Gottlieb speaks at length about reimbursement issues and dysfunctional payment policies and how they are maladapted to innovation. Discussion that investors are forced to use arcane reimbursement rules to guide investments and what products can be brought to market - not medical science and best clinical advances and outcomes.
Find it here:
http://www.aei.org/publication/remarks-before-the-national-press-club-headliners-luncheon/
He builds to this conclusion:
Our biggest obstacles may be policy. Our biggest challenges may be our inability to devise coverage schemes that can enable the efficient, and when appropriate the rapid adoption of these innovations; allow for a return on capital that maintains investment in these high-risk endeavors; and most important, enables equal access to a cure regardless of a person’s wealth.
We must address these challenges directly. We must be willing to start over with new payment schemes when it comes to these paradigm leaps like cell and gene therapy.
There’s no need to try and fit a cure into the existing payment schemes, when we already know those structures have struggled to keep pace with this innovation.
If of interest, I've included a lightly annotated/highlighted version below the break.
See also an OpEd article by Gottlieb on CNBC, May 20, here.
In a March 2019 speech to the Federation of American Hospitals, the notable senior White House health policy expert Joe Grogan similarly decried a health financing system too dependent on gaming and coding. Summary here.
Gottlieb 8 minute interview with CNBC, May 21, here.
Gottlieb 24 minute interview during CNBC health conference, May 22, here.
DR GOTTLIEB, 3200 words:
May 10, 2019
Remarks before the National Press Club headliners luncheon
I had the privilege to be at FDA during a remarkable period of political and scientific opportunity. On the one hand, we had the tailwind of substantial new authorities and resources to advance novel medical innovation. That policy momentum came from the recently passed 21st Century Cures Act and the reauthorization of the Prescription Drug User Fee Act. At the same time, we inherited the chance to craft modern rules to govern the development and safe regulation of these new products.
With gene therapies, cell based regenerative medicine, more targeted therapies; and the introduction of better tools for delivering therapies from digital health apps to artificial intelligence to next generation sequencing – we’re living in an age ofmomentous progress and rapid cycles of innovation. We have more ability to use technology to achieve sizable and secular advances in medicine than ever before.
This stands in stark contrast to the history of medicine.
That history was generally marked by a gradual evolution in the standard of care.
That history is one where small advances in science each consolidated to provide incremental improvements in medical care over long stretches of time.
By contrast, the age we’re living in now is one where the improvement to care and outcomes, are no longer gradual. Instead, theadvances can be rapid and dramatic.
It’s a time where in one year, we can be treating the chronic burden of a disease like sickle cell. And a year later, we’re able to cure the same illness with a gene therapy.
This is what I saw at the FDA.
To advance these opportunities, at FDA we focused on shaping the modern regulatory framework for the efficient and safe regulation of these new platforms.
Looking back, I hope the policies we crafted, and set in motion, will be one of the defining features of the period of time that I had the opportunity to lead the agency.
But with all of these scientific models, as we firm up the framework for developing and safely regulating these technologies, we’re struggling with the proper framework for reimbursing them. We need to make sure that patients who can benefit from these advances have access to them, regardless of their economic status.
It isn’t just a question of price. It’s fundamentally a question of access.
Price impacts access. But it’s not the only factor impacting access.
Sometimes the high price of a transformative innovation is well justified by the risk and costs of development, and the value that’s being delivered to patients.
But even when a price that can be justified by the value a product offers, access can still be forestalled — especially for patients in Medicaid. The insurance type, and rules governing coverage, matter. And in an age of curative therapy, access is paramount.
A treatment that can deliver a cure takes on a special public health value.
People’s destiny should not depend on whether they can pay for a cure.
The very success of the pharmaceutical sector in delivering outright cures for disease, raises the imperative to make sure everyone has equal access to these opportunities.
This can be especially true when it comes to transformative new technology where the costs are high, and the prerogative to widely and rapidly adopt a new product is strong owing to its transformative potential. These kinds of paradigm changes don’t fit neatly into the way public insurance schemes are structured and budgeted.
As a result, increasingly we see privately insured patients have faster and broader access to potentially lifesaving new technologies, while patients in Medicaid programs or with skinny health plans can be locked out of these same opportunities.
