Untangle Complexity

04/09/2023

Read time: 26 min

Hayden CG

By Hayden CG 

IRA: Patient Access to Therapeutic Options

A broad range of medicine treatment options is fundamental to providing care that best fits an individual person’s health, biology, and preferences. The Inflation Reduction Act (IRA) puts patient access to treatment options at risk.

Executive Summary

Each person’s health needs are unique, and nowhere is need for considering this uniqueness as necessary as it is when ensuring the right patient receives the right prescription drugs for their disease or condition. To achieve this, there is a need to have a choice of therapies to maximize effectiveness and tolerability and align with individual patient treatment goals and needs.

Patients benefit when they – and their care team – have a choice of multiple treatment options to assess which is most appropriate for the patient. The recently enacted Inflation Reduction Act (IRA), however, may have the unintended effect of reducing access to multiple therapeutic options for patients, limiting the choices available to patients and physicians, and leading to substandard care.

This paper details two avenues by which the IRA will compromise patient choice and threaten health outcomes:

  • In the short term, the IRA empowers the government to set prices on certain prescription drugs in the Medicare Part D program. Payers are likely to use these government price controls to seek large, additional discounts and rebates from the manufacturers of competing products in the same class that are not subject to price controls. If those manufacturers are unable to offer those large discounts, payers may increase utilization management or increase cost-sharing on those products, effectively limiting patient access to the most appropriate treatment options.
  • In the long term, the IRA disincentivizes drug development, particularly for small-molecule medicines, by limiting the amount of time a therapy can earn potential returns before being subject to government price controls. This reduces the lifecycle revenue potential for research-based biopharmaceutical manufacturers and has resulted in biopharmaceutical companies announcing reductions in and shifts in R&D funding for both new medicines and for additional uses of already-marketed drugs. Additionally, this may alter the types of treatments that research based biopharmaceutical manufacturers invest in given the IRA effectively penalizes investment in small-molecule medicines, thus further depriving patients of therapeutic options.

While most of the policy changes from the IRA have not fully taken effect, there is growing consensus that the law will dramatically alter how and what type of medicines are researched and developed and which existing and new medicines patients will have access to. This paper details the importance of access to multiple therapeutic options and provides examples of classes of medicines where having a range of therapies in the same class can lead to health benefits.

Potential Impact of the IRA on Access to Therapeutic Options in Part D

The IRA includes an unprecedented provision for the government to select and set prices of eligible small molecule medicines (generally pills, tablets, and capsules) just 7 years after U.S. approval and large molecule medicines (biologics, generally shots or injections) 11 years after approval, with the government “maximum fair price” (MFP) going into effect for selected medicines 2 years later. Another provision of the law redesigns the Medicare Part D benefit by eliminating the coverage gap, establishing an out-of-pocket cap on patient prescription drug expenses in Part D, and changing the financing of Part D among different stakeholders.

Government setting of an MFP for medicines and the redesign of the Part D benefit will establish new market dynamics that may affect availability of, and patient access to, a range of treatment options. This will occur principally through 1) changes in competitive dynamics that determine plan coverage and formulary placement that will result in greater barriers to access and 2) a resetting of incentives for investment in developing future medicines resulting in a decline in overall R&D and fewer novel therapeutics coming to market.

We expect that therapeutic areas impacted directly by greater controls on patient access and reduced R&D investment will disproportionally include diseases impacting elderly and disabled populations, such as cancers, chronic diseases, neurological conditions, and mental illnesses. Each of these disease states are areas where the importance of having a range of therapeutic options has been shown to be critical to successful treatment but are also areas where the clinical trials are often longer, more complex, and costly and which under IRA will no longer make financial sense in many cases for companies to make those continued investments.  These diseases also represent areas where significant unmet needs remain for patients. The IRA puts investment into areas of high scientific uncertainty and certain diseases at risk.

Short-term implications on competitive dynamics and formulary placement

Introducing a government-set MFP for products will shift competitive dynamics that drive formulary coverage, not only for products with an MFP but for other competitor drugs in the same therapeutic class. These effects will place further pressure on patient access to therapeutic options.

