PHILADELPHIA – Provenge (sipuleucel-T), the prostate cancer immunotherapy developed by Dendreon Inc., was a topic of conversation at several sessions at the BIO International Convention, and not in a good way. Instead, the therapy was cited as a cautionary tale about the disconnect between regulatory approval and commercial success – particularly as the U.S. market begins to emulate the European model.

In the EU, individual countries have put up hurdles to reimbursement that require therapies to demonstrate more than incremental improvement over standard of care before they win favor. The barriers include, but are not limited to, measurement of disease burden, comparative effectiveness, cross-border reference pricing and even selection of clinical endpoints.

"The U.S. market is living in a bit of a bubble," observed Michael Abrams, managing partner at the health care consulting firm Numerof & Associates. Although pharmas and biotechs that conduct most of their business in the U.S. may believe "the worst has passed" and their scientific prowess will prevent further market encroachment, "that's not really true," he cautioned.

A decade ago, the process of evaluating market access and reimbursement was considered "an afterthought," while companies plowed resources into gaining FDA approval of a new drug or device, Abrams said. With that approval in hand, "everyone figured they would automatically take their product into the market and customers would pay the price" that was set.

Provenge became the poster child of change, showing the strategy was no longer assured. And the battle has moved uphill in the U.S. In the aftermath of the Affordable Care Act (ACA), payers, purchasers and even providers are seeking to rein in health care costs. Pharmacy benefit managers also are jumping into the game, Abrams pointed out, noting that Express Scripts so far this year has dropped 66 branded drugs from its formulary and CVS/Caremark has dropped 96, making reimbursement of these drugs difficult or impossible for covered members to obtain.

Unlike the EU, the Centers for Medicare & Medicaid Services so far is precluded from negotiating directly with manufacturers over drug prices. As a result, U.S. consumers pay a premium of approximately 50 percent over European consumers for exactly the same product, Abrams said. But as payers and providers in the U.S. become "emboldened" by the pushback of some of their counterparts in Europe, that may be about to change.

In the EU, where pharmaceutical parallel trade – in which goods may be moved freely across member states across Europe – is a huge phenomenon, pricing is not always predictable. In fact, drug prices often are set at a much lower level than the originator drug, said Alexander Natz, director general of the European Confederation of Pharmaceutical Entrepreneurs, or EUCOPE.

Negotiation also factors into the equation, as national health technology assessment (HTA) bodies are responsible for making judgments on the relative efficacy of drugs that feed into reimbursement decisions at each member state level following the approval of a drug under the EMA's centralized procedure. The EMA has been grappling with better alignment with HTA bodies, but so far those efforts have not produced the clarity that drug developers want to see. (See BioWorld Today, May 12, 2014, and June 30, 2014.)

"The way forward, we think, is to have differential pricing – to have price negotiations at the individual level," Natz said.

PFS '. . . NOT RELEVANT FOR REIMBURSEMENT'

In particular, changes in Germany – which threw its weight around as the EU's largest member state by issuing new pricing rules in 2010 as part of a larger market reform – have caused "an epic shift" in pricing, said Stefan Seliger, head of pricing and reimbursement for Roche Pharmaceuticals Inc. Previously, a biopharma had 100 percent access from the day of launch at the price chosen by the company, provided that price fell within the standardized European pricing corridor, Seliger explained.

"Technically, we still have 100 percent access in Germany, and we have free pricing for the first year," he said. "But then reality kicks in. Depending on how you perform in your benefit assessment and how well you then perform in your first negotiation, you have an outcome that you may or may not like."

Among drug products that have come to market in Germany since 2011, more than 70 percent now are priced below the European average, according to Seliger. For 30 percent of branded drugs, prices in Germany now are the lowest in the region.

"When you combine that with all of the other countries that reference or re-reference the German price, you can quickly see the reference potential of your product erode within the European member states," he said.

In a nutshell, "if you have a product in the pipeline, you can't underestimate the effect this could have on your reimbursement," Seliger said.

One of the biggest issues with Germany's benefit assessment is the selection of comparative therapy, he added, calling progression-free survival (PFS), as an endpoint, "clinically meaningful but not relevant for reimbursement."

Intuitively, "it makes sense that if a [therapy] is better, the system is willing to pay a premium for it," he admitted. "But if you're not better, your price is capped at the comparator." Consequently, companies seeking to demonstrate a leap in innovation over marketed products must use endpoints that are not only accepted by EU regulators but also endorsed by the HTA bodies that set drug prices, Seliger said. He advised drug developers to ensure agreement on the comparator drug and clinical endpoints for the benefit assessment at the time of phase II studies.

"If you move into phase III with the wrong comparator, you're basically in a very tough position," he warned.

Biopharmas that depend on the U.S. market should consider the very real possibility that "some of the very draconian measures that have been taken in the EU will be adopted here," Abrams predicted, especially as European HTAs use increased scrutiny to determine which drugs to reimburse.

Laura Spiegel, group marketing manager for strategy and innovation at Roche Diabetes Care, advised biopharmas to use growing price sensitivity as an opportunity to demonstrate the value they can offer payers. She suggested "changing the metrics" in discussions with payers and taking those conversations farther upstream during drug and device development.

In diabetes, for instance, the top 1 percent of patients typically represent 10 percent or more of a payer's costs in the indication, and 10 percent of patients with diabetes will be hospitalized each year for complications of the disease. Drug and device makers should approach payers as allies, suggesting strategies where they can work more closely to help control the cost of caring for these expensive patients, Spiegel suggested.

"At a payer level, we're starting to see more of a solutions-oriented mindset rather than just a focus on cost," she said. "It's getting easier to have these conversations.