FEBRUARY 2008 VOLUME 1, NUMBER 1

©2008 Engage Healthcare Communications, LLCwww.AHDBonline.com

THE PEER-REVIEWED STAKEHOLDERS’ FORUM FOR DRUG BENEFIT DESIGN™

PREMIER

ISSUE

Creating a 21st-Century Intelligent Health SystemNewt Gingrich, Nancy Desmond

Interview: The Impact of CMS on Biotech Drug Coverage (Part 1)Joseph Antos

Disruptive Innovation: Value-Based Health PlansF. Randy Vogenberg

Role of NCCN in Integrating Cancer Clinical Practice Guidelines into the Healthcare DebateAl B. Benson, Elizabeth Brown

Measuring the Value of Treatment to Patients: Patient-ReportedOutcomes in Drug DevelopmentRichard J. Willke

What Kind of Healthcare Debate Do We Want?Robert E. Henry

- FDA Watch- Industry Trends

REGULATORY

BUSINESS

CLINICAL

EDITORIAL

COLUMNS

™

Brief Summary of Prescribing InformationUSE IN PREGNANCYWhen used in pregnancy during the second and third trimesters, drugs that act directly on therenin-angiotensin system can cause injury and even death to the developing fetus. When pregnancy is detected, MICARDIS® tablets should be discontinued as soon as possible.See WARNINGS: Fetal/Neonatal Morbidity and Mortality

