BLOG: FDA approves, but payers decide
What does it mean when a drug or device is FDA approved but patients can’t get it? How many doctors have prescribed a newly released drug only to run into time-consuming obstacles from the patient’s pharmacy benefit manager, causing the doctor to back down and instead use an older, less ideal treatment? Shouldn’t this process be simplified?
In the U.S., the FDA’s job is to evaluate a drug for its safety and effectiveness. Companies with products must undergo rigorous testing for proof of concept (phase 1), dose ranging (phase 2), and safety and effectiveness (phase 3). This process takes an average of 10 years from discovery to commercial availability and costs on average $2.6 billion for a single new drug, according to the Pharmaceutical Research and Manufacturers of America.
The bigger hurdle, though, for a new drug is overcoming cost barriers. Unlike other countries, the U.S. does not regulate drug cost, so companies seek to not only recoup their development cost but understandably generate some profit for shareholders. Naturally, there is a real risk for overpricing drugs, and some cases of egregious profiteering have appropriately made headlines. Generally, new drugs are priced competitively to entice doctors to prescribe and insurers to give them preferred formulary status.
Insurers, though, truly wield the power to make or break a new drug’s or device’s success. The dreaded prior authorization process that varies widely between product and specific insurance plan creates endless work and frustration and often leads doctors to simply give up on a new product. In our specialty, this process has already caused very slow adoption of drugs like Xiidra (lifitegrast, Novartis) and newer formulations of cyclosporine (Cequa, Sun Pharma) and loteprednol (Lotemax SM, Bausch + Lomb; Inveltys, Kala).
Most of us physicians feel we need to choose affordable drugs whenever we can. But we also made a pledge to take the best care of our patients. Sometimes this means embracing newer, better technologies and holding fast to our convictions when we’re questioned on a prescription. But how much staff time can we realistically take for this process? One of my technicians told me recently he navigated through the prior authorization process for a prescription I had written. When I asked him how much time it took, he said, “It wasn’t bad. It was only about 30 minutes.” That was for one patient. Clearly, we physicians are caught in an ethical conflict between our duty to our patient and containing the workload of our staff. Meanwhile, our staff members are becoming numb to the outrageous amount of time this process takes.
It’s easy to blame drug companies for pricing their products too high, but in many cases they have no choice. According to drug reimbursement experts, the complicated formulas used by many payers and state-sponsored health systems (Medicaid) force the manufacturers to set their cash price high to give room for discounting. Supplying non-U.S. countries, which do regulate drug prices, with the same products also puts upward pressure on the price charged in the U.S. Finally, there is the oddity of passthrough reimbursement, which affects retinal drugs and some new products we use in the operating room, like Omidria (phenylephrine 1% and ketorolac 0.3% intraocular solution, Omeros), Dextenza (dexamethasone ophthalmic insert 0.4 mg, Ocular Therapeutix) and Dexycu (dexamethasone intraocular suspension 9%, EyePoint Pharmaceuticals). To qualify for separate reimbursement, these products must be priced at 25% of the average hospital outpatient department reimbursement rate for the entire cataract facility fee. This puts the pricing floor around $500. That means that a company with an innovative drug for use in the operating room must charge $500+ if it hopes to get passthrough reimbursement. The only other choice is to price it so low that a facility will use the product with no reimbursement as part of the bundled facility fee. For us, that would mean a price $20 or less, and even then we would be very choosy on which new drugs to use. Anything priced in between will simply not be prescribed.
Certainly, readers of this blog will fall on different areas of the political spectrum, but most of us would agree that sanity needs to be reintroduced to drug pricing in the United States. It’s not reasonable to price a new drug above $500 simply to get it reimbursed in the operating room. In the office, it’s not sustainable to force doctors and their staffs to spend 30 or more minutes per prescription to secure a prior authorization. Prior authorization simply needs to be streamlined and standardized, so with a few clicks, a doctor and his staff can explain the justification for a more expensive treatment. In the operating room, certainly the threshold for passthrough reimbursement should be lowered. There are trillions of dollars and millions of patients’ lives at stake.
Disclosure: Hovanesian reports he is a consultant or investor in a variety of drug and device companies, including some of the companies mentioned in this blog.