Want Drug Pricing Regulation? Why Not AMNOG?

[This article was posted on December 29th 2016 on the Health Affairs blog.  It was co-written with Dr. Karl Lauterbach, the Deputy Leader of the Social Democratic Party in the German Bundestag, and Dr. Elizabeth Seeley of the Harvard Chan School of Public Health.] 

Donald Trump and Hillary Clinton agreed on almost nothing during the 2016 presidential campaign — but they did agree that the U.S. needs to address unaffordable prescription drug prices. And the public also supports this idea. A survey released in October 2016 showed that 64 percent of voters, including 52 percent of Republicans, believe that the federal government should place a “limit on how much pharmaceutical companies can increase prescription drug prices.”germanparliament

Further, 73 percent of all voters (68 percent of Republicans) concur that the federal government should be able to negotiate with drug companies to lower Medicare drug prices for seniors. While the November 8 federal election results have dampened prospects for policy change along these lines, does anyone believe that this issue now will disappear? We think not.

The German Model for Regulating Drug Prices

If political will emerges to tackle this issue, is there a realistic and politically savvy model to use? On what basis would drug purchasers and drug makers negotiate? How would the value of new prescription drugs be determined? And how would genuine scientific innovation be encouraged and rewarded, and not stymied?

We suggest that a superior model to accomplish these goals now exists and can be found in Germany’s drug pricing regulatory system that has performed admirably since 2011. Called AMNOG (the Act to Reorganize Pharmaceuticals Market in the Statutory Health Insurance System or Arzneimittelmarktneuordnungsgesetz), the system has noteworthy advantages in that it:

  • Rewards innovative drugs that provide genuine breakthrough clinical benefits;
  • Provides immediate access to new drugs by allowing marketing, sale, and full reimbursement in the first year, during which time the drug’s clinical benefits are assessed;
  • Uses non-governmental, non-profit organizations for review and decision making, with the pharmaceutical manufacturers bearing much of the costs;
  • Makes decisions based on clear empirical evidence of clinical benefit to patients;
  • Determines prices only after—and based on—a determination of clinical benefits, and through negotiations involving drug companies and key system stakeholders, not government bureaucrats;
  • Avoids controversial tools such as Quality Adjusted Life Years (QALY) that place a monetary value on each additional year of life;
  • Ensures full transparency in all key processes and steps.

Historically, as with the U.S., Germany has had a reputation for high drug prices. Prior to AMNOG, drug prices in Germany were 26 percent higher than average drug prices in the European Union. Since AMNOG’s 2011 launch, by August 2016, 146 new drugs have been assessed. Of the newly assessed drugs, 63 percent were determined to have an additional benefit, though half of those only for select patient groups. In 2015 alone, Germany achieved savings of $1 billion on new drug spending, with discounts averaging 21 percent in this market segment.

If the U.S. cares to examine other national models, AMNOG should top the list. Because of AMNOG, the average annual growth rate in public pharmaceuticals expenditure per capita between 2009 to 2013 in Germany was -0.7 percent, as compared with +2.7 percent in the US. In a recent international comparison of health benefits assessments of pharmaceuticals, Germany showed more rigorous appraisals of new drugs than other countries in the survey.

How the AMNOG process works

First, once a new drug has been demonstrated as safe and efficacious by the European Medicines Agency (the European Union’s equivalent to the U.S. Food & Drug Administration) or by the German Federal Institute for Drugs & Medical Devices, the drug maker may introduce the product into the German market at any initial price of its choosing, fully reimbursed by all German insurance plans for the first 12 months.

Second, during those 12 months, the Federal Joint Committee (G-BA), a non-governmental body of payer, provider, and patient representatives, with authority over coverage decisions for all German payers, commissions a clinical comparative effectiveness review by a non-governmental and non-profit research body known as the Institute of Quality and Efficiency in Healthcare (IQWiG). IQWiG assembles, evaluates, and reports all evidence of a new drug’s clinical effectiveness and benefits compared with standard treatment and/or existing drugs, including data on benefits for different demographic groups. Drug makers must submit all their relevant data in a “Benefit Dossier,” and will face sanctions for withheld information. Results are subject to an expert hearing published and used to inform both doctors and patients.

