Kymriah and the Outcomes-Based Contract: Is this a Trend?
Novartis made history this year when the Food and Drug Administration (FDA) gave its approval for Kymriah, the first ever chimeric antigen receptor T-cell (CAR-T) therapy to gain such approval. But it is not just the drug itself that is generating talk — there’s also been much discussion about their novel contract with the Center for Medicare and Medicaid (CMS) and whether it is a harbinger of the future of pharmaceutical deals.
A Brief Introduction to Kymriah
According to Novartis, Kymriah is an intravenous infusion to treat patients with acute lymphoblastomic leukemia (ALL). The FDA approval of this drug was based on a multinational, Phase II trial of 68 patients with ALL. Results showed that 83 percent of these patients had either complete remission or complete remission with incomplete blood cell recovery within three months of the treatment.
The FDA has labelled Kymriah a “genetically modified autologous T-cell immunotherapy”. The treatment is tailored to the individual patient: the patient’s own T-cells are removed, then genetically modified to contain a chimeric antigen receptor, which is programmed to kill leukemia cells. Once modified, these T-cells are then returned to the patient via an intravenous infusion. Only one treatment is required. This novel therapy could have a significant impact on ALL patients. Novartis reports that ALL is responsible for 25 percent of cancer diagnoses in children under 15, making it the most common form of childhood cancer in the United States. Novartis also notes that the prognosis for ALL is poor: less than 10 percent of those with this disease survive five years after their diagnosis. According to the FDA, around 3,100 patients under the age of 20 are diagnosed with this disease yearly. Of these, around 15 to 20 percent either have not responded to current treatments or have the cancer return after the treatment is over.
It is not just the medical novelty of this treatment that is causing comment, however. The nature of the contract and the money behind Kymriah is also causing a stir within the pharmaceutical industry and among other healthcare stakeholders.
The CMS Agreement
The price tag for this one-time drug is $475,000, according to Pharmaceutical Commerce. However, Novartis reports that it is working with CMS to deliver value-based care and improve the efficiency of regulatory requirements. Their contract with CMS includes a clause that allows for payment based on outcomes: The company will only receive payment for patients who have received this treatment and show significant improvement within a month after the infusion.
Moreover, Novartis is planning to continuing to work with CMS on outcomes-based pricing “to potentially expand the approach to other products and disease states.”
Outcomes-Based Contracts and the Future
The terms of the Novartis agreement with CMS inevitably raises the question: Is this a trend? According to the Fierce Pharma website, Bernstein analyst Tim Anderson believes that while Novartis has gone first to the government to set up this type of pay-for-performance contract, it will likely also come to similar terms with private insurance companies. That’s not surprising, since drug policy expert Peter Bach, writing on the Stat News website, notes that previous outcomes-based contracts have typically been between pharmaceutical companies and private insurance agencies.
Bach believes that the nature of the Kymriah contract is the start of things to come in regards to value-based pricing, the kind of contract that “links a drug’s price to a transparent measure of its benefit.” Still, he warns that there are both advantages and disadvantages to this kind of contract. When a company is only paid when their treatment is actually effective, this means that the medication’s pricing is a measure of its benefit.
Or is it? Bach goes on to say that there are ways that a company can skirt this issue, either by charging an astronomical price for the drug to begin with or by aligning its price with the wrong outcomes or outcomes that tend to favor the drug company. He notes that Novartis might be criticized for charging for the Kymriah treatment if patients receive benefits after a month rather than a year, since short-term benefits for cancer patients are more frequent than long-term ones.
Another inherent disadvantage in this contract is the financial risk that pharmaceutical companies are taking as Novartis already has admitted.
On the whole though, Bach believes that this kind of contract is a positive step, and one that has already been tested in the private sector with corporations like Express Scripts and CVS. It appears to also have government support. The Obama administration, in an effort that was never finalized, proposed indications-based payment under Medicare Part B, and the current administration appears to favor this strategy as well. Given growing support in both the private and public sectors, we are likely to see more outcomes-based contracts in the future.
In conclusion, the FDA approval of America’s first CAR-T therapy could have an impact that goes beyond ALL patients who need a novel therapy for their condition. The nature of Novartis’ contract with CMS might also set the stage for value-oriented care for future pharmaceutical contracts.
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