INDICATIONSMICARDIS is indicated for the treatment of hypertension. It may be used alone or in combination with otherantihypertensive agents.CONTRAINDICATIONSMICARDIS (telmisartan) is contraindicated in patients who are hypersensitive to any component of this product.WARNINGSFetal/Neonatal Morbidity and Mortality Drugs that act directly on the renin-angiotensin system can causefetal and neonatal morbidity and death when administered to pregnant women. Several dozen cases have beenreported in the world literature in patients who were taking angiotensin converting enzyme inhibitors. Whenpregnancy is detected, MICARDIS (telmisartan) tablets should be discontinued as soon as possible. The use ofdrugs that act directly on the renin-angiotensin system during the second and third trimesters of pregnancyhas been associated with fetal and neonatal injury, including hypotension, neonatal skull hypoplasia, anuria,reversible or irreversible renal failure, and death. Oligohydramnios has also been reported, presumablyresulting from decreased fetal renal function; oligohydramnios in this setting has been associated with fetallimb contractures, craniofacial deformation, and hypoplastic lung development. Prematurity, intrauterinegrowth retardation, and patent ductus arteriosus have also been reported, although it is not clear whetherthese occurrences were due to exposure to the drug. These adverse effects do not appear to have resultedfrom intrauterine drug exposure that has been limited to the first trimester. Mothers whose embryos andfetuses are exposed to an angiotensin II receptor antagonist only during the first trimester should be soinformed. Nonetheless, when patients become pregnant, physicians should have the patient discontinue theuse of MICARDIS tablets as soon as possible. Rarely (probably less often than once in every thousandpregnancies), no alternative to an angiotensin II receptor antagonist will be found. In these rare cases, the mothersshould be apprised of the potential hazards to their fetuses, and serial ultrasound examinations should beperformed to assess the intra-amniotic environment. If oligohydramnios is observed, MICARDIS tablets shouldbe discontinued unless they are considered life-saving for the mother. Contraction stress testing (CST), anon-stress test (NST), or biophysical profiling (BPP) may be appropriate, depending upon the week ofpregnancy. Patients and physicians should be aware, however, that oligohydramnios may not appear untilafter the fetus has sustained irreversible injury. Infants with histories of in utero exposure to an angiotensinII receptor antagonist should be closely observed for hypotension, oliguria, and hyperkalemia. If oliguriaoccurs, attention should be directed toward support of blood pressure and renal perfusion. Exchangetransfusion or dialysis may be required as a means of reversing hypotension and/or substituting fordisordered renal function. There is no clinical experience with the use of MICARDIS tablets in pregnantwomen. No teratogenic effects were observed when telmisartan was administered to pregnant rats at oraldoses of up to 50 mg/kg/day and to pregnant rabbits at oral doses up to 45 mg/kg/day. In rabbits,embryolethality associated with maternal toxicity (reduced body weight gain and food consumption) wasobserved at 45 mg/kg/day [about 12 times the maximum recommended human dose (MRHD) of 80 mg on amg/m2 basis]. In rats, maternally toxic (reduction in body weight gain and food consumption) telmisartandoses of 15 mg/kg/day (about 1.9 times the MRHD on a mg/m2 basis), administered during late gestation andlactation, were observed to produce adverse effects in neonates, including reduced viability, low birth weight,delayed maturation, and decreased weight gain. Telmisartan has been shown to be present in rat fetusesduring late gestation and in rat milk. The no observed effect doses for developmental toxicity in rats andrabbits, 5 and 15 mg/kg/day, respectively, are about 0.64 and 3.7 times, on a mg/m2 basis, the maximumrecommended human dose of telmisartan (80 mg/day). Hypotension in Volume-Depleted Patients Inpatients with an activated renin-angiotensin system, such as volume- and/or salt-depleted patients (e.g., those being treated with high doses of diuretics), symptomatic hypotension may occur after initiation oftherapy with MICARDIS® tablets. This condition should be corrected prior to administration of MICARDIS tablets,or treatment should start under close medical supervision with a reduced dose. If hypotension does occur, thepatient should be placed in the supine position and, if necessary, given an intravenous infusion of normalsaline. A transient hypotensive response is not a contraindication to further treatment, which usually can becontinued without difficulty once the blood pressure has stabilized.PRECAUTIONSGeneral. Impaired Hepatic Function: As the majority of telmisartan is eliminated by biliary excretion, patientswith biliary obstructive disorders or hepatic insufficiency can be expected to have reduced clearance. MICARDIS(telmisartan) tablets