Third, within six months of a drug’s market introduction, and with IQWiG’s report in hand, the G-BA determines the new drug’s added benefit over existing drugs or treatments, including information on benefits and risks for specific patient subpopulations. New drugs are rates 1-6:

  1. Major added benefit — sustained and substantial improvement not previously achieved by current therapies;
  2. Considerable added benefit — significant improvement over current therapies;
  3. Minor added benefit — moderate improvement;
  4. Added benefit present but not quantifiable;
  5. No added benefit proven;
  6. Lower benefit than current therapies.

A drug can receive differential rankings for varied patient subpopulations. In addition, the quality of the studies and data on which the classification is based is specified in three categories:

  1. Proof of benefit
  2. Indication of benefit
  3. Hint of benefit

The combination of benefit ratings and quality categories summarizes the extent and probability of additional benefits of drugs in patient groups.

Fourth, if the G-BA accepts the IQWiG recommendation and the new drug is ranked in any of categories 1-2-3, then the newly established clinical value rating sets the basis for negotiations between the drug maker and the National Association of Statutory Health Insurances, the organization of all public insurance providers in Germany. If parties cannot reach agreement, the matter is submitted to an arbitration panel for a decision based on other international prices.

Fifth, if a drug offers no additional value over a previously available drug, ranked in categories 4-5-6, then payers will reimburse only at prices currently paid for the older existing drugs or therapies. Drug companies can choose to sell their product at higher prices, though patients who want the newer and lower ranked drug must pay the difference out of their own pockets. Importantly, if a drug company charged an excessive rate for a lower ranked drug in the first year of availability, the extra revenues must be returned to payers. A drug company can opt for their drug to not be assessed, in which case the drug’s price is set through the German reference pricing system. Under the reference pricing system, a drug’s price is based on the price of other drugs in that therapeutic class, including lower priced generic alternatives.

Results and Implications for the United States

As mentioned, in 2015 alone, Germany achieved savings of $1 billion on new drugs, with discounts averaging 21 percent in this pharmaceutical market segment. This savings estimate does not include a calculation for drugs that were placed in categories 4-6, so full savings would be significantly larger. Rather than stifling innovation, in AMNOG’s first four and one half years, 124 new products had completed assessments and launches, and only 13 were withdrawn from consideration.

Though some American policymakers suggest that the U.S. has little to learn from other nations, Germany may be an exception. Unlike single payer systems in Canada and the United Kingdom, Germany has a private multi-payer system where more than 90 percent of the insurance market is managed by non-profit “sickness funds.” Public anger led to AMNOG’s establishment as drug prices began to skyrocket in the last decade, reaching a growth rate of over 6 percent by 2009. Growth rates in the U.S. were 12.2 percent in 2014 and 8.1 percent in 2015.

In the U.S., the Patient Centered Outcomes Research Institute (PCORI), established under the Affordable Care Act, was created to commission clinical-effectiveness research to provide evidence to support patient-centered care, evaluating drugs and medical therapies. Like PCORI, IQWiG in its early days chose research targets on its own initiative. Under AMNOG, IQWiG now systematically reports on all new drugs and also may assess the effectiveness of older ones, including medical devices, plus surgical and screening procedures. PCORI may be well positioned to review manufacturers’ comparative-effectiveness documents as IQWiG now does.

In the U.S. pharmaceutical industry and elsewhere, a growing movement among some drug makers proposes payment based on the “value” of their products rather than on arbitrary price setting. This new “pay-for-value” movement, of course, now extends far beyond the pharmaceutical sector through initiatives such as accountable care organizations, bundled payments, and hospital readmission penalties set in motion by the Affordable Care Act. AMNOG represents a scientific and evidence-based way to pay for drugs based on their value.

For sure, the AMNOG system faces challenges, as any new and complex policy would. At times, the G-BA has chosen comparator drugs about which manufacturers disagree, that have resulted in negative benefit ratings. Parties have disagreed about appropriate end points that manufacturers must include in disclosed studies, especially in domains such as oncology where surrogate endpoints may not reflect ultimate clinical outcomes. However, the G-BA works extensively with manufacturers up front during the assessment process to communicate their choice of comparators and endpoints, allowing manufacturers a hearing or appeals process in which they disagree or develop new data.

