down a wrong path that could be clinically detrimental to the patient.

It takes advanced thinking and maturity in the market to get beyond the dollar I’m spending today and understanding this is a dollar I’m going to spend over a long period of time.

PMO How would you articulate the value proposition justifying the costs of personalized medicine – in cancer and overall – to the clinical, business, and government sectors, as well as the patients?

Mr Hennessy The value proposition for personalized medicine to the people paying the bill, whether it’s the government, your employer, or your insurer, is that we’re going to get people to the right place at the right time and give them the tools to make better decisions that are reflective of their lifestyle.

The challenging aspect is making sure that we really are getting a patient to the right treatment when using personalized medicine techniques. If the only thing we’re doing is narrowing down the choices a little bit, it’s a much tougher sell. But if we can say, yes, for this particular subset of patients, I can get them to the right place very quickly and demonstrate good results, we’ll have much more success.

PMO Is the pricing methodology of manufacturers for personalized medicine therapies and diagnostics becoming more sophisticated or skillful and less arbitrary so as to balance necessary profit with product affordability?

Dr Vogenberg The questions around pricing for the cancer products and personalized medicine in general are becoming an increasing concern in this country through both the Medicare program and CMS as well as on the commercial insurance side of the business.
The observations about pricing are a little mixed, ranging from whether they are arbitrary or if there’s some precision that’s beginning to be seen. The jury’s still out, but there is certainly opportunity to improve the methodology around pricing for these products, whether it’s for the drug, the diagnostic, or the device.

Ms Morris We can speak to the payer perspective of how medications are being priced in terms of cost and efficacy. For example, if you take a therapy that’s indicated for a very broad population that might only be moderately effective for some of those folks and you weigh that against a very expensive therapy that’s indicated for a very narrow subpopulation of patients but it’s very effective in those folks, payers view those situations very differently and definitely take that into account when they are assessing per member per month cost.

Mr Hennessy One of the questions about the affordability of these products is considering whether affordability is based on the supplier’s need for profit or whether it’s based on a value proposition for both the patient and the payer, and I think that’s left to be seen.

I don’t know where that limit is or at what point it will be too expensive. But if you tell me that you had a $10,000 test that would get me to $100,000 treatment before wasting 6 months on a $50,000 treatment, that seems to make a lot of sense to me. But if it’s a $100,000 test to choose between a $5 drug and a $10 drug, I think that’s a real challenge. You’re really going to focus then on value of life, which is something we don’t do a good job of in this country.

So hopefully the economics will be clean enough that it’s choosing between costs of treatments and not going down a more ethically challenging road, which I think is going to be really challenging for us to do as a society.

PMO If a biological is developed that treats a cancer with a large patient population so well that it keeps the patients alive for the rest of their normal life expectancy, how do we avoid bankrupting the healthcare system?

Dr Vogenberg With many of the cancer treatments today lasting for longer periods of time, particularly as it’s becoming more of a chronic disease, it raises the question of affordability for these agents as the population continues to age and we have more cancer diagnoses.

As cancer care progresses and improves in precision, the question of the length of the therapy and the affordability of paying for the therapy will become increasingly important. And is it going to so-call bankrupt the system, whether it’s Medicare or the commercial insurance side, is a real issue that many are beginning to talk about and look at for solutions.

In cancer care, there’s a variety of different stakeholders on the coverage side that we have to consider that are interested in affordability, whether it’s CMS on the government side or an employer, a union, or a municipality on the commercial side. All of them are facing this dilemma around affordability and avoiding its contribution to the financial pressures or potential bankruptcy.

Mr Hennessy One of those things we have always looked for is that magic bullet, that 1 drug, that eradicated cancer for a patient. And that is worth something. It’s worth a lot. But what is that number, and how do we pay for it? I think it’s awfully hard to deal with that retrospectively. In fact, we’ve done a pretty lousy job of that when you look at the pricing of new products that come onto the market, each getting a little more expensive. There’s no reason to think that prices won’t escalate forever, particularly in an environment where we don’t have any external controls.

At some point, we’re going to have to cross this bridge and ask, what’s it worth, what are we willing to pay? Interestingly, with bone marrow transplants we’ve been doing this for quite some time. There have been plenty of insurance companies that have had a maximum benefit of $100,000, $200,000, $250,000, and somehow it’s been okay. We’ve managed to work within that environment. However, in the ACA environment, where we don’t have those limitations, there are no annual limits, no out-of-pocket maximums, we run the risk of not being able to afford something. It probably would be better if we had a sense of what that affordability index was so that to the extent people are searching for this magic bullet, they also understand it’s got to be affordable at the same time.

Ms Morris This is a very big question that healthcare providers, payers, and the community have been grappling with for the last several years: how do we provide the most or the best care to the majority of people? For payers, does that mean drawing a line in the sand in terms of quality-of-life years that are appropriate for a given price point? The jury is still out on that.
But payers are scrutinizing price more in the context of the price/value equation. In that respect, the payer will consider the difference between an oncology product that’s approved for a very broad patient population but might only be effective in a small portion of those patients versus a product that’s approved for a very narrow subpopulation and is very effective for those individuals but might be priced really high.

A payer is going to perceive these 2 situations very differently in context of cost and value of the product. In fact, payers are much less likely to heavily manage or scrutinize the cost of products if there are very few treatment options for that particular cancer. So unmet need plays a large factor as well.

PMO Is the ACA financially compatible with the growth of personalized medicine overall and specifically in oncology, or will its additional costs reduce the spread of personalized medicine overall and in oncology in particular?

Mr Hennessy I agree that the effect of the ACA in oncology is going to be really interesting. The most obvious opportunity right away is to take a portion of the population who probably didn’t have good access to oncology care and get those people into the system sooner, learn more about their disease sooner, and make changes where possible.

It’s going to introduce more people to personalized medicine, but maybe it will help us evolve personalized medicine much more rapidly than we would with a smaller population.

PMO Thank you so much for taking the time to answer our questions. Your insights are very much appreciated.

The Last Word - July 15, 2013

Trouble at the Beginning: Diagnostic Acumen and the Relentless Search for Red Flags

Four decades ago I was told that pain is the universal magnet drawing people to a doctor’s care. At the time, it was medical wisdom itself – for who would seek aid unless pain suggested a health issue? Today’s personalized medicine, technologically driven to include preventive care, has updated this [ Read More ]

Uncategorized - July 12, 2013

Anti–PD-L1 Drug Achieves Response in Variety of Tumors

The engineered PD-L1–targeted antibody shows impressive tumor shrinkage rates in several types of cancers that had progressed on several lines of previous therapy. In a phase 1 study, the novel agent demonstrated safety and durable responses in non–small cell lung cancer (NSCLC), melanoma, and kidney, colorectal, and gastric cancers. The [ Read More ]