should be used with caution in these patients. Impaired Renal Function: As a consequenceof inhibiting the renin-angiotensin-aldosterone system, changes in renal function may be anticipated insusceptible individuals. In patients whose renal function may depend on the activity of the renin-angiotensin-aldosterone system (e.g., patients with severe congestive heart failure), treatment with angiotensin-converting enzyme inhibitors and angiotensin receptor antagonists has been associated with oliguria and/orprogressive azotemia and (rarely) with acute renal failure and/or death. Similar results may be anticipatedin patients treated with MICARDIS tablets. In studies of ACE inhibitors in patients with unilateral or bilateralrenal artery stenosis, increases in serum creatinine or blood urea nitrogen were observed. There has beenno long term use of MICARDIS tablets in patients with unilateral or bilateral renal artery stenosis but an effectsimilar to that seen with ACE inhibitors should be anticipated. Information for Patients. Pregnancy: Femalepatients of childbearing age should be told about the consequences of second- and third-trimester exposureto drugs that act on the renin-angiotensin system, and they should also be told that these consequences donot appear to have resulted from intrauterine drug exposure that has been limited to the first trimester. Thesepatients should be asked to report pregnancies to their physicians as soon as possible. Drug Interactions.Digoxin: When telmisartan was coadministered with digoxin, median increases in digoxin peak plasmaconcentration (49%) and in trough concentration (20%) were observed. It is, therefore, recommended thatdigoxin levels be monitored when initiating, adjusting, and discontinuing telmisartan to avoid possible over-or under-digitalization. Warfarin: Telmisartan administered for 10 days slightly decreased the mean warfarintrough plasma concentration; this decrease did not result in a change in International Normalized Ratio (INR).Other Drugs: Coadministration of telmisartan did not result in a clinically significant interaction withacetaminophen, amlodipine, glibenclamide, simvastatin, hydrochlorothiazide or ibuprofen. Telmisartan is notmetabolized by the cytochrome P450 system and had no effects in vitro on cytochrome P450 enzymes,except for some inhibition of CYP2C19. Telmisartan is not expected to interact with drugs that inhibitcytochrome P450 enzymes; it is also not expected to interact with drugs metabolized by cytochrome P450enzymes, except for possible inhibition of the metabolism of drugs metabolized by CYP2C19.Carcinogenesis, Mutagenesis, Impairment of Fertility There was no evidence of carcinogenicity whentelmisartan was administered in the diet to mice and rats for up to 2 years. The highest doses administered tomice (1000 mg/kg/day) and rats (100 mg/kg/day) are, on a mg/m2 basis, about 59 and 13 times, respectively,the maximum recommended human dose (MRHD) of telmisartan. These same doses have been shown toprovide average systemic exposures to telmisartan >100 times and >25 times, respectively, the systemicexposure in humans receiving the MRHD (80 mg/day). Genotoxicity assays did not reveal any telmisartan-related effects at either the gene or chromosome level. These assays included bacterial mutagenicity testswith Salmonella and E. coli (Ames), a gene mutation test with Chinese hamster V79 cells, a cytogenetic testwith human lymphocytes, and a mouse micronucleus test. No drug-related effects on the reproductiveperformance of male and female rats were noted at 100 mg/kg/day (the highest dose administered), about 13times, on a mg/m2 basis, the MRHD of telmisartan. This dose in the rat resulted in an average systemic exposure(telmisartan AUC as determined on day 6 of pregnancy) at least 50 times the average systemic exposure inhumans at the MRHD (80 mg/day). Pregnancy Pregnancy Categories C (first trimester) and D (second andthird trimesters). See WARNINGS, Fetal/Neonatal Morbidity and Mortality. Nursing Mothers It is notknown whether telmisartan is excreted in human milk, but telmisartan was shown to be present in the milk oflactating rats. Because of the potential for adverse effects on the nursing infant, a decision should be made whetherto discontinue nursing or discontinue the drug, taking into account the importance of the drug to the mother.Pediatric Use Safety and effectiveness in pediatric patients have not been established. Geriatric Use Of thetotal number of patients receiving MICARDIS in clinical studies, 551 (18.6%) were 65 to 74 years of age and 130(4.4%) were 75 years or older. No overall differences in effectiveness and safety were observed in these patientscompared to younger patients and other reported clinical experience has not identified differences in responsesbetween the elderly and younger patients, but greater sensitivity of some older individuals cannot be ruled out.ADVERSE REACTIONSMICARDIS (telmisartan) has been evaluated for safety in more than 3700 patients, including 1900 treated for