Today, biopharmaceutical companies provide a discount from the price of a drug to health insurance plans in exchange for preferred formulary placement, with the discounts often higher in competitive therapeutic classes where there are many medicines to treat the same condition. When a biopharmaceutical company provides a privately contracted discount to a health plan for preferred formulary placement, the plan may place the medicine on a lower tier so patients that take those medicines may pay less or may have fewer utilization management (UM) restrictions. Under the IRA, products with an MFP will be required to be on formulary, however, Part D insurance plans will retain control over tiering decisions and other UM controls for these medicines. Guidance from the Centers for Medicare and Medicaid Services (CMS) indicates the agency will require health plans to explain their reasoning if they decide to place medicines with an MFP on a non-preferred formulary position. However, the practice is not necessarily disallowed.  Since health plans will be looking to more tightly control utilization as a way to manage cost and liability, we expect that health plans will continue to seek greater discounts from manufacturers and leverage the low MFP in formulary coverage negotiations to do so. Specifically, if manufacturers do not offer similar or better discounts on competitor drugs as compared to the net price for drugs with an MFP, we expect that health plans may restrict access to these competitors by not including them on formulary, imposing significant UM hurdles, or placing them on a higher cost-sharing tier, making them more expensive for patients.

These possible actions by plans due to the IRA will result in more narrow formularies and reduced coverage and access to therapeutic options for patients

These dynamics will be intensified due to the redesign of the Part D benefit, which sharply increases the share of drug costs for which plans are at risk. The Part D redesign establishes an out-of-pocket cap on patient expenses, eliminates the coverage gap, changes the level and duration of manufacturer required discounts, and requires health plans to take on 60% of costs in the catastrophic phase of the benefit.i These changes increase incentives for health plans to manage their greater financial risk by more tightly controlling drug utilization at all stages of the benefit, including by reducing patient access to therapeutic options.ii

As such, the combined effects of these new dynamics will incentivize health plans to achieve savings and limit risk by:

  • Adding UM restrictions on covered medicines (e.g., requiring prior authorization, fail first, or step therapy); and/or;
  • Placing medicines that do not offer large discounts on higher tiers that require higher patient cost sharing; and/or;
  • Excluding more medicines from formularies or increasing UM (within bounds of the coverage requirements for protected classes and medicines with MFPs).
Long term implications on drug development

Government setting of the MFP under the IRA given the shorter time frames will reduce expected revenues, leading to a reduction in resources available for future R&D investments and will change the nature and type of R&D investments to the detriment of patients and ultimately resulting in fewer novel therapeutic options coming to market. Additionally, the expected nearer-term effects to restrict formulary coverage for other medicines is likely to harm incentives to invest in researching and developing future treatments that offer patients expanded options.

The changes set by the IRA will alter incentives for research-based biopharmaceutical manufacturer investment that will change the nature and timing of R&D investment in three ways: 1) shortening of the commercial runway for brands by introducing the potential for government price setting sooner than anticipated expiry of patent protections, 2) limiting of returns from seeking approval for additional indications for commercial brands, and 3) distorting R&D incentives that will move investment away from following the science and from investing in diseases and conditions that primarily impact the Medicare population.

The first key reason investment incentives will be diminished under the IRA is that the law allows the government to select for price setting of select small molecule medicines (generally pills, tablets, and capsules) and large molecule (biologic) medicines in Medicare 7 and 11 years after FDA approval, respectively, with the government MFP going into effect for each kind of medicine 2 years later. This significantly shortens the timeframe in which manufacturers can earn a return on investment with competitive and market-based pricing as small molecule medicines face generic competition an average of 13-14 years after FDA approval, whereas the IRA drug price setting timelines are substantially shorter, which will result in lower returns on investment for the entire therapeutic class of an MFP product. The law specifically disadvantages the development of small molecule medicines due to the shorter timeframe on the market afforded these products. Manufacturers and their investors will anticipate dramatically lower revenue, particularly for small molecule medicines, resulting in a decline in the R&D investment for classes that are expected to have an MFP in the competitive set.

