Health technology assessment will inform Medicare drug price negotiations

The Centers for Medicare and Medicaid Services is leveraging third-party health technology assessments to inform its offer price in February 2024 for the 10 drugs it has selected for price negotiations. To illustrate, the drug cost watchdog the Institute for Clinical and Economic Review published a report on the blockbuster blood thinners Xarelto and Eliquis and submitted it to CMS. Xarelto and Eliquis are two of the 10 drugs set to face the first round of Medicare price negotiations under the Inflation Reduction Act.

The ICER report modeled the comparative effectiveness of these products over generic warfarin in stroke prevention, myocardial infarction prevention and major bleeding episodes. This includes an assessment of the justifiable price premiums for the two branded products given several different cost-effectiveness thresholds. The table below shows ICER’s calculations of price premiums for Eliquis relative to the generic comparator warfarin and the branded comparator Pradaxa (dabigatran).

Drug manufacturers and payers impacted by the IRA will need to gather and evaluate this kind of information, as well as evidence from peer-reviewed articles and other sources. In turn, they must use the data to inform the price negotiation process for selected drugs but also competing products in the same therapeutic classes.

Launching soon, the Lyfegen Drug Pricing Simulator is a dynamic tool that gathers data inputs and runs real-time simulations that help users understand potential rebate, revenue, cash flow, and budget impacts for the different types and combinations of drug pricing models.

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Related blogs

Study: Out-of-pocket drug costs increasing 5.8% per year

A new study investigated how drug rebates affect out-of-pocket costs for health plan beneficiaries. Rebates lower costs for payers, but depending on the health plan, they can raise costs for the patient.

There is a lot of secrecy surrounding the final price paid for a drug at the pharmacy, as official data on drug prices does not factor in rebates or the end price for the patient. The rebates paid by manufacturers to pharmacy benefit managers is not publicly available. The study therefore sought out to understand the relationship between rebates and the prices paid by insurers and beneficiaries.

Results: The negotiated price, defined as the price paid by the beneficiary at the pharmacy and by the payer after rebates are taken into account, rose 4.3% from 2007 to 2020. However, the out-of-pocket price, or that paid by the patient at the pharmacy, rose 5.8% annually. Retail pharmacy prices increased 9.1% annually.

Implications: Low-income families may be especially impacted by plans with higher deductibles and lower premiums, as they are not prepared for surprise costs associated with cost-sharing. As the authors stated: “consumers with a low deductible or capped copays appear to be shielded from steep pharmacy price increases.” The main contributor to increases in out-of-pocket expenses were increasing deductibles and co-insurance payments.

The authors emphasize that drug price transparency is important for health policy recommendations and more work needs to be done to understand drug price inflation.

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Ongoing debate around GLP-1 drug coverage

Payers are seeing increased costs due to the demand of GLP-1 drugs. It’s estimated that 57.4 million adults under the age of 65 could be eligible for this class of drugs, based on currently approved FDA indications. There are 36.2 million people with an obesity diagnosis alone in the US.

If 10% of eligible adults take GLP-1 medications for weight loss, a $15 increase could be seen in the per-member-per month costs. This number rises to $50 if one-third of eligible adults start taking these drugs. Zepbound, manufactured by Eli Lilly, has a list price of $1059 per month, whereas Novo Nordisk’s Wegovy costs $1349 for a one month supply. However, last month, Eli Lilly announced a major price cut for their weight loss drug. Now, a 4-week supply of their drug at 2.5 mg will cost $399, whereas 5 mg vials will cost $549.

The measure is aimed at improving patient access, while reducing the risk of counterfeit medications. This price reduction was made without changes to insurance policies, and the drugs are available through LillyDirect, the company’s online pharmacy.

Not all insurers want to cover weight loss drugs like Zepbound, Wegovy, Mounjaro, and Ozempic, and innovative strategies are being explored to manage costs while keeping them available. One strategy is a utilization cap, which sets stricter standards for who is eligible. Another strategy is mentioned in Evernorth’s EncircleRX plan, which provides a 15% cost cap or a 3:1 savings guarantee when the medication is covered for weight loss.

The value of these drugs is still being investigated. If these medications can provide additional health benefits, there could be additional savings for payers down the road. Of note, studies have found reductions in cardiovascular death and sleep apnea when the drugs were used for weight loss.

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