World Payer Hotspots in Specialty & Oncology - Potential Areas for Increased Management in Specialty and Oncology Pharmaceuticals

Dec 09, 2015, 18:10 ET from Research and Markets

DUBLIN, Dec. 09, 2015 /PRNewswire/ --

Research and Markets ( has announced the addition of the "Payer Hotspots in Specialty & Oncology" report to their offering.

This Payer Hotspots survey focuses on the potential areas for increased management in specialty and oncology pharmaceuticals. The survey was conducted in the 3rd Quarter of 2015. Each of the 10 respondents hold a Medical Director position at a major health plan and cumulatively represent 41 million covered lives. All 10 MD's engaged completed the entire survey.

What are the risks within Pharma's pricing structure?

From Wall Street's perspective, most of the drugs are seen in isolation - not in aggregate. As a result, we see a growing conflict between product teams fine-tuning marketing strategies to maximize sales and those bearing the costs. Meanwhile, the totality of the industry could be headed straight for a cliff. Very few are looking downstream to see the entire industry heading for the edge. Even the American form of capitalism has boundaries. If they are pushed too far - far enough to threaten the overall economy, and the U.S. government will act. We've seen it before.

Common belief is that when data from 2015 become available, we will see Specialty drugs commanding 20% - 30% of total drug spend. On the high end, some payers are reporting 3-fold and 4-fold growth in Specialty spending over the next 4 years.

Hidden within broad categories like Specialty and Oncology are some striking specifics that demonstrate how pervasive this dilemma has become ever since we crossed that out-of-pocket threshold in 1996.

Orkambi, Vertex's recently FDA-approved drug therapy for Cystic Fibrosis (CF), will increase the patient pool almost 3-fold. Kalydeco, Vertex's first CF therapy, treated about 2,000 patients at a price of $300,000 a year per patient. Orkambi, on the other hand, will likely increase the population size to 8,500 patients at a $259,000 per patient (annually) cost. Investors are confident that number will expand to cover even more populations.

The life expectancy of some CF patients, due to new and innovative therapies, has been extended to over 40 years. This, in and of itself, is a good thing! The vast majority of CF patients will be diagnosed by age 12 - the approved age for beginning Orkambi treatment.

If 5,500 (two-thirds of population size) patients continue treatment for their chronic disease from age 12 to 41 (ages of approved treatment and average life expectancy, respectively), we can expect therapy to last 29 years on average. Orkambi could potentially cost someone a total of $41 billion to treat this population over their lifespan - $7.5 million per patient.

Oncology is facing similar unsustainability, except that whereas Specialty (non-Oncology) is at most risk from volume pressures like expanded patient populations, Oncology will present management challenges because denying best in class therapy to cancer patients has long been a no-no for payers.

The problem now is that Pharma is pushing for Specialty-like pricing in Oncology, where vast populations already exist. The situation is untenable.

Specialty has a numbers challenge. Oncology has a no challenge.

On average, Oncology as a percentage of total drug spend is expected to grow by 20% - 30% in the next 2-4 years. It is understandably difficult for payers to say no to cancer patients; therefore limiting formularies will be more complicated than with some Specialty indications.

In fact, any relief payers experience in Oncology will likely come from drugs which are going generic (e.g., Gleevec, some tyrenise kibose inhibitors). Payers can opt to include only generics in formularies wherever possible. However, by the time many Oncology drugs do go generic, new drugs will be replacing them, and preference will almost certainly shift to next-generation therapies.

Although, we are not exhausting our map of Specialty & Oncology in this introduction, we are suggesting that these key issues (numbers and no) will contribute much to the race to the cliff.

Key Topics Covered:

- Introduction
- About this Survey
- Areas of Focus
- Current Percentage of Total Drug Spend: Specialty
- Average Expected Percentage Growth of Total Drug Spend: Specialty
- Percentage of Current Specialty Spend: By Indication
- Two- to Three-Years Estimated Growth: Specialty
- Targeted Categories for Increased Management: Specialty
- Current Percentage of Total Drug Spend: Oncology
- Expected Percentage Growth of Total Drug Spend: Oncology
- Largest Categories & Estimated Percentage of Oncology Spending
- Top Areas of Oncology Spending Growth over the Next 2-3 Years
- Top 3 Therapy Classes of Expected Growth: Oncology
- Top 3 Categories of Growth: Rare Diseases
- Parting Thoughts

Companies Mentioned

- Abbvie
- Amgen
- AstraZeneca
- Bayer
- Bristol-Myers Squibb
- Eli Lilly
- Gilead Sciences
- GlaxoSmithKline
- Johnson & Johnson
- Merck
- Novartis
- Pfizer
- Roche
- Sanofi
- Teva

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