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Building Value for Cell and Gene Therapies and Establishing Market Access Pathways

This blog is a summary of Chapter 3 of the Advanced Therapies Investment Report 2017 produced by Phacilitate & Biotech and Money. The report aims to equip investors with the basic knowledge required to understand the risks of investing in cell and gene-based technologies through contextualised and empirical experience, valuable insight from a series of leading industry stakeholders, and market research and analysis. You can get the full detailed report here.

Cost, price and value are key principles to understand in pricing advanced therapies. Pricing should predominantly consider healthcare economics, and in some cases integrate elements of cost. Pricing and reimbursement (P&R) are major challenges for advanced therapies owing to their high cost/high reward profile which can present difficulties to buyers. Drug pricing must be negotiated on a national level and public healthcare authorities have differing decision-making frameworks. Many countries also offer autonomy on a regional level for the implementation of new drugs. In the UK P&R assessments are undertaken by NICE, considering cost-effectiveness as a function of quality-adjusted gain to life expectancy associated with therapy administration, preferably in the context of a relevant comparator. Long-term clinical data and indirect healthcare cost requirement analysis is key to fully capturing the value of ‘curative’ treatments, in turn essential to justify the high price required to recover development costs. Direct data is considered of the highest quality but often technology developers opt for extrapolated models based on shorter term data. Reimbursement appraisals take into consideration the risk of a therapeutic failing to function as intended, based on the robustness of clinical data. Even therapies proven to be cost- effective and technically eligible for reimbursement may not be bought as high prices could present a barrier to adoption and (due to their structure) reimbursement funds may not be able to afford or effectively reimburse clinicians for unusually expensive products. Novel reimbursement mechanisms have been widely considered but so far not adopted, with buyers previously expressing preference for traditional upfront payments. Gene therapies particularly exemplify this dynamic. The private insurance reimbursement framework in the US presents additional complications.

Typical Stages of Cell Therapy Development

The high level of diversity in advanced therapy design means that no two development pathways will experience the same overall process or set of specific challenges. There are however underlying principles and themes, broadly separated into four key value inflections: licensing or identification of the technology and initial fundraising round; submission of phase I regulatory application (e.g. IND); good manufacturing practice (GMP) validation and initial manufacture for clinical trials; and pre-approval inspection for a license to manufacture the product to supply the market.

Cost, Price and Value

The meanings of cost, price and value are subtle but important to differentiate. In the context of P&R: cost is the amount required to manufacture and deliver the therapy; price is the amount reimbursed for the product; and value is what the healthcare provider perceives as the worth of the therapy. These factors are to some extent positively correlated but price and cost should be largely divorced.

Cost can be divided into operational cost and development cost. Operational cost is dependent on manufacturing, supply chain, delivery, and ongoing expenses such as staff salaries, while development costs refer to expenses incurred throughout product development and include R&D, clinical testing, and regulatory filings. Operational costs continuously accrue while development costs may fluctuate depending on product development stage, access to infrastructure, and other needs.

Price should depend primarily on external forces such as market value, orphan status, clinical value (relative to competitors), and other health economics calculations. Cost may be a factor in pricing evaluation but should not be a primary driver.

Value is what the buyer perceives the product to be worth. In the case of medicinal products this is measured as cost-effectiveness, and largely depends on the clinical safety and efficacy data gathered through clinical trials. Clinical evidence can be thought of as the core driver of product value.

Pricing and Reimbursment Decisions in Advanced Therapies

Advanced therapies are substantially more expensive to develop and manufacture than small molecules and molecular biologics, and aim to deliver high clinical benefit in areas of significant unmet need. High pricing points are therefore likely, as evidenced to date. Several complex and largely unresolved issues exist around how to optimise reimbursement, and this presents risk to their commercial success. Crucial to mitigating these risks is firstly to explore and fully understand perceptions and incentives across the issue, and secondly to engage with the relevant stakeholders early in the product development cycle for their discussion and resolution. Engaging with reimbursement bodies through industry groups such as the BioIndustry Association (BIA) can be an approachable and informative first step.

How Pricing Decisions are Made

The gold standard for drug pricing is through comparability studies with existing products, often the standard of care, but P&R strategies vary nationally across the EU and globally. Jørgensen and Kefalas (2015) provides an excellent summary of ATMP reimbursement considerations across major European markets.60 In England, NICE assesses the merit of a novel medicine through an assessment of its cost-utility. The gain in quality-adjusted life year (QALY), which refers to both the duration and quality of life extension, is factored in with treatment cost to produce an incremental cost-effectiveness ratio (ICER) value. The ICER is calculated as:

Medicines with an ICER value below £20,000 are always recommended by NICE, while values between £20,000 and £30,000 are assessed on a case-by-case basis with increasing detail as the ICER value rises. Factors contributing to such an assessment are the degree of certainty around the data, the adequacy of quality of life benefit, the innovative nature of the technology, whether the technology is considered to be a ‘life-extending treatment at the end of life’, and aspects that relate to the non-health objectives of the NHS.