Germany’s AMNOG system is value and evidence-based, transparent, non-governmental, publicly managed, and innovation embracing. If the U.S. wants to create an evidence and value-based system to pay for prescription drugs, we could not start at a better place than emulating the AMNOG model.

Amazing Accomplishments in Global Health in 2015

We get so caught up in the Donald and Hillary and Ted and Bernie shows.  Yet there is so much else going on in the world about which most Americans never hear — such as global health.

Permit me to draw attention to This Week in Global Health (TWiGH) which has been producing weekly live online programming on global health topics since mid-2014.  Hosted by Dr. Greg Martin, editor of Globalization and Health, (an open access journal) it’s compelling and accessible.  Recently, the group asked its experts to identify big accomplishments in global health in 2015.  The list grabbed my attention, so here it is – see the YouTube video as well: https://www.youtube.com/watch?v=vHxIYdQyejc

  1. Malaria: After 30 years and $565M, 2015 saw the development of the first-ever malaria vaccine; 50% of world population is at risk at risk and this development just might transform millions of lives for the better.
  1. HIV: The World Health Organization updated its guidelines for HIV treatment recommending that it be universal, and that everyone should be treated as soon as positive test result is made; those on treatment are far less likely to transmit the virus to another person.
  1. Climate change: The Paris Agreement on climate change puts in place the first international brakes on global warming, with 196 participating nations, and legally binding when signed by at least 35 countries.
  1. Bariatric Surgery: Though the spread of this treatment is controversial, it is considered the most important breakthrough in diabetes care since the discovery of insulin, with unrivaled health benefits.
  1. Ebola: We are seeing the beginning of the end of the West African Ebola Crisis – though the ordeal is far from over for 17,000 survivors.
  1. Polio: Last year we saw the elimination of polio from the African continent – the last cases were in Nigeria and in September the WHO said that polio is no longer endemic in Nigeria. Only Afghanistan and Pakistan remain as countries with polio.  Eradication is possible!

sdg5

  1. Approval of the Sustainable Development Goals: 2015 saw the final approval of new international health and social development goals; compared with the earlier Millennium Development Goals, the SDGs are more comprehensive, more inclusive, and financed to encourage sustainable development.
  1. Research: A Nobel Prize was awarded to researchers for novel therapies for parasitic diseases and malaria, demonstrating the vital role and positive impact of research on global health.
  1. Ending Extreme Poverty: The number of people living in extreme poverty (defined as less than $1.90 per day) is down 10%, down from over 900m in 2012 to under 700 million now; a big MDG goal to end extreme poverty by 2030.
  1. Maternal & Child Health: Infant mortality is down to an all time low, down 54% since 1990 down by to 5.9 million, from 63 deaths per 1000 live births in 1990 to 32 in 2015; maternal mortality is down 44%.
  1. Water – In 2015, 91% of the world’s population had access to an improved drinking-water source, compared with 76% in 1990.

Well, wow!  I didn’t know that! Let’s notice and celebrate real progress for citizens of the world.  Let’s hope that 2016 brings other good news for the world.

CVS Quits US Chamber of Commerce over Tobacco

The reaction against the U.S. Chamber of Commerce’s advocacy for the global tobacco industry is growing, first reported last week in the New York Times.

Today, the Times reported that CVS Health Corporation announced that it is quitting the U.S. Chamber because of their work around the world in fighting restrictions on tobacco and smoking.  This follows CVS’s major step last year discontinuing tobacco product sales in all its stores.  Double hurray for CVS!smoking

We are still waiting to see whether Boston’s Steward Health Care System and its CEO Ralph de la Torre, will turn their words into action.  Last week, a Steward spokesperson said: “If the chamber is in fact advocating for increased smoking, we do not agree with them on this public health issue.”  Now that the Chamber’s advocacy is clear, it’s time to go beyond words — as Paul Levy makes clear.

