In August 2012 Sanofi launched Zaltrap for the treatment of metastatic colorectal cancer at twice the cost of Avastin. When oncologists at Memorial Sloan Kettering said that they would not prescribe the drug because the cost differential was not worth the additional 1.4 months survival gain, Sanofi promptly cut the price by 50%. Sanofi feared tthat the importance of Memorial Sloan Kettering’s refusal to prescribe Zaltrap would have ripple effects across the Oncology community, dampening demand for the drug. As a result, the company backed away from its launch price.
What would happen if the Benchmark and Qualified Health Plans in the California State Exchange refused to cover a pharma company’s key product? With Kaiser’s limited formulary serving as the Benchmark Plan, that possibility is real for many pharma companies as even Qualified Health Plans that compete with Kaiser’s Exchange offerings will be hard-pressed to provide broad access and still be profitable. With the largest uninsured adult population in the United States (~5.9 million) and approximately 5.5 million individual and small group policy holders, the impact of an Exchange non-coverage decision in California could be severe.
So what should a pharma company operating in California be doing right now concerning the possibility of a dramatic change in access? Will the opportunity to simply adjust pricing at the last second to avert a non-coverage decision always be there? The answer is probably not and by not considering 1) freezing prices for the first few years of Exchange implementation to allow Exchange premiums and insurer profitability to settle; 2) building partnerships with ACOs that support improvements in outcomes that increase shared savings between plans and providers and 3) identifying risk-based pricing approaches that link future pricing increases to improvements in plan population outcomes for specific disease areas, pharma may find itself looking from the outside in within California and across several states that are taking on large uninsured or under-insured populations that are State Exchange and Medicaid eligible .
By the time states start paying part of the bill for Medicaid in 2017 and Exchange premiums begin to become highly relevant in a consumer marketplace, most pharma drugs will need to have validated their value or risk future restrictions in access.
Time is running out for pharma to figure this out.