Rae Woods (00:02):
From Advisory Board, we are bringing you at Radio Advisory your weekly download on how to untangle healthcare's most pressing challenges. My name is Rachel Woods, you can call me Rae. Are you worried about how the industry will handle the rise of high-cost drugs? Because I certainly am. Look, there are a ton of new therapies in the pipeline in 2023. All of which are expensive and as an industry, we need to figure out how to deploy and finance these drugs so that we can get them in the hands of the patients who desperately need them. Today I want to focus on what these different drugs are and what they mean for industry stakeholders. To do that I brought two pharmacy experts from Advisory Board. You know their names, Gina Lohr and Chloe Bakst. Hey Gina, hey Chloe welcome back to Radio Advisory.

Gina Lohr (00:53):
Hi Rae.

Chloe Bakst (00:54):
Hello.

Rae Woods (00:56):
Are you feeling anxiety as we go into this conversation about anxiety over high-cost drugs?

Chloe Bakst (01:03):
I'm relaxed. I think that we can hopefully name the fears and that makes them less scary, that's sort of my goal for this conversation. So hopefully we're easing the anxiety with our conversation.

Rae Woods (01:20):
I want you to ease my anxiety. I mean I think I'm one of those people, so I am looking forward to achieving your state of calm by the end of this conversation.

Gina Lohr (01:30):
I mean truthfully I agree with Chloe. I think I was feeling more anxiety about this topic before we started researching it and realizing that I think it's the media narrative is informing so much of how we're thinking about things as opposed to the facts on the ground.

Rae Woods (02:00):
Well let's get into it then and hopefully my blood pressure will slowly come down throughout this conversation. You two are our drug experts, what categories of drugs are you all watching right now?

Chloe Bakst (02:14):
There's a lot of drugs that we sort of have in our sites at the moment. Gene therapies are one, cell therapies are another. Further down the pipeline there's a whole bunch of protein therapies, those are what we would consider the more like high cost one-time curative treatments. There's also other drugs that we're watching, Alzheimer's treatments are pretty hot right now. Weight management drugs which we actually talked about on a podcast earlier, Rae maybe drop those show notes in there. Are also pretty high cost drugs that are going to have some big impact in the coming years, so we're watching them closely.

Rae Woods (02:51):
Yeah. That's exactly what I was going to say. You mentioned the ultra high-cost drugs but the weight loss drugs are also expensive, right? All of the drugs that you're watching are the ones with the high price tags.

Gina Lohr (03:02):
I don't think they're making low price tag drugs anymore. I mean, although there's a lot of conversation about generics and there's a lot of conversation maybe we're not watching them in the pipeline. But they're certainly impacting the conversations we're having every day. I mean this is where I'm like back to the Mark Cuban conversation we had last year.

Rae Woods (03:24):
Another podcast episode we could maybe add to the show notes. All right. So I kind of teased at the beginning that the conversation around these drugs are causing a lot of anxiety because of their price tag because they are expensive. What is the reaction been from actual health leaders when you are talking to them every day about these high cost drugs? What's their response been?

Chloe Bakst (03:48):
I think it depends on the drugs we're talking about, some of them feel scarier in concept than others. When you talk about gene therapies for example, those are the ones when I'm talking with health leaders specifically plans and employers. Those are the ones that people say keep them up at night. They're really scared of this idea of being hit with them even though the population size is small and the risk therefore is small, it feels high.

Rae Woods (04:15):
Why are they more afraid of these drugs now than maybe the last few years?

Gina Lohr (04:20):
I think there's a lot of folks who are watching the pipeline and know that these drugs are in development but it's not really until they come out that it feels real. So now we have six of these gene therapies on the market and it's starting to feel real. I think employers are feeling an increasing... It's still tiny. But increasing likelihood like hey, I could get hit with one of these. I could have an employee or their child who needs one of these drugs and it starts to feel real and now we're looking at the pipeline and know that there are still so many more to come out that just compounds.

Rae Woods (04:55):
Yeah. I think there are 13 more that are expected to come out in the next year. So going from six to 13, more than doubling and my understanding is that these therapies are not just expensive. They're multi-million dollar therapies, which is why it makes sense for Chloe to say it depends on the drug. But what I'm also hearing you say is that it depends on the stakeholder, I heard you mention employer and maybe the smaller payers who are concerned about that huge price tag. They feel like they're playing Russian roulette, with will they get hit with one of these ultra-high costs. What about some other stakeholders?