The law specifically disadvantages the development of small molecule medicines due to the shorter timeframe on the market afforded these products

The IRA’s impact on R&D investment goes beyond the decision to invest in a new medicine. Today, manufacturers also invest in research to identify new uses for medicines that are already on the market, to learn which additional patient populations or disease states may benefit from the medicine. As government price setting takes effect 9 years after a small molecule medicine is approved by the FDA, the time for companies to earn potential profits on investment in R&D for incremental indications will be much shorter, disincentivizing further investments in discovering new indications for commercialized medicines. Today, new uses that stem from post-approval research are central to generating a range of options for patients in many therapeutic areas. For example, 40% of medicines approved ten years ago received indications for three or more new uses after the medicine was initially approved.iii

Not only will the IRA reduce investment in novel medicines and post-approval research due to the risk of selection for price setting, but it will also harm incentives for development of medicines in therapeutic classes in which at least one product has been or may be subject to price setting. As discussed above, the distorted competitive dynamics that will lead to more restricted formulary access for all drugs in a class with an MFP product will signal to investors that new and better options for treatment within that class are not valued, thereby further discouraging R&D, above and beyond the reduced incentives from the risk of the product to be selected for price setting in the first place.

Importance of Patient Access to Therapeutic Options

As every patient is genetically and physiologically different, the effect of a medicine varies from patient to patient. For these reasons, a patient may not respond to treatment as expected based on average effects reported in clinical trial data. Additionally, although medicines within the same category or class may have the same basic mechanism of action, even small differences at the molecule level and the site of action can impact how a drug works inside a patient’s body, producing varying treatment effects, creating different side effect profiles, or resulting in interactions with other medications.iv For example, it is common for patients to develop resistance to a particular medicine or for their disease to progress such that an alternative medicine is needed to treat the same condition.

Clinical practice guidelines provide recommendations for health care providers about the care of patients with specific conditions. Practice guidelines for many conditions emphasize the importance of access to a wide range of medicines, as substituting an alternative treatment than that selected by the health care provider could have unintended consequences including poor adherence or avoidable side effects. For instance, numerous studies have found that switching stable patients to a new medicine for non-clinical reasons leads to poor side effects and increased nonadherence and is often associated with negative health outcomes.v There are a number of reasons patients need access to multiple therapeutic options, for example:

Differences in patient response can vary for an individual medicine.

Clinical trial results reveal information on the safety and effectiveness of a medicine, but this is reported as the average response of patients in the study and is not reflective of any one patient’s experience with the medicine. A medicine that is highly effective for the average patient in a clinical study may not work in a subset of patients, and medicines that are generally well tolerated on average may be poorly tolerated by some people due to differences in diet, comorbidities, age, weight, drug-drug interactions and genetics.vii The unique genetic signatures underlying a disease can inform the most targeted approach for treatment. Science has also revealed the role that normal genetic variability among the population can play as a signal of an individual’s ability to metabolize, and therefore respond to, a particular medicine. However, for many conditions, the relationship between a patient’s genetics and drug efficacy is still largely unknown, and a trial-and-error process is often needed to find the optimal medicine or combination of medicines.

Treatment resistance develops when patients experience diminishing response to a therapeutic dose of a treatment.

This occurs in particular for infectious diseases and cancer. For example, in cancer, patients are administered the maximum tolerated dose of a therapy to kill the disease-causing cells while inducing minimal side effects. However, variability across patients which affect efficacy and the complex genetic profiles behind each cancer can contribute to cancer cells mutating in response to treatment and developing resistance, rendering the medicine ineffective. When this happens, other drugs within the same class of treatment provide a second- or third-line option for patients.  The availability of a range of different drugs is critical to providing treatment options for patients when they stop responding.

Tolerability and adherence to treatment can vary from patient to patient.

