How To Define A Drug’s Value? Consider The Cost
15 CommentsBy Ed Silverman // June 15th, 2010 // 8:20 am
How does one define the value of a drug? Depends who you ask. Not surprisingly, the answers differ according to a survey of 144 pharma and biotech execs, 129 managed care execs and 1,048 US adults over than 18 years old that was conducted by Quintiles, the contract research organization.
As the chart indicates, 73 percent of patients value efficacy and 75 percent also value safety, while 59 percent cited quality of life and 58 percent listed cost. These attributes were much less valuable to the biopharma and managed care crowds. In fact, just 4 percent of biopharma execs listed cost as a way to define value (in other words, the price is always right?), and 19 percent of managed care execs agreed. Just 38 percent of biopharma execs cited safety and 44 percent noted efficacy. As for quality of life, only 15 percent of biopharma execs checked this box. [We should note the execs were asked to rank options in order of importance, while patients were asked to select all that applied].
Some other nuggets: only 38 percent of biopharma execs believe China will emerge as a major center of biopharma innovation, compared with 47 percent of managed care execs. Nearly one-third of biopharma execs think patients will be very or extremely influential in the success or failure of new drugs over the next five years, but only 11 percent of patients share that sentiment. And just 31 percent of biopharma execs believe they are effective at educating patients about a drug’s value.
Three-quarters of patients feel patent protection is important in promoting the development of new drug therapies. However, 30 percent also believe drugmakers should never be the only company that can make and sell a drug. And this is interesting - 45 percent of patients say they made lifestyle changes within the past five years to avoid taking prescription drugs (see the survey).
Given pipeline problems, 88 percent of biopharma execs believe it is important to partner with rivals to strengthen their pipelines, yet only 44 percent would be willing to share info about failed compounds (although here’s an exception). In contrast, 91 percent of managed care execs say biopharma should share info about failed compounds with competitors in order to bring drugs to market faster.
pharmavet
The results of the patient portion of the survey run counter to the conventional wisdom about cost value, efficacy and safety. The only way that I see that a reasonable person would interpret the data is that patients place efficacy and safety as a greater value driver than cost. Said another way, they are willing to pay a premium price if the drug delivers on its promise.
SteveM
This survey is almost meaningless because of the sloppy way the trade space is defined. Relative clinical benefit, safety and cost are all dependent on the nature of the condition being treated as well as available alternative therapies.
Moreover, for stakeholders paying little or none of the cost for pharmaceuticals, of course price is no object. It’s ridiculous to even ask.
Objective benefit-risk-cost analysis across the spectrum of drugs indicated for specific illnesses SHOULD be done. And those results should be published online as reference information for physicians. E.g., “Try OTC Omeprazole before writing a script for Nexium, duh…”
But unfortunately, no one is apparently interested in doing so because many expensive, branded me-too drugs would fall off the table.
Condor
I was particularly struck by one particular graphic (which I’ve taken the liberty to reformat for clarity and design sense) — click to enlarge, at the link. Nearly half of both the payors (managed care organizations) — and the biopharma companies, themselves — feel biopharma needs to do a better job of demonstrating its collective value, in the health care marketplace.
That’s truly remarkable. I’ll have more, soon — but here is how Quintiles asked the question:
“. . . .What should be the most important priority for biopharmaceutical companies as the industry continues to change?”
I’ll have more later, but one note, for/to SteveM: I think a lot of consumers DO pay the costs — fully loaded, too — for these therapies. In fact, close to 50 million of them do, as un-, or under-insured — so their views are meaningful.
Namaste
Jack
“Relative clinical benefit, safety and cost are all dependent on the nature of the condition being treated as well as available alternative therapies.”
Agreed.
Also a consumer’s opinion imagining have a disease and a patient who has a disease may prioritize differently.
Lastly, so we’re comparing one group that ranked order, and one group that checked all that apply? Doesn’t the difference in methodology behind the surveys preclude a meaningful meta-analysis comparison of the two surveys? Sounds like comparing these two surveys and a $1.25 will get you a Coke.
Mari
Quintiles replies: I agree that each person brings different experiences/perspectives to their views on the survey questions, which is one of the primary reasons we conducted this research. However, for the specific question above, in the aggregate, among patients/the public, efficacy and safety were chosen more often than cost as extremely important in defining value.
Additionally, we know that the “public” is not as invested as “patients.” We are also aware that a lot of consumers do pay the costs. Sixty-three percent of the people in this study had someone in their household regularly taking a prescription drug for a chronic health condition. It’s interesting to note that there was little difference between these consumers and others not taking prescription drugs in what they thought was important in defining value. Efficacy is more important to those households with someone taking a prescription, but cost is second-tier for both groups.
Finally, regarding rank order, it is a good point and we will take into consideration for future surveys. What we see as important is the natural ranking that patients made. In a “top tier,” about 75 percent chose efficacy and safety as extremely important in defining value, and then in a decided “second tier,” about 60 percent chose quality of life and cost.