That sets up an intolerable circumstance. I believe the tension over the high price of these technologies is often an expression of angst over this differential access.
It’s a rightful angst. People should be upset by these circumstances.
But we need to focus our attention on the public health dimension.
And that dimension turns on access.
It turns on making sure that when a cure is at hand for a vexing disease, the ability to alter the destiny of a child or a cancer patient shouldn’t be rationed.
We’re seeing these same struggles play out in Medicare.
The current leadership at CMS is acutely focused on the challenges of paying for disruptive and beneficial new technologies like gene therapy and Car-T. They’ve advanced a number of thoughtful policies to try and contemplate how Medicare will create the modern framework to provide efficient, equitable access to these advances.
But despite these efforts, challenges persist.
It’s a result of longstanding, structural features of Medicare that make it hard for the program to embrace coverage of new technology. And Medicare isn’t an ordinary payer. The decisions it makes end up driving a lot of the private insurance market.
By design, Medicare has features that are often deliberately calculated to slow the introduction of new technology, and smooth out its costs over time.
It can take a year or more to adjudicate a new technology through a national coverage determination. Congress established this process to give time for public comment.
But the delay can deny patients access to breakthrough technology for a long time.
Although a new product is covered while under a national coverage determination, hospitals can be confused about how it will be covered and stop providing it.
This is the case with Car-T. By contrast, the private health plans do a more seamless job integrating new technology. One consideration is to delay NCDs on newly approved breakthrough products until they’ve been on the market for two or three years, so CMS can see how the new therapy works in real world settings.
Implementing a national coverage determination so close to a product’s first launch can thwart adoption. But these ideas are just tweaks to a struggling model.
There are other, similar challenges when it comes to hospital-administered technologies like Car-T that are paid for under existing hospital-based diagnostic related groups or DRGs. The DRGs are basically bundled payments for categories of items and services, including drugs. But it can take a long time to develop a new reimbursement level for a DRG in order to accommodate the cost of a new technology.
The difficulty of paying for new, hospital-based innovations makes entrepreneurs reluctant to pursue new treatments that must be administered in the hospital setting.
New technology add on payments are meant as a stopgap way to offset the costs of beneficial new technologies while Medicare modifies its other payment rules.
The leadership of Medicare has recently taken thoughtful new steps to more routinely extend these payments to breakthrough devices and increase the rate that’s paid.
But these payments are still often insufficient to offset the reimbursement shortfalls.
This can be especially true for drugs.
Here, payment is sometimes less than 50 percent of the cost of a drug itself.
The add on payments, while helpful, are another policy band aide that don’t fully cover the program’s systemic wounds.
In the end, there’s a bureaucratic roulette when it comes to coverage for new technologies. Which Medicare payment scheme a drug falls into has a lot to do with its commercial success, and in turn, whether investors will back it in the first place.
That makes no sense. It’s exactly backward.
Innovation should follow the clinical opportunity. Not payment rules.
This is especially true when payment rules are more dependent on site of service than any measure of value to patients or the benefits that patients are going to derive.
In the case of Car-T, we’re seeing a growing reluctance to invest in new development programs for fear that the reimbursement framework can’t accommodate even the best of these innovations. The late Car-T pipeline is robust. But earlier investment in Car-T isn’t as vibrant as the clinical opportunity set would seem to allow.
We’re seeing situations where investment and development is being fashioned in a way to create products that can carve around reimbursement obstacles, rather than following the science toward a product that will have the best therapeutic profile.
Consider Car-T for the treatment of cancer.
Car-T works by modifying T cells to teach them to recognize, and attack, cancer cells.
CARs are proteins that allow the T cells to recognize an antigen expressed on the surface of tumor cells. There’s a belief that for certain cancers, the ideal Car is one where the T cells are derived from a patient, modified to recognize their specific tumor, and then re-inserted into the same patient. This is referred to as autologous therapy. It’s based on the patient’s own cells; obtained from that same individual.
But the use of autologous cells raises the cost of goods. It also lengthens the time it takes to develop each unit of the product. The process requires a complicated supply chain. Cells must be harvested from the patient through a procedure that’s similar to certain types of blood donations. The cells are then sent to a central location to be programmed using a gene therapy to recognize a patient’s specific cancer cells.