Gina Lohr (05:31):
I mean I suppose, yeah life sciences firms are interesting. We talk a lot about high prices and they will say, but hey look at the value that patients are getting from these drugs across their whole lives. We price it in a way that makes sense and so that they're pushing back and saying, "These are really justifiable prices and they're excited about that." Although I'm sure they also have some anxiety as they're going through the FDA review process. Because there's also a lot of work that has gone into them, a lot on the line as they see them come close to launch.

Rae Woods (06:05):
What about the providers? What are you hearing from them?

Chloe Bakst (06:07):
Generally they're excited about these treatments. But I will say when you're working with rare and orphan diseases it's really hard to get a comprehensive sense of the value of the drugs. Because generally the studies that come out are on such small populations, so their concerns are less on the cost. They're concerned about the cost for sure, but they're also thinking about value and efficacy of the treatment.

Gina Lohr (06:31):
I think the other question on the mind of providers is, if I was going to invest in providing this drug on behalf of a patient. I want to make sure I have all of my ducks in a row to make sure that I get reimbursed for that and that I'm not at risk for the cost of this drug. Those who we've talked with who have administered some of these drugs have pulled together a whole team from their rev cycle team and working with the providers. The ethicists on staff to make sure that everything is a go for the patient administration.

Rae Woods (07:04):
So there's a lot of fear. Gina, you've mentioned that there's a lot of hype too in how this is being talked about in the media. My question is, are health leaders today thinking about the problem or the impact of high-cost drugs in the right way?

Gina Lohr (07:21):
So this is currently one of my big bones to pick with the media and all of this talk of high cost drugs. Because it feels to me like stakeholders are losing the opportunity to actually address these by lumping them all together. Whereas we actually have a handful of smaller problems with different core challenges that can be addressed if you would look at each one one at a time. But because we keep talking about, "We have a problem with high cost drugs in this country." We struggle to take action.

Rae Woods (07:55):
Leaders are disproportionately focused on the price tag. But as Gina said we're always talking about high cost drugs, at this point the question is how high does it get? So what other factors should health leaders be focused on to help us understand these drugs? Categorize these drugs and ultimately understand how to act?

Chloe Bakst (08:14):
I think there are a couple of factors that we can think about here, first comes to mind is duration of treatment. So is this a drug that's a one-time curative dose or is it something that you would get over the course of a lifetime? That kind of in my mind goes hand in hand with patient age as well. Is it something that's going to treat an infant, something that's going to treat somebody on Medicare? There's nuances there to consider when you think about price and cost. The other one that comes to mind for me is eligible patient population, so you have gene therapies treating incredibly small patient populations for rare disease.

Rae Woods (08:50):
That's right, hence the Russian roulette analogy.

Chloe Bakst (08:52):
Exactly. The other side of that coin, right? So you have the gene therapies, small patient populations. You have some like the weight management drugs whose patient populations feel near infinite. So it depends on the drug itself, and that's where Gina mentioned you can get into the different kinds of strategies you would take to approach them.

Gina Lohr (09:13):
I mean, I think that helps then to put those rare ultra-high cost drugs into context and how do we compare those to something like a weight management drug? Because you have these drugs that you take once for a tiny patient population, but they cost a lot. A $3 million price tag feels huge but you scale that down to it's only given once to a very small patient population. Actually the impact on the industry cost is going to be smaller for that than for something like a Wegovy where you have a much broader patient population who's paying $1000 a month for... Maybe it's a couple of years, maybe it's into perpetuity, we're still trying to figure that out. The scientific community has not come to consensus on that.

Chloe Bakst (10:02):
That's right.

Gina Lohr (10:02):
That adds up.

Rae Woods (10:04):
I wonder if we can go into a few more examples about this. How does population size and duration of treatment results in different industry impacts? Gina just mentioned the weight loss drugs as one. What are some others?

Chloe Bakst (10:17):
Well, I think an important nuance to call out here is that not all rare diseases impact the same patient population. So we're seeing gene therapies come out that are still for rare diseases, but they're for rare diseases that are much broader than what we've seen in the past. Sickle cell for example, that is a disease that impacts roughly one in 3000 Americans while something like spinal muscular atrophy which is Zolgensma. That's one of the drugs that's on the market today, impacts one in 10,000. So there's just more drugs coming out that could have a broader impact.

Rae Woods (10:55):
By the way, I think that sickle cell drug is actually one of those ones that's in the pipeline for 2023. Not yet out, but something that we're actively watching.

