A cutting-edge new cancer treatment has two different price tags - and it could be the future of how we pay for drugs
- A cutting-edge new cancer treatment from Novartis called Kymriah just got approved to treat more people with certain blood cancers last week, the drug's second approval.
- The new approval - this time to treat large B-cell lymphoma - came with a new price tag: $373,000 for the one-time treatment.
- It's a lower price point than the one initially set for the drug. When Kymriah was initially approved, it was as a treatment for pediatric acute lymphoblastic leukemia which carries a smaller patient population.
- It's a new practice known as "indication-based pricing," in which drugs are priced based on what they're treating. Drugs used to treat rare diseases with smaller pools of patients typically carry higher prices.
The FDA last week approved a cutting-edge cancer therapy to treat another form of blood cancer - and with that approval came a new price tag.
Proponents for the pricing model say that it's a good way to link a drug's price to its benefits, while others are concerned that it may raise costs across the board.Kymriah, made by pharma giant Novartis, is a highly personalized treatment called CAR T-cell therapy. It's a type of cancer immunotherapy, which harnesses the body's immune system to take on cancer cells. It removes a person's cells, reengineers them, then puts them back into their body to attack cancer cells.
Here's how indication-based pricing works: Say you have a drug that works really well to treat a certain condition (known as an indication), but one that only affects a small group of people. The drug may also work well at treating another condition that affects a larger number of patients.Instead of charging the same amount for both groups of patients, under indication-based pricing, the drugmaker can price the drug higher for that smaller patient population and lower for the larger patient population.For now, Novartis is the only drugmaker that is using this type of pricing technique.
"Over the past few years, indication-based pricing has been an approach discussed and requested by payers, institutions and policy makers as an opportunity to establish a more sustainable healthcare system," a Novartis spokeswoman told Business Insider. "Indication-based pricing considers a number of factors including the impact and duration of product benefit for each FDA-approved indication (based on clinical studies and ongoing clinical experience), as well as the commercial availability and outcomes data of other approved treatment options for the same indications."
Novartis applied for two national drug codes for Kymriah, so that when patients get the treatment, it can go through the insurance system in a way that's specific to the type of cancer they're being treated for.The Institute for Clinical and Economic Review, an organization that evaluates the value of prescription drugs, is on board with the practice, and has argued that drugmakers, insurers and governments remove barriers to this type of pricing when it comes to CAR-T cell therapies like Kymriah.
"With multi-indication drugs on the rise, it is important for payers and manufacturers to consider the options through which pricing can better reflect differential benefit by indication," ICER said in a 2016 report.
But there are concerns about what indication-based pricing means for patients, as well as spending overall."Simple economics makes it clear that relative to uniform pricing, indication-based pricing results in higher prices for patients who benefit the most, higher utilization by patients who benefit least, higher overall spending, and higher manufacturer profits," Northwestern University professors Craig Garthwaite and Amitabh Chandra argued in the New England Journal of Medicine's Catalyst publication in 2017.
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