ThermoDox Reimbursement Deep Dive (Part 2)

While this follow-up is not quite the “Part 2” of the Reimbursement Deep Dive that I had in mind (my original intent was to walk through pricing and reimbursement in the EU-5 plus China), I do nevertheless want to take the time to highlight some of the components of the “pharmacoeconomic” puzzle that Celsion management will have to consider during the commercialization process of ThermoDox. In fact, forward-thinking biotechs and pharma companies now proactively plan for pharmaceconomics and reimbursement much earlier in the commercialization life cycle, in many instances making such considerations as trials are being designed.

Let me preface this by saying, boldly, that pharmacoeconomics is not entrenched in the fabric of the US health care system, though it is much more widely used and adopted in other developed countries (I personally think the US is in the stone ages in this regard, we have a lot to learn from Europe, I digress). While there have been uproars about the cost of products such as Erbitux, Avastin, and more recently, Provenge and Yervoy, for the most part, payers grudgingly cover them (particularly within oncology). Drugs might get certain utilization management restrictions in the US, but they still end up on the market. A payer might place a very expensive pharmacy benefit drug (recall the distinction I made in my first article between pharmacy versus medical benefit drugs, as this is a critical foundational piece to understanding pricing and reimbursement) on a 4th tier rather than 2nd tier, for example, and have a prior authorization, but the drug still makes it in to the market place, and is still relatively affordable by most with insurance. In contrast, in the UK, for example, the National Institutes for Health and Clinical Excellence (NICE) has a relatively rigid bar in terms of the required cost per quality adjusted life year (QALY) in order to recommend reimbursement of a particular drug. If NICE does not recommend the drug, it is technically on the market, but the government will simply not reimburse.

So, what point am I trying to make? The US is much more lax about even considering "cost" in determining access decisions for drugs compared to the EU. The difference between the US and EU is that while a pharmacy and therapeutics committee (health plans have P&T committees consisting of medical and pharmacy directors who make such formulary coverage decisions, hospitals almost always have their own separate P&Ts as well) at, Aetna, for example, can place restrictions on a product, payers rarely flat out do not cover something. In Europe, it is somewhat binary, coverage or no coverage.

Alright, now that I have gotten that out of the way, what is pharmacoeconomics? At its simplest, pharmacoeconomics takes into account two key components: cost and outcomes (For those seriously interested in diving into this further, I have several references I could guide you to). The above-mentioned cost/QALY used by NICE is one commonly used metric, though there are others as well.

So, what will forward looking payers in the US and Ex-US countries consider from this perspective in evaluating ThermoDox, and what types of data must Celsion be prepared to share in such dossiers/analyses?

Costs (some are incremental reductions/additions)

• Drug price
• Obviously, this is the big one. We still don't know definitively where ThermoDox will be priced, and again, I hope the company is proactively studying/gauging payers to see what type of price could be "digested" for a given level of benefit. My complete wild guess is that in the US and EU, $10-$20K, while in China, it will be 1/3 to 1/5 of that cost, unless the company is willing to "skim" the Chinese market and simply target affluent, self-paying individuals and forget about getting provincial formulary coverage.
• Pre-RFA visit fees (if needed) 
• Pre-RFA prophylaxis (I believe this was protocol in the HEAT study)
• Additional length of stay potentially to monitor for side effects (for inpatients)
• This can be significant. (Described below, every additional penny counts in the inpatient setting since reimbursement is fixed for the entire inpatient stay, you can conservatively count each additional inpatient day as an ~$2000 cost to hospitals)
• Drugs to treat chemotherapy-induced neutropenia (CIN)
• I am going to elaborate on this one a bit, because I think this is going to play into the “cost” of ThermoDox. Payers will often look at the experience of patients in clinical trials for guidance as to what to expect in the real world, although this can often be misleading for a number of reasons (topic for another discussion). I have no doubt that a good portion of patients in the HEAT study will require granulocyte colony stimulating factor (G-CSF) agents for CIN. Neulasta (once/cycle, ~$2,800 average sales price) and Neupogen (daily injections, ~$260-$414 depending on dose), marketed by Amgen, dominate the G-CSF market, but there are others as well, including biosimilar filgrastim and pegfilgrastim in the EU. These are not cheap, and payers will factor them in to the “total cost of care”, costs that would otherwise not be needed for RFA alone.
• Other drugs needed to offset other chemo side effects (nausea for example) 
• RFA Procedure cost
• If ThermoDox patients require fewer RFA to achieve complete ablation, this would be an incremental cost reduction, however, the data will tell us the story as to complete ablation rates in both arms. Similarly, avoidance of future RFA to reduce local recurrence would be yet another potential significant source of cost reduction for ThermoDox patients. 
• TACE avoidance (ThermoDox might preclude need for TACE in some instances) 

Potential Incremental Outcome Improvements

• Prolonged PFS 
• Extended OS 

What complicates this story is that the above-mentioned “costs” vary by site of care. Recall in the first part of my reimbursement deep dive I highlighted that inpatient versus outpatient sites of care are very, very different for drug reimbursement, given that in the former, drugs are bundled into a DRG (flat cost) for the entire hospitalization visit. In that instance, an extended stay, ThermoDox drug price, etc., would all be “swallowed” by the hospital, as they would not be able seek reimbursement for those separately unless the DRG is modified, or under the very rare circumstance that ThermoDox would be given a new technology payment. So, in that setting, the payer could care less, but in the outpatient setting, those would all be billed separately, and the payer would have to take them into account. As I have said before, Celsion’s pricing flexibility will be significantly limited (de facto as a function of reimbursement to providers) if most utilization is going to come from inpatient versus outpatient use of ThermoDox (not good news). This is the same as what I have said before about Delcath’s ChemoSat procedure, which by definition has to be done on an inpatient basis. Absent a compelling clinical story, inpatient adoption of very expensive drugs relative to the total DRG payment will be difficult.

The “gist” of what I am trying to get at with this article is that sophisticated payers won’t just look at the cost of the drug when making access decisions. Compared to patients who just receive RFA alone, as you can see, payers (and hospitals) will have a wide range of incremental costs (and reductions) to consider, not the least of which is the cost of the drug itself. As I have pointed above, this incremental cost story is nothing from a pharmacoeconomic perspective without knowing the incremental outcome benefit (however that is defined) for ThermoDox as well. For that, standby for final phase III data, which the company has firmly guided would be on hand by end of year.

I have personally advised Celsion management, if they have not already done so, to strongly consider engaging experts in the field to carefully craft their “payer engagement” strategies and devise a crisp, articulate value proposition for ThermoDox. While US payers will welcome this (some much more than others), it is simply a matter of necessity in the EU. Furthermore, contrary to what most people think, the EU is very heterogeneous in terms of reimbursement (unlike most EU countries, UK and Germany have "free" pricing for example, but as you saw in the UK example, the NICE cost/QALY is the de facto price regulator. Other countries such as France, Italy and Spain have "fixed" pricing for the most part). So, admittedly, I have not done justice in fully describing the EU system. Additionally, pricing and reimbursement in China is still extremely challenging, due in most part to a still fledgling, third party reimbursement system that is slowly beginning to take shape in China with national health reform changes.

I hope by now the reader has a much better picture of the complexities management will face during the commercialization process of ThermoDox (hopefully, a big pharma partner will be by their side as a partner during this process)

As always, feel free to ask any questions.

Siavoche