Side effects of medication are common and can range from life threatening to reducing quality of life. A side effect that may be tolerable for one person such as drowsiness may be intolerable for a person who needs to drive for work or care for others. There are a range of studies demonstrating adherence to treatment worsens with side effects, including for serious conditions like heart failure.viii The magnitude of side effects differs depending on age, health condition, or the presence of other treatments, and finding the right medicine may involve trial and error based on tolerability as well as efficacy. Having options in the type of dosage form or route of administration can also impact adherence and health.  For example, two treatments may be valued differently by patients or their provider if one is easier to take because it requires less frequent dosing or can be taken in pill form at home instead of being administered in a physician’s office. Improved adherence is not only valuable in improving patient outcomes but can have significant value to society. For example, improved adherence to hypertensive treatment alone in the Medicare population could save $14 billion a year.ix

Select Therapeutic Areas for Which Therapeutic Choice is Key to Patient Health

The following case studies describe how therapeutic options in medicines have proven to be important in enabling patients and their physicians to determine the best treatment plan to support patients’ health. These case studies all represent small molecule medicines, which highlight the importance of minimizing the threat the IRA may pose in upending competitive dynamics and innovation incentives that affect treatment options for patients.

Depression (SSRIs)

Selective serotonin reuptake inhibitors (SSRIs) for the treatment of major depressive disorder are more easily tolerated and safer than earlier classes of medications used to treat major depression.x In clinical trials, SSRIs show similar efficacy in the treatment of depression, however, a substantial number of patients who fail to respond to or are unable to tolerate the first SSRI they receive will achieve a clinically meaningful response when switched to another drug in the same class.xi,xii,xiii Between 30% and 50% of patients with major depression fail to respond to an initial course of antidepressant therapy.xiv For example, one study showed that 26% of the people who did not respond to one commonly used antidepressant therapy responded favorably to an alternative.xv Conversely, another study demonstrated that 63% of patients who failed treatment with one a commonly used depression medication did have a response to another.xvi If at least one SSRI drug has its price set under the IRA then plans are likely to increase cost sharing or impose utilization management to limit access for medicines that are not subject to price setting.ii As such, the IRA could limit patients‘ ability to work with their physician to determine which SSRI they are best able to tolerate, or they will face higher cost sharing or obstacles to access them. Alternatively, when patients find the treatment that works for them and can take it consistently it can also significantly reduce the other medical costs including hospitalizations, leading to overall system savings.xvii

Parkinson’s Disease

Because there is no cure for Parkinson’s disease, drug therapy is designed for symptom management and to improve the patient’s quality of life. Selection of drug therapy is dependent upon many factors, including what stage of the disease a patient is in, what symptoms are manifesting in the patient, the level of patient disability, age of the patient, and the side effect profile of the drug being considered.xviii Some patients prioritize avoiding side effects like dizziness, drowsiness and dyskinesias, while others want to control motor symptoms like slowness and tremor.xix The optimal treatment will also change often as the disease progresses and there is an onset of motor complications.xx,xxi  One main class of medicines, anticholinergic drugs are often considered useful in mild disease, but may not be recommended in older populations due to cognitive changes. Alternatively, if patients are very symptomatic at the onset of their disease or have problems with their daily living activities, L-dopa or dopamine agonists may be beneficial. It is critical for Parkinson’s patients and their doctors to be able to access available options as patients experience progression in the disease or as their treatment goals shift.

Schizophrenia (SGAs)

Second generation antipsychotics (SGAs) are used to treat delusions and hallucinations, negative symptoms, and cognitive deficits in those with schizophrenia. The mechanisms of action and side-effect profiles differ substantially between SGAs and many patients undergo switches from one antipsychotic to the next because it is very difficult to predict how a patient will respond or tolerate specific drugs.xxii,xxiii The different drugs in this class vary in their risk of antipsychotic-induced weight gain which consequently increases the risk for diabetes. Some medications in this class are more sedating than others and some carry an increased risk of experiencing extra-parietal symptoms, like movement and muscle control problems, as well as QT prolongation (heart arrhythmias). As individuals with schizophrenia navigate the challenges of their disease, it is essential that they are able to work with their physicians to determine the medication which best addresses their symptoms and cognitive deficits while limiting undesirable side effects. Alternatively, restrictions on treatment options can not only harm patients but also increase overall costs. Research has shown that low-income patients with schizophrenia subject to formulary restrictions for SGAs were more likely to be hospitalized and incur 23% higher inpatient costs, leading to $1 billion in increased state costs annually.xxiv

Chronic Myelogenous Leukemia (TKIs)

