NATIONAL INVESTOR’S CALL, PROVENGE AND ITS HIGH-PRICED PROGENY, AUG 2010
I was recently honored to be part of a national investors call, speaking about high-priced therapies and their likely future under Medicare and other coverage systems. The example du jour, of course, is the $93,000 prostate cancer treatment Provenge. More important, though, is the question of when the country will start that Conversation over the cost of care. And for investors, that then raises the question of which companies win or lose.
For those whose purple butterfly of a sleeping aid has stopped helping, here is my soporific and rambling set of Q&A at the end of my interview.
1. What is there to stop a company like Dendreon from pricing their drugs at something higher than $93,000, essentially escalating the cost of these Part B therapies?
Well, just to point out for the benefit of folks who don’t live in the Medicare world every day, most cancer drugs fall under Medicare Part B, which is to say basically where doctor’s bills come from, as opposed to a hospital benefit under Part A or an outpatient drug under Part D. These all have different rules.
In the Part B environment, the way folks have been reading one case from the D.C. circuit (Hays vs. Sebelius), “pay it” means pay it. If it had been $9,300, $93,000 or, I hate to say, $93 million – because at some point someone’s going to call a Congressional hearing – the law currently says Medicare should pay based on average sales price. That’s how I read it, at least.
2. There was a lot of news that Medicare could be taking pretty dangerous actions against Provenge, but it sounds like you’re arguing to the contrary. How could the consensus be so wrong? I mean, essentially, is there some sort of rationale for the fear of what’s going on?
Right. Well, the people I saw writing on their own, or being quoted as saying that the sky was falling, are not stupid people. They’re very smart people and their analysis was not totally groundless here, but I think it’s possible that in the fine print of Medicare reimbursement. It wouldn’t be so hard to confuse the rules on a Part B drug product from the rules on a Part D. Each little pathway in the Pachinko board is going to fall down into its own little bucket.
It’s quite possible that’s the whole gap. Another theory is that the law on the reasonable and necessary provisions might not have been clear until these last few years. So folks who have looked at historical CMS or HCFA kind of treatment may not be aware of, or at least may not be putting enough emphasis on, some of the changes CMS is making to be sort of the responsible purchaser for value, as opposed to just a payer of claims.
3. How about the actual process by which the National Coverage Analysis is being handled. Could you briefly sketch out a timeline for expectations of when we’ll hear next and when CMS will come out with a final ruling on this issue?
Short answer, no. Actually, I can’t. But you probably need a follow-up from that, right? Okay. Here’s the reasoning behind my no. I’ve seen a timeline where the Agency has tried to commit itself to having something done by next spring, maybe next June. That includes a piece of it where they’ll hire a private contractor to do all the scientific heavy lifting and that that report will take four or five months.
Those reports typically don’t meet their deadlines. In fact, sometimes, depending on how the federal contracting process works, to bring those contractors in, in the first place, things can really be slowed down. So that’s my way of saying I don’t know and certainly whatever numbers you’d be hearing out of CMS itself, I’d be likely to discount by a good percentage.
4. Are Medicare regional contractors currently reimbursing for Provenge or is that being held off currently because of the NCA?
It’s not being held off. I know that Palmetto is paying. Their coverage manual already has a page on it, has the definition of chart review and lab tests and things that need to be submitted. They are not offering any pre-authorization. They’re not requiring any kind of pre-authorization. But they are saying that the first claim for the first of the three treatments needs to have all the lab results and stuff coming with it. The second and the third do not, because, obviously, the patient’s already been screened for that.
I don’t know about the other MACs, as they call them now, the FIs and carriers, but from what I can tell, everyone is paying as they would and as they should in the interim.
5. Is there any way that Provenge is a transfusion procedure, take the blood, put it back in, that it somehow could be reclassified within the Part B pay scheme buckets and so, therefore, take it out of that court case precedent?
Okay, anyone could try anything. In fact, that may be Halley’s Comet coming in through my window right now, so I will never say impossible. But I will say that if the product is approved by the FDA as a drug, I would argue that it’s a drug. And for CMS to stand up and take a different definition than its sister agency and say, you might say it’s a drug and we say it’s a pint of blood, that would be difficult.