Chloe Bakst (11:03):
Yes, yeah.

Gina Lohr (11:04):
Weight loss drugs is getting a lot of attention now, but the other one that we're also watching that fits into the lower cost per dose but broad patient population is Alzheimer's treatments. We know that it's not a lifetime of treatments but it will probably be a few years for the patients who are taking that and at $1000, a few thousand dollars per dose. That also adds up quickly for the older adult for the Medicare population.

Rae Woods (11:31):
But even with these two factors in mind, we're still really talking about the impact on the healthcare industry more broadly. How will these two factors impact the individual stakeholders within healthcare?

Chloe Bakst (11:45):
So this is where the conversation gets a little tricky. I mean it's been tricky the whole time, but it continues to be tricky. Because you can't really talk about drug costs without thinking about who's bearing that cost and that's sort of a shared burden in the way that we handle drug pricing and drug costs right now.

Rae Woods (12:03):
Yeah. Maybe we should talk about who all the players are. We mentioned some of the big categories, the employer, the health plan, the provider. But what you're getting at is a lot more of a messy picture.

Chloe Bakst (12:13):
So you mentioned those folks we also have PBMs, pharmacy benefit managers. Their role is really complicated in this space, you have some drugs where they're definitely the entity, they're managing the formulary, they're managing the drug utilization. Those are pharmacy benefit drugs, but a lot of these gene therapies are medical benefit drugs. Right? You'd go to the doctor's office and they'd administer it for you, so it's a little less clear the role that the PBM would play. But they also are the ones with the experience in negotiating with manufacturers around high cost drugs, so there might be more room for them to step in.

Gina Lohr (12:51):
Chloe, you're making an interesting point. I think what you're saying so nicely hedging around a big question that we've heard people asking, is should PBMs have a rule to play in medical benefit drugs? What's happening there? Right now it's more sort of rumor and side discussions. I don't know that we would necessarily see movement there, but I think for exactly the reasons that you have mentioned. Because PBMs are the player that many health plans have sort of delegated drug questions too. If they wanted to be more active in managing drugs, is the PBM the right player for them to call on to do that? I mean, these are big questions I think that the industry is grappling with but certainly highlights the shifting rules there.

Rae Woods (14:58):
We've spent the last few episodes of Radio Advisory talking about the role of the employer and not all employers are created equal. Frankly not all health plans are created equal and the impact of some of these drugs is going to look different for the smaller employer, the smaller health plan versus the ones that are bigger. To your point, they do share a burden of the cost today and I think they are making different moves in anticipation of the rise of these ultra-high cost drugs.

Gina Lohr (15:27):
I mean, it's been striking to me the difference in perspective for smaller employers and health plans versus larger employers and health plans specifically related to the gene therapies. Larger health plans, larger employers kind of assume that they're going to be able to spread out the costs across a larger population of beneficiaries and it's not going to be a catastrophic hit. But those smaller entities if they lost the lottery, if they lost the game of Russian roulette. It could really have a serious financial hit to have just one patient, one beneficiary need these drugs and they're trying to figure out what to do about that. How can they spread the risk in a way that is more sustainable?

Chloe Bakst (16:14):
I want to bring this up because I feel like there's a lot of places we could go with this and I just don't want to lose this piece. We were talking about cost sharing, and when we talk about that we have to talk about patients and they have a lot at stake. They're trying to get these potentially lifesaving medications and they're incredibly expensive. When we're thinking about pharmacy benefit drugs in particular, where patients have to go to the pharmacy counter and pay that money up front to receive the drug. We know that even like a 10% increase in cost sharing can lead to a huge drop in patients being able to afford that medication and their utilization will drop. The average specialty to your copayment in 2023 was $100 and that's out of the budget of a lot of families. So I can imagine that these drugs seem out of reach for a lot of people who need them.

Gina Lohr (17:10):
Can I also take that patient comment in another direction as well? We've been talking about high cost drugs for most of this conversation, but I think this is also when you talk about the patient's money on the line. Generics are actually also a big part of the drug costs conversation nationally, even though the average price of a generic is much lower than $100 they add up when patients take multiples of them. I think patients have a lot of questions right now about whether they're getting a fair price. There's been so much news from Mark Cuban sharing his Twitter feed about patients who were able to save money from using their pharmacy benefit to coming to his pharmacy. It has raised a lot of questions in patient's minds and that has just added I think to the fuzziness around the drug costs conversation.