Tyrosine kinase inhibitors (TKIs) are a class of drugs that specifically target a protein produced by some cancer cells that causes the cancerous cells to grow out of control. They were first approved in 2001 to treat chronic myelogenous leukemia (CML). Despite the effectiveness of TKIs, half of CML patients will eventually fail to respond to first line treatment due to treatment resistance or intolerance, with many patients requiring third or even further lines of therapy.xxv As researchers have learned more about the mechanisms by which the disease develops resistance, they have developed additional TKIs that can be used if the leukemia cells are no longer responding to the original treatment.xxvi,xxvii There are a total of five TKIs available within this class today providing new options to extend the life of individuals with this disease.xxviii Before the availability of the first TKI for CML, this form of cancer was associated with a 20% 10-year survival rate. But today it has increased to 85% with TKI treatment.xxix In fact, patients with CML can expect to live close to normal life spans. This is due in large part to the approval of additional TKIs that provide critical options for CML patients whose tumors develop resistance to initial targeted treatment—which are the kinds of advances that are at risk with the IRA.xxx

Hepatitis C (DAAs)

Investment in scientific progress is not only important to bring expanded options for patients but can often bring improved efficacy to better manage a specific disease. For example, the first game-changing direct-acting antiviral (DAA) treatment for hepatitis C that reached market in 2014, boasted cure rates in excess of 90% transforming the treatment of the diseases. However, subsequent DAAs that came to market offered cure rates approaching 100% and offered patients with all genotypes of the disease as well as difficult to treat subpopulations with effective treatment options.  Not only did the second medicine offer additional efficacy, but competition in the therapeutic area also meant that plans were able to negotiate for discounts for formulary placement. These advances in treatment for hepatitis C over a short period of time highlight the importance of incentivizing development of treatment options for patients.

Diabetes (DPP-4 Inhibitors)

Dipeptidyl-peptidase-4 (DPP-4) inhibitors or “gliptins” are used in the treatment of type 2 diabetes. The class has become a mainstay of treatment based on a favorable risk-benefit profile and the ease of oral administration in a disease where patients might otherwise require injected therapies. The options for treating type 2 diabetes are varied, and patients frequently present with comorbid conditions. Labeling differences between different DPP-4 inhibitors call for different levels of monitoring of certain comorbid conditions,xxxi and patients and physicians may select medicines within the class based on the desire to minimize dose adjustments. Treatment decisions around type 2 diabetes may also involve decisions about which classes of medicines to use based on efficacy, tolerability and adherence.xxxii Rising rates of the disease and the difficulty of successful diabetes control suggest that additional innovation is needed, and disrupting the incentives for continued development may stall the evolution of treatment advances for type 2 diabetes.

Breast Cancer (CDK4/6 inhibitors)

CDK4/6 inhibitors are used to treat specific types of hormone receptor-positive, HER2-negative breast cancer. Breast cancer remains the most common cancer among women, and, for women, breast cancer is the second-leading cause of cancer-related death. The role cyclin dependent kinases play in breast cancer has been understood for decades, but earlier generations of CDK-targeting compounds had poor selectivity and high toxicity, driving the research that led to the CDK4/6 inhibitors, which are more specific. However, there are differences between approved CDK4/6 inhibitors, making the choice of treatment a critical decision that patients must make with their care team, based on “patient characteristics, potential comorbidities, and concomitant medications.”xxxiii An inability to choose a medicine that accounts for these difference can have profound impacts on safety, adherence, and quality of life, allowing patients to avoid the possibility of drug-drug interactions or poor tolerability without facing higher costs or requiring onerous utilization management.

Navigating the Consequences of the IRA to Preserve Patient Choice

As the IRA is implemented, preserving access to, and continuing to ensure the development of, therapeutic options is paramount to supporting patient health. The introduction of government set MFPs coupled with required coverage of these drugs and redesign of the Medicare Part D benefit will change the competitive dynamics in ways that will likely reduce access to existing medicines. It will also reduce the financial reward of developing new treatments or additional uses for existing treatments. For patients and the physicians that care for them, having multiple treatment options isn’t a luxury, it is essential to health. As the IRA is implemented, CMS must take caution to monitor the effects the law may have on formulary access for medicines and protect patients from restrictive utilization management, high cost-sharing, or other obstacles that will limit patient access to a broad range of therapies.

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