Do Drug Manufacturers Have the Evidence Needed for Price Negotiation?

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Summary

Manufacturers may find significant gaps between their existing evidence and the negotiation data elements that CMS will evaluate during the negotiation process.

The Inflation Reduction Act (IRA) brings landmark policy changes to the healthcare industry, raising important questions about pipeline investment, drug price negotiation, and reimbursement. In the IRA Question of the Week series, Avalere answers the pressing questions shaping healthcare stakeholders’ strategic decision making as the law is implemented.

In this installment, Avalere experts discuss recent Centers for Medicare & Medicaid Services (CMS) guidance on negotiation data elements and evidence gaps in manufacturer data that CMS will seek to evaluate during the negotiation process.

Negotiation Data Elements

In its March 15 draft guidance on Medicare drug price negotiation, CMS confirmed the data elements that the agency will consider when offering an initial maximum fair price (MFP):

  • Research and development costs
  • Current production and distribution costs per unit of a drug
  • Prior federal financial support
  • Patent and exclusivity data
  • Market data and sales and revenue data
  • The extent to which the drug represents a therapeutic advance
  • FDA prescribing information
  • Comparative effectiveness of the drug, specifically in Medicare subpopulations
  • The extent to which the drug fulfills an unmet need

Among these data elements, CMS specifically highlighted the importance of comparing selected products to therapeutic alternatives and measuring unmet need. CMS also said that it would prioritize evidence focused on Medicare subpopulations, including the elderly and people with disabilities.

Primary manufacturers have 30 days from the time their products are selected for negotiation to provide these data to CMS as outlined in the Negotiation Data Elements information collection request. Primary manufacturers also must submit these data on behalf of all secondary manufacturers associated with a selected product. Additionally, CMS will independently collect and review literature and evidence to develop an initial MFP offer.

Gaps in Evidence

Due to the structure of the negotiation process, this initial data submission provides an important opportunity for developers to influence the negotiation process. Through data submission to CMS, manufacturers and other stakeholders submit evidence supporting or contradicting a therapy’s value proposition. Evidence included in this submission should align with the developer’s value positioning strategy for negotiation. However, the value demonstration requirements for IRA negotiation represent a significant addition to current market requirements. Therefore, manufacturers may identify many gaps between currently available evidence and data that may demonstrate a product’s value in accordance with the negotiation data elements outlined by CMS.

Real-world evidence is likely dated and may not accurately portray a product’s current value

Many efficacy and effectiveness studies occur around a drug’s launch, but price negotiation cannot commence until 7 years after launch for a small molecule drug, and 11 years after launch for a biologic. Changes during this period can render these studies less relevant for negotiation. Developments in technology, policy, or the healthcare landscape (e.g., telemedicine, Medicaid expansion, and patient-centered value, respectively) can alter a treatment’s role in the healthcare system between launch and IRA negotiation. Thus, many existing studies may not appropriately demonstrate the current value of selected products. Manufacturers and other stakeholders should consider assembling more current real-world evidence in preparation for negotiation.

Studies often target populations not included in Medicare

Many studies of a product’s effectiveness focus on young, healthy populations. A lack of clinical trial diversity also may present a barrier to demonstrating a product’s value to populations with substantial health-related social needs. Manufacturers and other stakeholders should consider focusing studies on Medicare and key subpopulations. Developers should also consider incorporating greater clinical trial diversity for pipeline products to ensure the most robust and relevant data portfolio for future negotiation processes.

Comparative effectiveness studies from product launch may not represent the current market

Many comparative effectiveness studies focus on the standards of care available at launch. New therapies, often with the same mechanism of action, are likely to enter the market by the time negotiation occurs. Developers should assess the state of their evidence against more recent entrants. In addition, it is critical for developers to evaluate the extent and nature of evidence generated by other stakeholders regarding the value proposition of their therapy relative to the present-day therapeutic alternatives.

Dive Deeper

While CMS will collect evidence from multiple sources to develop an initial MFP offer, manufacturers and other stakeholders can frame their evidence in a way that best communicates the value of a selected product. As such, manufacturers should assess the need and return on investment for generating new evidence to best demonstrate a selected product’s value in a way that resonates with CMS. Due to the condensed timeframe between selection and data submission, stakeholders should begin assessing their ability to demonstrate a drug’s value before official selection for negotiation.

Avalere experts in drug pricing, Medicare, evidence strategy and generation, and plan design will be presenting at ISPOR 2023 in Boston. Visit us at booth #831 or schedule a meeting.

Additionally, Avalere experts in policy, market access, and evidence and strategy can help you understand what IRA provisions mean for your organization and weigh in on key implementation decisions. To better prepare for and shape the changing healthcare landscape in 2023 and beyond, connect with us.

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