The newly programmed cells are then expanded. And once a sufficient quantity is on hand, the cell product is sent back to the clinic to be infused into the patient.
The entire process can typically take a few weeks from cell harvesting to reinsertion.
The autologous features contribute to efficacy. But there’s a belief that these same attributes may also contribute to the risks that require it to be infused in hospitals. Risks like the cytokine release syndrome. Because these drugs are delivered in a hospital, it puts them under the inpatient hospital-based payment scheme.
And here again is the rub.
Being under the hospital-based payment scheme means the hospitals lose money on each infusion. Site of service, rather than clinical considerations, drive payment.
Hospitals have lost money on each infusion. Now, some aren’t even able to treat eligible patients with this new technology. Manufacturers have had a hard time getting pricing that they say compensates for the cost – or the value they’re offering.
As a consequence, much of the new investment in Car-T is going toward developing allogeneic treatments. These are cells that can be taken off the shelf and aren’t derived from – or specific to – each individual patient. It’s more akin to a traditional biological.
Make no mistake. There isn’t a clear view that the allogeneic cells work as well as the autologous preparations. In fact, there’s a general sense that they probably won’t.
Instead, the allogeneic cells might be easier to administer in the doctors’ office or hospital outpatient department. That could game around the reimbursement challenges plaguing Medicare’s current inpatient system. The allogeneic cells would fit the mold of how Medicare pays for other biologicals in these settings.
So what’s happening is that the investment and development strategies are being shaped in some measure to match the reimbursement paradigm, rather than merely leverage the best scientific and clinical opportunity for the patient.
The reimbursement framework for a cancer cure should be the easy part.
The coverage should be engineered to accommodate the best science.
Not the other way around.
This is the tangible consequence of the sometimes-ossified government payment schemes. And it can’t be argued here that Medicare is doing its job and just extracting a payment matched to the value of the treatment. That’s not the judgment being applied here. There’s no reason to believe that the value of the allogeneic products will exceed the autologous preparations when all things are considered.
Over time, these challenges have not been lost on policymakers. But the policy band aides crafted to blunt these incongruencies don’t cover the wounds.
The inpatient prospective payment system, which essentially bundles the payment for hospital-based services, make it hard for new technologies to qualify for add-on payments that were meant to offset the cost of disruptive new innovations.
Medicare faces challenges on the outpatient side too. Under office based and hospital outpatient payment schemes, Medicare can be slow to make coverage decisions.
It can also pay for things in ways that don’t drive value and evidence creation.
The program chronically overpays for services that deliver negligible value. It’s subject to manipulation and fraud. And it’s slow to spot the ways that that its insurance schemes are gamed – or to erect rules to curtail these practices.
Now this is, in no way, a knock on the people at CMS who recognize these challenges. They’re working hard to address them. It’s a function of the rules they’re forced to operate under. And the tools that they have to address these challenges.
There are some notable examples of where the labored process by which Medicare adopts new innovation slowed beneficial advances in the practice of medicine.
In the early 2000s, CMS substantially and chronically underpaid for a new class of radiopharmaceutical drugs. The drugs were designed to deliver a radioactive payload directly to cancer cells. Two of these drugs were Bexxar and Zevalin.
The FDA approved the drugs to treat patients with relapsed or refractory non-Hodgkins lymphoma whose disease no longer responded to chemo- or radiotherapy. And evidence showed the drugs could lead to longer remissions in some patients if given before conventional therapy. But CMS set reimbursement rates for Bexxar and Zevalin at about $10,000 and $15,000, respectively. And the drugs actually cost more than $20,000 per dose. Moreover, the treatment could require one or more doses.
Hospitals realized that they weren’t getting paid commensurate to what the products cost. So, they stopped doing this type of therapy in hospital outpatient departments.
And if Medicare beneficiaries couldn’t get the drug, well, nobody could.
Under federal rules, hospitals that don’t offer a drug to Medicare patients are barred from offering it to others, even if other insurers fully cover the treatment costs.
The drugs were a clinical success for certain patients.
But the medicines were a commercial failure.
The episode had a broader effect on the market for other radiopharmaceuticals that had to be administered in hospital facilities; demonstrating Medicare’s outsized influence. Innovators soon got out of the business of making radiopharmaceutical drugs despite the promise of this technological approach to the treatment of cancer.