Chloe Bakst (18:07):
We talk about high cost drugs, what's a high cost drug to a health plan is not what is a high cost drug to a patient.

Rae Woods (18:13):
Yeah.

Chloe Bakst (18:14):
It's just important to call out that nuance.

Rae Woods (18:18):
Damn. I don't know if so far you have made me less anxious throughout this conversation. 'Cause I'll tell you my worst fear is that we have all this incredible science that's created these life-changing curative drugs that ultimately just end up sitting on a shelf. 'Cause we can't figure out how to deploy them and more importantly we can't figure out how to finance them.

Gina Lohr (18:41):
Rae, I would adjust that fear if I was taking it on myself. I am less worried that the drugs will sit on a shelf somewhere. I am more worried that the system will be able to finance them but that there will be some patients who are very much excluded and will have sort of a pay to play system. Patients who have really good insurance or who can pony up the cash to pay for these drugs themselves will be able to access them but that access won't extend to everyone.

Rae Woods (19:12):
Gina you were supposed to be making me less afraid, not more.

Chloe Bakst (19:15):
Bouncing off of Gina's fear, the rumor mill that I hear in conversations are that employers are considering carving cell and gene therapies out of their coverage completely. Which in my worst imagination, can create some sort of cascading scenario where all of a sudden different parts of our benefit structure getting carved out. New players are stepping in, the government has to step in and healthcare implodes. I don't think that's likely to happen, but I do think that conversations like this are necessary to sort of make this problem seem less intangible. So that, that worst case scenario of an employer like throwing up their hands and saying, "This is just beyond me and I can't do it and I'm getting out of the game." Doesn't happen.

Rae Woods (20:04):
So wait a minute. Why should we be less afraid of these high-cost drugs than the media frenzy panic is making us out to believe?

Chloe Bakst (20:12):
I think your risk is smaller than you think it is, although you should definitely get your actuaries on that because I'm not one. I also think that you can trust that the healthcare system we've built can absorb a lot of the costs and I know that can make purchasers nervous because they're the ones who might be the ones absorbing it. But there are mechanisms out there, solutions are out there. We just need to move beyond paralysis to experimentation.

Rae Woods (20:41):
So how do we want our listeners to move beyond paralysis? What do you want the individual leaders listening to this podcast, the stakeholders that we mentioned in this episode. What do you want them to do?

Gina Lohr (20:53):
I mean, I can speak to providers here. They're hearing the hype about all of these drugs and wondering what their opportunity is and I think that they need to think about their position in the market. Are they going to be a provider that is treating these rare disease populations and wants to build up their capabilities, their ability to demonstrate outcomes and their partnerships related to that? Are they a provider who wants to be specializing in weight management and distinguishing themselves there? Or are they a provider who's actually going to be collaborating, working with other providers who are giving this support to patients?

Chloe Bakst (21:33):
I think for employers what comes to mind for me is just encouraging them to break down the monolith in their head of high cost drugs and think about how they can work with different partners for specific disease states for around specific treatments. Think about how you can work with PBMs to hone your utilization management strategies so that you can make sure that the patients who are accessing the weight management drugs are the right patients. Think about how you can work with third parties or with your health plan to create an innovative contract around gene therapies. What do you want from those partnerships and what does success look like for you beyond just avoiding the cost? Start asking yourself the harder questions.

Rae Woods (22:17):
Well Chloe, Gina I do think I'm less afraid. So thank you for coming on Radio Advisory.

Chloe Bakst (22:24):
Thanks for having us.

Gina Lohr (22:25):
Thanks, Rae.

Rae Woods (22:27):
Thanks for the therapy.

Gina Lohr (22:30):
We all need a little bit of that.

Rae Woods (22:36):
I hope your anxiety around high cost drugs has come down a little bit too and if it hasn't, I want you to go to the show notes because we've added two episodes from the Radio Advisory feed that I think will help. One is on Mark Cuban and his attempts to create a marketplace for low cost generic drugs. The other is on the rise of weight management drugs, which as Chloe and Gina mentioned are still expensive. Even if there have price tags in the thousands instead of the millions. I want you to go back and listen because remember as always we are here to help. Radio Advisory is a production of Advisory Board. This episode was produced by me, Rae Woods as well as Katy Anderson, Kristin Myers and Atticus Raasch. The episode was edited by Dan Tayag. With technical support by Chris Phelps and Joe Shrum. Additional support was provided by Carson Sisk and Leanne Elston. Thanks for listening.