June 03, 2014

A Tale of Two Medicines

Imagine two versions of a medication that are essentially identical but one costs 100 times as much as the other. Using the more expensive variety enriches the drug company that manufactures it and the doctors that administer it—with patients and the American people paying the price. Yet that’s exactly what’s happening with two drugs that are used to treat a form of macular degeneration and diabetic macular edema, 2 common conditions that cause blindness, principally in older people. And the reason this is happening is the steadfast refusal of Congress to allow Medicare to consider cost in making reimbursement decisions.

The story came to light when Medicare released data in April about how it spends its money. It turns out that eye doctors are among the physicians who get more than a million dollars a year from Medicare. The reason: they inject the drug Lucentis (ranibizumab) into the eyes of their patients, an effective treatment for macular degeneration or macular edema, and are paid the average price of the drug plus 6% overhead by Medicare. They could, however, inject a far cheaper version of the drug, using the chemotherapy agent Avastin (bevacizumab) off-label. In absolute dollars, Lucentis costs $2023 per dose and Avastin costs $55 per dose. And a typical patient is treated up to 12 times per year, sometimes for years.

It turns out that that National Institutes of Health (NIH) actually funded a study of over 1000 patients comparing treatments for the more common of the 2 eye conditions for which the drug is used, neovascular macular degeneration. The study found no difference in effectiveness between the 2 drug variants, Lucentis and Avastin. Not enough patients were enrolled to determine if there are statistically significant differences in safety. That is, it’s possible that one version of the drug is safer—and since a compounding pharmacy has to convert the chemotherapy drug Avastin into the drug used by eye doctors, this is a theoretical possibility—but we don’t know for sure. Subsequent studies have found minor differences in the safety profiles of Avastin and Lucentis, which are both made by the same drug company.

Carefully performed modeling of what we can expect over the next 10 years—making reasonable assumptions about how common the eye conditions will be, how beneficial treatment is likely to be, the extent of side effects—shows that if current practice patterns continue, in which 2/3 of people are treated with the cheaper drug and 1/3 with the costlier drug, then Medicare will spend $20 billion on these 2 treatments and patients will spend $5 billion (on co-pays). If, however, everyone started using the cheaper drug, then Medicare would spend only $2 billion and patients only $420 million. And if everyone switched to the more expensive drug, Medicare would spend $57 billion and patients would spend $14 billion. So what should we do?

A recent opinion piece in JAMA suggests that Medicare, which is currently prohibited from negotiating over drug prices, could get around this problem by using a technical loophole. It can exercise flexibility in how it figures out how much to pay for a product or service if the current payment amounts are “inherently unreasonable because they are either grossly excessive or deficient.” To date, this process has never been invoked in paying for medications.

The article in Health Affairs describing the predictive model suggests that Medicare could selectively increase reimbursement to doctors who use the cheaper drug or that Congress could modify the regulations for “biosimilars” (as the generic versions of biologically complex drugs such as Lucentis are called). All these approaches take as a given that for Medicare to spend 1/6 of its entire Medicare Part B budget on one drug is absurd. Just how absurd becomes apparent if we look at the cost-effectiveness of Lucentis: medical costs would go up $2 million/QALY (quality-adjusted life year) if everyone took Lucentis instead of Avastin, though most health economists consider $50,000-$100,000/QALY a reasonable amount to pay.

What all this tells me is that it’s time we stop pretending that cost-effectiveness analysis is unethical. Spending $25 billion in 10 years when we could achieve the same end by spending $2 billion is what’s unethical. Comparative effectiveness research, which is supported by the Affordable Care Act and which forms the foundation of the new independent research agency, the Patient Centered Outcomes Research Institute (PCORI), is legally prohibited from considering cost. But if we don’t start considering cost explicitly, we will pay dearly in the not so distant future.

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