Challenges in pricing and Reimbursement

Central to HTAs is the availability of comparative clinical data. The chosen comparator treatment should reflect the standard of care for an indication but ideally would be similar in nature to the tested product. Comparator identification may require input from HTA bodies. Most advanced therapy approvals in the EU and US have occurred within the last 7 years and there are relatively few relevant products through which to compare new ATMPs, complicating HTA calculations. This effect is compounded where ATMPs pursue rare indications with few or no existing treatment options, further reducing the pool of potential comparators. A 2015 correspondence in Nature Biotechnology identified organ transplantation as the preferred comparator for gene therapies owing to the homology of their perceived patient benefits.63 This is in contrast from the conventional wisdom that ongoing enzyme replacement costs might be a relevant comparator.

Direct head-to-head comparisons are the gold standard, but in some cases indirect comparisons are increasingly used. This is usually in situations where patient recruitment and ethical considerations present challenges with the inclusion of comparator arms in clinical trials, such as in small patient populations or sub-populations, in terminal or high-risk patients, or in particular the combination of both. In cases where the clinical and economic outcomes associated with SOC are not well documented, generation of comparative evidence may also be necessary to demonstrate incremental benefit of new treatments. NICE refused to recommend reimbursement for Provenge in 2014, stating that “[it] was shown to prolong overall survival compared with a placebo treatment, but there were uncertainties in the evidence about how well [it] works compared with some other existing treatments.”

Advanced therapies may require novel surgical or non-surgical administration devices or protocols, and these may in some cases require a separate HTA assessment before the medicinal product itself can be appraised. This could delay reimbursement negotiations and present additional complications. The healthcare economics contribution of peripheral devices should be considered within appraisal of the therapeutic itself.

Unique Reimbursement Challenges of Conditionally Approved Medicines

An increasing number of advanced therapies are approved on conditional market authorisations. While conditional approval has clear incentives around shorter development timeline and earlier cash flow, the strategy may present issues in convincing healthcare providers to reimburse the treatment. Conditional market authorisations rely on post-market surveillance to generate efficacy data, but this can only occur if the product is successfully bought, and the uncontrolled nature of market patient population treatment may result in poorer observed efficacy rates than through a controlled-environment clinical trial. Foregoing the conditional authorisation mechanism for formal late-stage efficacy data may therefore be advantageous to commercial success.

Unique Challenges of Pricing and Reimbursement in the US

The US has a buyer ecosystem incomparable to that of most EU countries, with private health insurers providing reimbursement to individuals’ healthcare costs. The majority of US citizens are covered by healthcare plans provided by their employer, and it is common for the insurance provider of an employer and thus its employees to change approximately every 2-3 years. This dynamic complicates efforts to develop annuity reimbursement models because of the need to transfer annuity payment contracts between insurers, something not deemed possible without an associated provision of service.

Opportunities in Pricing and Reimbursement

HTA bodies, buyers, and insurance companies are increasingly addressing the raft of issues faced by P&R solutions in advanced therapies. In the face of both existing and future potential clinical value, multiple stakeholders are coming together to develop novel solutions. The Centre for Commercialization of Regenerative Medicine (CCRM) in Canada is one of many translational centres globally working to bring stakeholders together to address these issues.

Enabling Market Access

Clinician adoption is a major factor in the success of advanced therapies. This includes the subjective opinion of both prescribing physicians and the patients themselves. The efficacy of some therapies can depend on the skill and training of the attending physician, many of whom are likely to have little to no experience with the product, and clinicians who feel unable to use the product effectively or feel uncomfortable using the product may avoid its use. Bespoke training and/or dedicated clinicians may be required for the administration of some therapies. Autologous therapies are expected to be more akin to service provisions more analogous to IVF treatment than the prescription of a medication, and the experience of both patient and physician will be a major determinant of the treatment’s commercial success. Peer-recommendation through patient advocacy groups and internet-mediated discussion is likely to be a powerful driver for market penetration. Advanced therapy administration protocols must therefore be as simple, comfortable, undemanding and user- friendly as possible, designed with clinician needs and patient experience in mind.


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