The flak against the Chamber is going global, as Margaret Chan, Director General of the World Health Organization, made clear this week:

“By lobbying against well-established, widely accepted and evidence-based tobacco control public health policies, the U.S. Chamber of Commerce undermines its own credibility on other issues … So long as tobacco companies continue to be influential members of the chamber, legitimate businesses will be tarred with the same brush.”

The Chamber is feeling the heat and beginning to lash out against those taking them to task for the deathly advocacy.  Here’s part of their recent statement: “It’s unfortunate that a concerted misinformation campaign about the U.S. Chamber’s position on smoking has resulted in a company leaving our organization.”

If the Chamber wants any legitimacy on this issue, step number one — come clean on how much money you have taken from tobacco companies over the past 20 years. Put it all on the table without delay.  Otherwise — you have no credibility.

U.S. Chamber of Commerce and Global Tobacco: The Heat Is On — Sign the Petition!

Signs of life regarding last week’s New York Time’s expose of the U.S. Chamber of Commerce’s role as the leading advocate around the globe to prevent governments from taking steps to control and reduce their citizens’ use of tobacco products:money-pile-188

  • Strong New York Times editorial, “Tarred by Tobacco:”
    • “Now that it is clear what kind of pro-tobacco advocacy the chamber is carrying out, the organization’s members, particularly in the health care industry, ought to speak out. Do they want their names associated with such a blatant attempt to stop governments in developing countries from enacting sensible public health policies?”
  • Strong Washington Post editorial:
    • “A chamber spokesman told us that the organization “is not an advocate for cigarette smoking and we know that smoking carries obvious health risks” but that the group is opposing encroachment on business rights. Does a health warning on a pack encroach on intellectual property of a cigarette company? We doubt it.”
  • Joint statement by U.S. Senators Sherrod Brown, Richard Blumenthal, Dick Durbin, Jeff Merkley, Al Franken, Elizabeth Warren, and Sheldon Whitehouse:
    • “The U.S. Chamber of Commerce’s decision to use its international clout to fight regulations of tobacco products around the world is craven and unconscionable. Commerce member companies should be concerned that their good name is sullied in efforts to strike down public health protections worldwide. The U.S. Chamber of Commerce is, in effect, renting its letterhead and name to big tobacco, contrary to responsible corporate interests and Americans’ interests in improving global public health. We urge the chamber to rethink this strategy and instead find partners to help improve global public health, not strengthen efforts that will worsen the health of millions globally and cause innumerable deaths from tobacco usage.”
  • The Campaign for Tobacco Free Kids has started a Facebook Petition to tell the Chamber to cut it out.  Add your name please!

Continue reading “U.S. Chamber of Commerce and Global Tobacco: The Heat Is On — Sign the Petition!”

The U.S. Chamber of Cancer

I recall sitting in my office in the U.S. Senate’s Hart Office Building in DC between 2008 and 2010 with my desk TV always turned onto one of the cable news channels when the Senate was not in session.  Incessantly, I saw TV ads from the U.S. Chamber of Commerce speaking as the “voice of small business” attacking Democratic efforts to achieve national health reform and universal coverage because of the harm it would cause small business.

Only later, in 2011, did we learn that the entire tab for that endless advertising campaign was paid for by major U.S. health insurance companies and their trade association, America’s Health Insurance Plans (AHIP) to the tune of more than $100 million in direct donations.  Later, I had the chance to ask AHIP President Karen Ignagni (who recently stepped down) why these donations had never been disclosed.  “Because no one ever asked us,” she replied.

Today, the New York Times reports a devastating story about the role the U.S. Chamber of Commerce is playing in advancing the interests of the global tobacco industry in thwarting tobacco regulation and smoking prevention efforts in nations all around the globe:

“From Ukraine to Uruguay, Moldova to the Philippines, the U.S. Chamber of Commerce and its foreign affiliates have become the hammer for the tobacco industry, engaging in a worldwide effort to fight antismoking laws of all kinds, according to interviews with government ministers, lobbyists, lawmakers and public health groups in Asia, Europe, Latin America and the United States.”

Continue reading “The U.S. Chamber of Cancer”