Think of it as an initial skirmish in the standoff between the pharma industry, which wants top dollar for new medicines with dramatic cure rates, and the biggest US payer: the federal government. Rep. Lloyd Doggett (D-TX) and eight other Democratic Congress members sent a letter to Seema Verma, CMS administrator, requesting information on how Novartis’ newly approved Kymriah therapy, a treatment for acute lymphoblastic leukemia (ALL) would be reimbursed. Kymriah (tisagenleclucel) is the first FDA-approved drug employing CAR-T therapy (genetically manipulating patients’ own T cells), showing high promise in essentially curing the majority of patients who have failed other therapies.
When FDA approved the drug, Novartis announced an invoice price of $475,000 for the one-time therapy, and that only Medicare/Medicaid patients who shows significant improvement after one month would be billed—one version of a so-called outcomes-based contract. Analysts had expected the drug to come in between $400,000 and $700,000. Even so (as the Congress letter notes), CAR-T therapy has received some $200 million in public NIH dollars, and Dr. Carl June, the researcher at the University of Pennsylvania whose CAR-T technology has been licensed to Novartis, has said that the internal cost of the therapy (which involves extracting patient T cells, treating them, then re-infusing into the patient) is around $20,000.
The Congressional letter asks CMS some questions that are fairly straightforward for drug pricing and public healthcare expenditures—how many patients will need the drug? How is therapeutic success defined? How will patient data be tracked?—all of which are indicative of the novelty of outcomes-based contracting, whether for public or private health insurance. And it goes on to address some inside-the-Beltway issues: Is Kymriah’s pricing structure similar to what Novartis expects to do outside the US? What CMS political appointees were involved in the Novartis-CMS discussions, and are they former pharma-industry employees? How does the pricing take the prior NIH research funding, and the supposed production costs, into account?
The Novartis-CMS project isn’t the only outcomes-based contract in existence; other versions have been tried in the past, and numerous private health plans are setting up similar deals. For sure, it is a bold step by Novartis to go at the public healthcare marketplace with such a contract in place; contrast this with the introduction of Gilead’s Sovaldi, the powerful treatment for hep C, which entered the market at $84,000 for a 12-week regimen, but with literally millions of patients who could use the drug. Gilead earned some $12 billion in the first full year of Sovaldi’s launch, breaking many new-drug launch records (and some state or specialized healthcare budgets) in the process. In short order, Sovaldi competition appeared, and Gilead began some significant discounting of its invoice price.
By comparison, Kymriah enters the market as an orphan drug with a very limited base of treatable patients (estimated at 600 per year). However, it’s feasible that Kymriah will become a first-line therapy (it’s second or even third now); and that Kymriah will be usable for other types of oncologic disease. No public response from Administrator Verma has been released as yet.