over six months and more than 1300 for over one year. Adverse experiences have generally been mild andtransient in nature and have only infrequently required discontinuation of therapy. In placebo-controlled trialsinvolving 1041 patients treated with various doses of telmisartan (20-160mg) monotherapy for up to 12 weeks,an overall incidence of adverse events similar to that of placebo was observed. Adverse events occurring at anincidence of 1% or more in patients treated with telmisartan and at a greater rate than in patients treated withplacebo, irrespective of their causal association, are presented as follows: The most common adverse eventsoccurring with MICARDIS Tablets monotherapy at a rate of e1% and greater than placebo, respectively, were:upper respiratory tract infection (URTI) (7%, 6%), back pain (3%, 1%), sinusitis (3%, 2%), diarrhea (3%, 2%), andpharyngitis (1%, 0%). In addition to the adverse events, the following events occurred at a rate of 1% but wereat least as frequent in the placebo group: influenza-like symptoms, dyspepsia, myalgia, urinary tract infection,abdominal pain, headache, dizziness, pain, fatigue, coughing, hypertension, chest pain, nausea and peripheraledema. Discontinuation of therapy due to adverse events was required in 2.8% of 1455 patients treated withMICARDIS tablets and 6.1% of 380 placebo patients in placebo-controlled clinical trials. The incidence of adverseevents was not dose-related and did not correlate with gender, age, or race of patients. The incidence of coughoccurring with telmisartan in six placebo-controlled trials was identical to that noted for placebo-treatedpatients (1.6%). In addition to those listed above, adverse events that occurred in more than 0.3% of 3500patients treated with MICARDIS monotherapy in controlled or open trials are listed below. It cannot bedetermined whether these events were causally related to MICARDIS tablets: Autonomic Nervous System:impotence, increased sweating, flushing; Body as a Whole: allergy, fever, leg pain, malaise; Cardiovascular:palpitation, dependent edema, angina pectoris, tachycardia, leg edema, abnormal ECG; CNS: insomnia,somnolence, migraine, vertigo, paresthesia, involuntary muscle contractions, hypoaesthesia; Gastrointestinal:flatulence, constipation, gastritis, vomiting, dry mouth, hemorrhoids, gastroenteritis, enteritis, gastroesophageal reflux,toothache, non-specific gastrointestinal disorders; Metabolic: gout, hypercholesterolemia, diabetes mellitus;Musculoskeletal: arthritis, arthralgia, leg cramps; Psychiatric: anxiety, depression, nervousness; ResistanceMechanism: infection, fungal infection, abscess, otitis media; Respiratory: asthma, bronchitis, rhinitis, dyspnea,epistaxis; Skin: dermatitis, rash, eczema, pruritus; Urinary: micturition frequency, cystitis; Vascular:cerebrovascular disorder; and Special Senses: abnormal vision, conjunctivitis, tinnitus, earache. During initialclinical studies, a single case of angioedema was reported (among a total of 3781 patients treated withtelmisartan). Clinical Laboratory Findings In placebo-controlled clinical trials, clinically relevant changes instandard laboratory test parameters were rarely associated with administration of MICARDIS tablets.Hemoglobin: A greater than 2 g/dL decrease in hemoglobin was observed in 0.8% telmisartan patientscompared with 0.3% placebo patients. No patients discontinued therapy due to anemia. Creatinine: A 0.5 mg/dLrise or greater in creatinine was observed in 0.4% telmisartan patients compared with 0.3% placebopatients. One telmisartan-treated patient discontinued therapy due to increases in creatinine and blood ureanitrogen. Liver Enzymes: Occasional elevations of liver chemistries occurred in patients treated withtelmisartan; all marked elevations occurred at a higher frequency with placebo. No telmisartan-treatedpatients discontinued therapy due to abnormal hepatic function. Post-Marketing Experience The followingadverse reactions have been identified during post-approval use of MICARDIS tablets. Because these reactionsare reported voluntarily from a population of uncertain size, it is not always possible to reliably estimate theirfrequency or establish a causal relationship to drug exposure. Decisions to include these reactions in labelingare typically based on one or more of the following factors: (1) seriousness of the reaction, (2) frequency ofreporting, or (3) strength of causal connection to MICARDIS tablets. The most frequently spontaneously reportedevents include: headache, dizziness, asthenia, coughing, nausea, fatigue, weakness, edema, face edema, lowerlimb edema, angioneurotic edema, urticaria, hypersensitivity, sweating increased, erythema, chest pain, atrialfibrillation, congestive heart failure, myocardial infarction, blood pressure increased, hypertension aggravated,hypotension (including postural hypotension), hyperkalemia, syncope, dyspepsia, diarrhea, pain, urinary tractinfection, erectile dysfunction, back pain, abdominal pain, muscle cramps (including leg cramps), myalgia,bradycardia, eosinophilia, thrombocytopenia, uric acid increased, abnormal hepatic function/liver disorder, renalimpairment including acute renal failure, anemia, and increased CPK. Rare cases of rhabdomyolysis have beenreported in patients receiving angiotensin II receptor blockers, including MICARDIS.OVERDOSAGELimited data are available with regard to overdosage in humans. The most likely manifestation of overdosagewith MICARDIS (telmisartan) tablets would be hypotension, dizziness and tachycardia; bradycardia couldoccur from parasympathetic (vagal) stimulation. If symptomatic hypotension should occur, supportive treatment should be instituted. Telmisartan is not removed by hemodialysis.DOSAGE AND ADMINISTRATIONDosage must be individualized.The usual starting dose of MICARDIS (telmisartan) tablets is 40 mg once a day. Bloodpressure response is dose related over the range of 20-80 mg. Special Populations:Patients with depletion ofintravascular volume should have the condition corrected or MICARDIS tablets should be initiated underclose medical supervision (see WARNINGS, Hypotension in Volume-Depleted Patients). Patients withbiliary obstructive disorders or hepatic insufficiency should have treatment started under close medicalsupervision (see PRECAUTIONS, General, Impaired Hepatic Function, and Impaired Renal Function). Mostof the antihypertensive effect is apparent within two weeks and maximal reduction is generally attained afterfour weeks. When additional blood pressure reduction beyond that achieved with 80 mg MICARDIS isrequired, a diuretic may be added. No initial dosing adjustment is necessary for elderly patients or patientswith mild-to-moderate renal impairment, including those on hemodialysis. Patients on dialysis may developorthostatic hypotension; their blood pressure should be closely monitored. MICARDIS tablets may beadministered with other antihypertensive agents. MICARDIS tablets may be administered with or without food.Rx only