Ed Silverman
Hi Folks,
I’d like to note that Quintiles responded here to the earlier remarks. The note from Mari is an official reply from the CRO, which I asked them to provide, given some of the comments and questions posted today about the survey.
Whether or not you agree with the explanations, I hope the Quintiles response somehow helps you digest the data. In any event, I appreciate that some of you chose to raise the points you did and that Quintiles made sure to answer directly.
Regards
ed
SteveM
Well I see Condor has crawled out from under his pedantic yet oily rock.
Of course patients will not be totally insensitive to drug prices. But say a drug that costs $100 a month has a $10 co-pay, while a drug that costs $300 a month has a $30 co-pay. Twenty versus $200 differences present two totally different utility curves for the classes of consumers that have a drug benefit plan versus the ones who don’t. Not breaking out that demographic makes the aggregate patient response profiles meaningless.
Now all the managed care guys see the $200 difference. The absolute co-pay difference is chump change to them. So those responses have more meaning.
Condor
Hey SteveM — my point was actually related to the uninsured. But whatever — as I often say “these comment boxes/message boards are like mirrors — should an ass peer into one, we should not expect that an apostle will peer back out. . . .”
[With sincere apologies to Georg Christoph Litchenberg -- for so trivializing his immortal bon mot (in the orginal, he referred to books).]
Namaste, to all of good will.
Condor
Oh, and thanks, Mari “O’Quintiles“!
Good on ya’ — very illuminating; thanks for clarifying.
Namaste
SteveM
Condor, I applaud your self-reflection…
pharmavet
In the interest of full disclosure, Quintiles’ commercial operations also include an equity stake in some of the compounds it develops, though it would probably prefer the term risk-sharing. Thus Quintiles and other CRO’s stand to gain financially from compounds after their approvals through various royalty agreements. As I see it, Quintiles could use the results of this survey in order to cherry pick those companies that might seem more likely to enter into partnerships. I never entered into these types of gain-share agreements because I saw it as a potential conflict of interest. CRO’s agressively pursue these deals because of their ability to significantly enhance the bottom line and produce a steady revenue stream to a business where revenues are inherently fluctuating.
Condor
I gather, SteveM, just as much as I am bemused — by your lack — of the same.
In any event, I’ll fall silent here, secure in the knowlege that I been thoroughly “out-assed,” by your last.
Condor
While what you write is all true, pharmavet, it is also true that Quintiles monitors clinical trials for new drugs, for a fee — as a sort of “third-eye” on the integrity of the process and data.
That is, there is the (i) PI (university-affiliated lead researcher), then (ii) the sponsor (or pharma company itself), and then (iii) Quintiles (the pharma’s hired-gun process and data integrity checker).
So it might also be that Quintiles is undertaking a more benign purpose — getting payors and developers to see more of each others’ points of view — in order to reduce the inherent tensions in bringing any new compound toward FDA approval: the search for real improvements over current standard of care (not just statistical “nudges“) — and all at price-levels that make sense.
That’s what I, for one, see here.
Namaste
Kim
Health policy research dating back to the RAND experiment of the 1970’s teaches us that there is a 20%-30% elasticity of demand associated with patient out-of-pocket spending for pharmaceuticals. Marketing executives seemed to have forgotten this during the 1990’s during the golden age of flat $10 co-pays but the three tier benefit designs of the last decade provided a quick refresher on the subject.
Now that novel biopharmaceuticals are increasingly specialty products carrying five-to-six figure annual treatment costs and benefit designs are moving toward co-insurance (vs. fixed co-payments) we’re going to find out the limits of what patients are willing (and able) to pay for medications. Given the minimal level of financial assets in the US (the most recent Employee Benefits Research Institute survey pegs the median amount as between $10,000-$25,0000) I suspect we’re going to find out that 10%-20% of most specialty products is a good deal more than most people would be able to pay even if they wanted to.
What all this shows is the “job one” for the biopharma industry is demonstrating to third party payers (especially employers and CMS) that expensive new biopharmaceuticals really do have a strong value proposition. Without third party payment, there isn’t going to be much of a market for these new agents.
SteveM
Re: Kim. Right. The biggest unknown is the (usually) dysfunctional pathway the federal government will take in addressing the problem. And what obvious unintended consequences pop-up that the government blindly ignores when it passes dense, obscure legislation to “fight for us.” I.e., Free Lunch governance.
If Pharma concentrates on developing and registering very expensive biologics because that’s where the money is, the initial government response will be a mandate to managed care companies to heavily subsidize the cost to consumers as biologics become more plentiful.
The managed care companies will then drop drug benefit coverage altogether if legally possible or jack up the price to employers that make drug coverage unaffordable. Obamacare may preclude that and force a different response. I don’t know.
But whatever, large unintended effects will appear and the process will play out badly. The government will then step in again and do something else stupid in response.
All the while, the fetid, illogical political gaming will continue, driven by lobbying in Washington. With a probable end game being a federal subsidy of biologics using dollars borrowed from the Chinese (Free money).
And so it goes…