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For Expensive New Drugs, Biopharma Should Make Money-Back Guarantees Mandatory

In a recent paper on “Value-Based Pricing for Drugs”, authors Anna Kaltenboeck and Peter B. Bach of the Memorial Sloan Kettering Cancer Center discuss the high cost of drugs, particularly the newly introduced gene therapies and biologicals, and the emerging new policy ideas designed to cope with the impact of these drugs on the healthcare system. The authors focus on three general themes: aligning drug price with drug benefits; altering the mechanism of drug payment; and aligning demand with value. All of these approaches merit discussion as we all grapple with the issue for paying for new drugs that can cure deadly diseases.

The authors state “value-based pricing is becoming an important policy idea in the United States”. They go on to say that “value-based pricing is being promoted as a response to high drug prices. But as the term gains traction, distinctions in both method and likelihood of improving aligning prices with value should be carefully considered.” It’s hard to argue with that. However, there is one step that the biopharma industry can immediately take which will help its credibility as well as help the healthcare system: offer money-back guarantees when drugs don’t work as promised.

This would have been unheard of five years ago. It’s one thing for a drug to impact biomarkers, such as lowering blood pressure, reducing LDL-C levels or decreasing plasma glucose. But the ultimate endpoint for these types of drugs is preventing death due to heart attacks and strokes. Although these classes of drugs might stave off death for a finite period of time, people with cardiovascular disease will in all likelihood still die of heart attack or strokes. The same points can be made with drugs to treat cancer. The drugs might buy time, but not cure the disease. Are money-back guarantees even possible for such diseases?

 Yet, pressure put on drug makers by payers has begun to change this, as recently shown with PCSK9 inhibitors, drugs that lower LDL-C to unprecedented levels. Because these drugs were launched with a very high list price of about $14,000/year of treatment, payers balked at allowing heart disease patients access to these medicines. Amgen, which markets Repatha, countered this by offering money-back guarantees. For the first time, Amgen stated that if a patient has a heart attack while on Repatha, the payer is eligible for a full rebate from Amgen for the drug’s cost. There are, of course, some stipulations. One requirement is that a patient must be on Repatha for at least six months before being eligible for a full reimbursement. Also, there is a time limit set in each contract that Amgen signs with a payer as to how long Repatha is expected to protect the heart patient. This type of guarantee was a first for LDL-C lowering drugs.

Novartis has taken a similar step with its new gene therapy, Kymriah, a cure for childhood acute lymphoblastic leukemia (ALL). This CAR-T based therapy is priced at $475,000/patient. Novartis took the novel approach that payment for Kymriah would not be made unless the patient responded to Kymriah one month after treatment. If Kymriah doesn’t work, there is no charge for the drug. Isn’t that how things should be?

Right now, actions like these by Amgen and Novartis are exceptions. That should be changed. The two major trade organizations for the industry, BIO (Biotechnology Innovation Organization) and PhRMA (Pharmaceutical Research and Manufactures of America), should pass resolutions that money-back guarantees become a formal practice with its member companies. Such a move would help bolster the reputation of the biopharmaceutical industry. It would also improve drug access to patients. New drugs and gene therapies designed to treat cancer, rare diseases, etc. are justifiably commanding high prices. However, if they don’t work, payments shouldn’t be required. Novartis and Amgen have set the bar. Others should follow.