So I can’t predict how that would come out if anyone tried it. But I can say that it would be difficult on the Agency to say something inconsistent with one of their sister agencies.
6. Here’s a follow-up to the discussion to the discussion about the regional MACs. Is it possible for the regional MACs to actually reject reimbursement for Provenge? Do they have the authority to determine that type of coverage?
They are given the discretion to pay appropriate claims and to reject inappropriate claims. So yes, it’s a good question that’s being posed here. Could one of the MACs say we find this an inappropriate claim, even though another regional carrier has written guidance that it’s going to be covered, period, even if the Agency has given no signal?
I suppose they could say it’s inappropriate. And, of course, there’s likely to be a lawsuit on that: I think that lawsuit would order coverage, and the only one who has lost is the administrative carrier who’s lost some big legal fees. They’re not out the claims dollars, either way. They’re just writing checks out of the trust fund’s checking account. So paying it doesn’t put them at any risk. Not paying it puts them at the risk of litigation, et cetera.
That may help on the question of whether they would or not, but, you’re right, in theory they could turn it down.
7. What do you think CMS can conclude from this process? Essentially, if they can’t do anything about the price of Provenge specifically, is it their goal to make sure that use is restricted to product label?
If it weren’t a cancer drug, I would predict that absolutely they would limit it to the label. Because it’s a cancer drug, there’s a special status in Medicare. The cancer community has successfully shown Congress that most cancer drugs are approved for very narrow indications and then used for all kinds of other tumors. If you tried to get FDA approval for every indication, you wouldn’t have enough patients to enroll in all those clinical trials.
So it’s always used off-label, and Congress tells CMS to pay. The mandate is that CMS must cover an off-label use of a cancer drug if it appears in certain formularies, or it’s appeared in certain medical journals. This serves as a sort of surrogate for on-label approval.
So in the future, products could be limited to their labels, for sure, if they’re not cancer and I think it’s more of an uncertain question on cancer drugs.
8. Given that there are so many drugs that seem to be coming under the pressure of costs, what’s being done, generally, to fight for a better reimbursement environment? Essentially, is there anything that’s currently happening in D.C., be it lobbying or worked out by researchers to take action in terms of these actions?
Okay. From my own vantage point, there are always some coalitions coming together for a particular disease, for a particular patient population and these are nice, broad groups involving the clinical community, the pharmaceutical folks, the academic medical centers. They’re all there, but it’s always for a very narrow range.
Then, of course, there are the trade groups that get together for everything that affects a drug company or a biotech or whatever, but in this area, I’m not seeing it. I’m not seeing that this is one of the signals that we’re reaching that uncomfortable price point and there’s a whole pipeline of products this expensive and way more coming in, where it wouldn’t be too soon to start pulling that kind of broad coalition together and working on it. So far, I’m not seeing it.
So, I’d say the time’s probably ripe to begin preparing for The Conversation the nation will be having one day soon. One lesson from the Provenge issue might be that it’s not about Provenge payments, but it really is about the wakeup call to get prepared for The Conversation.
9. The next question is related more to international markets. Given the setup of many other developed nations with their national healthcare systems that seem to be better set up to negotiate cost of drugs, are there any, I guess, risky markets or better markets for Provenge on an international stage?
I don’t want to discuss individual countries or individual drugs. But certainly countries where there’s a national health payer or where the health ministry itself is involved in making the list of what’s covered and not, expensive treatments like this will have a much harder time. They won’t have the kind of law that Washington has that it’s covered, it’s paid for, period.
We’ve certainly had some close calls where products weren’t going to be delivered to a country that wasn’t paying enough until, gee, all of a sudden there were clinical trials showing that half the dose was just as effective. And half the dose means half the money and half the money gets approved and all of a sudden, the country gets the drug.
I think we’re going to have a lot more staring contests outside the U.S. That would be my prediction.
Read More
Drugs like Provenge are largely at the mercy of Medicare coverage and reimbursement, especially since most prostate cancers occur in the Medicare population. These drugs are doctor-administered, typically in a hospital or, at least, an outpatient clinic kind of setting.