The Medicare scheme, by design, aims to slow the introduction of new technology platforms – and the paradigmatic clinical change that can result from this progress.
The program is structured in a way to smooth the fiscal impact of this change.
Yet the nature of where and how the innovation occurs is offering the opportunity for exactly the opposite – sharp and sweeping improvements in how we approach the care of many diseases; and even the opportunity to cure intractable illnesses.
Sometimes the innovation is so novel it falls entirely outside any existing bucket of benefits. In these cases, Medicare grapples with a way to pay for a product even in circumstances where it embraces the technology.
Such was the case with insulin pumps.
The remedy can be to seek specific authority from Congress to cover a new benefit class. But patients can’t wait for Congress to separately act on each new category of technology, every time there’s a paradigm change in the state of medical care.
We should consider these impacts as we contemplate “Medicare for all.”
Medicare is a slow – and sometimes resistant – payer for new technology. It’s been sluggish to expand coverage for cardiac devices like minimally invasive aortic valves, past the point where the clinical prerogative was inevitable. The policy reforms that it’s pursued to patch these structural and cultural challenges have often fallen short.
Now I know Medicare has a seductive political appeal for its seeming simplicity. So much so, that prospects of a single Medicare payer are nearer than many appreciate.
The political candidates advancing this proposal could implement it on a fairly slim majority. The two key elements of “Medicare for All” could be achieved through budget reconciliation — expanding benefits to include younger people, and eliminating private insurance coverage by taxing employer sponsored insurance
Budget reconciliation is that special legislative vehicle that circumvents the filibuster. It lets a bill proceed with 51 votes. And it’s been used in similar circumstances.
If a Democratic candidate wins the White House in 2020, it’s conceivable that the new President could also seize control of the Senate. Democrats already used budget reconciliation to pass much of Obamacare, and Republicans used it for their repeal.
The Congressional Budget Office would estimate that much of the cost of employer-sponsored coverage would be passed through to employees in the form of higher wages. These earnings would then be subject to FICA and income tax. That increased revenue could offset a lot of the cost of the Medicare expansion.
Expanding covered services in legislation may be hard under reconciliation. But lowering the eligibility age or even eliminating cost sharing might be possible.
And Congress could leave it to CMS to approve coverage for new treatments within the existing benefit categories. The agency already has legal discretion to determine which services are “reasonable and necessary” for diagnosis or treatment.
If Medicare is expanded to cover younger patients, rather than hardwiring specific new benefits into the initial legislation, these decisions could be left to rulemaking.
Now I’m not advocating this approach.
I think it could squelch innovation and medical progress.
There are many reasons to be highly skeptical of expanding Medicare and using it to crowd out private coverage. And the potential impact on innovation and the adoption of transformative new medical technology should not be underestimated.
The private market has shown a much better ability to incorporate beneficial new innovations than government insurance programs like Medicare and Medicaid. It’s been much more willing to embrace sweeping advances in medical care.
But consider if there was Medicare for All.
With CMS driving the adoption curve for new innovation, we’re likely to see even more investment be distorted in ways that are designed to fit advances into the rigid, and often outdated coverage categories rather than optimize the scientific opportunity set. We’re likely to see adoption curves slow further. And we’re likely to see the chance for paradigmatic changes in medical practice become more elusive.
We’re living in a time where the opportunity from science to alter or cure disease is firmly at hand. Scientific challenges remain. But our biggest obstacles may be policy.
Our biggest challenges may be our inability to devise coverage schemes that can enable the efficient, and when appropriate the rapid adoption of these innovations; allow for a return on capital that maintains investment in these high-risk endeavors; and most important, enables equal access to a cure regardless of a person’s wealth.
We must address these challenges directly. We must be willing to start over with new payment schemes when it comes to these paradigm leaps like cell and gene therapy.
There’s no need to try and fit a cure into the existing payment schemes, when we already know those structures have struggled to keep pace with this innovation.
The scientific and regulatory challenges may turn out to be the relatively easy part when compared to the challenge for paying for these things. Especially if we want to finance these opportunities in a fashion that optimizes access to patients who most need them and doesn’t discourage future investment and innovation.