MC-BS (03/07)

Copyright © 2007, Boehringer Ingelheim Pharmaceuticals, Inc. All rights reserved.

Printed in U.S.A. (10/07) MC48827

MICARDIS is indicated for the treatment of hypertension. It may be used alone or in combination with other antihypertensive agents.MICARDIS is contraindicated in patients who are hypersensitive to any component of this product. The most common adverse events occurring withMICARDIS Tablets monotherapy at a rate of e1% and greater than placebo, respectively, were: upper respiratory tract infection (URTI) (7%, 6%), back pain(3%, 1%), sinusitis (3%, 2%), diarrhea (3%, 2%), and pharyngitis (1%, 0%).

Please see Brief Summary of Product Information on adjacent page.

USE IN PREGNANCYWhen used in pregnancy during the second and third trimesters, drugs that act directly on the renin-angiotensin system can causeinjury and even death to the developing fetus. When pregnancy is detected, MICARDIS Tablets should be discontinued as soon as possible(see WARNINGS, Fetal/Neonatal Morbidity and Mortality).

Copyright © 2007, Boehringer Ingelheim Pharmaceuticals, Inc. All rights reserved. Printed in U.S.A. (10/07) MC48828

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References: 1. Weber MA,White WB, Giles TD, et al. An effectiveness study comparing algorithm-based antihypertensivetherapy with previous treatments using conventional and ambulatory blood pressure measurements. J Clin Hypertens.2006;8:241-250. 2. White WB, Giles T, Bakris GL, et al. Measuring the efficacy of antihypertensive therapy by ambulatoryblood pressure monitoring in the primary care setting. Am Heart J. 2006;151:176-184.

Please visit www. micardis.com for more information, including Prescribing Information.

2 AMERICAN HEALTH & DRUG BENEFITS February 2008

The launch of American Health & DrugBenefits™ brings with it the sentinel ques-tion: How shall we frame the healthcaredebate? The answer we propose involves avision of how healthcare standards change;who is involved in the process of care; whatare their systems, needs, agendas, and incen-tives; and what are the evidentiary methodsproper for determining success or failure.

All the forces involved in healthcaredelivery come to bear at the point of formu-lary and benefit design coverage, ie, the only realhealthcare intervention is that which is covered. Themanagerial competency needed to make good coveragedecisions entails a new type, and a blending, of clinical,financial, and regulatory best practices. This journalseeks to provide a forum for understanding the intersec-tion of these forces and how they form the governingdynamics of health and drug benefits coverage. What’smore, we will examine these forces from the differentviewpoints of the key stakeholder groups—patients,providers, payors, purchasers, manufacturers, evaluators,distributors, regulators, academia, and investors—withthe idea that they are seated at a round table where theidea of hierarchy is subordinate to the pursuit of con-sensus. The ideas and resources for healthcare progresshave never been more sanguine. However, they requirea new perspective to master them, a new spirit of coop-eration, and a new willingness to try new systems anddispense with traditional prerogatives.

That this new and urgent pursuit of excellence wasprecipitated principally by cost rather than quality con-cerns does not detract from its value to the practice ofmedicine. What has become evident is that healthcarecannot tolerate inefficiency on any level: not clinical,not business systems, not regulations.

There is yet another new shift in the winds thatattends this quest for consensus around best practices:reconciling the responsibilities of the disparate stake-holders toward one another. Could this mean inter-stakeholder cooperation and transparency? The onlyanswer the healthcare system can tolerate—it isincreasingly clear—is yes, though it will take years forthe adversarial tone of the healthcare debate to bereplaced by a sane, professional discourse. This willoccur when they share one another’s realities. In short,

good communications will make not onlygood neighbors, but also a system that is notfighting against itself. The healthcare debateneed not—indeed should not—take on thecharacteristics of a series of power plays, anymore than the human body’s own organswould compete with one another for “mas-tery” over the body.

The confluence of stakeholder interestsand demands on healthcare delivery consti-tute a composite picture of the ever-chang-

ing healthcare debate. The vast scope of activity maymake the prospect of aligning activities seem daunting,but there are few fundamental structural pillars to theprocess of care, and these form the scope of inquiry ofAmerican Health & Drug Benefits™.

The first is value, as reckoned by a balance of Cost,Quality, and Access. The second is the triad ofClinical, Business, and Regulatory forces that deter-mine health and drug benefits. The third is the “collegeof stakeholders,” each with its own incentives, data,and agendas. The fourth is Culture—healthcare cover-age models are products of the culture in which medi-cine, and the ancillary business and regulatory pillarssupporting it, is practiced. The fifth is Evidence—whatdo we know, what can we measure, about the Clinical,Business, and Regulatory actions we undertake in thename of healthcare?

There are 2 central questions asked by AmericanHealth & Drug Benefits™: (1) Will we conduct thehealthcare debate among stakeholder groups as adver-saries or as colleagues? (2) Is healthcare on the verge ofprofound success or imminent collapse? The editorialphilosophy of American Health & Drug Benefits™ is col-legial, positive, and professionally optimistic, ie, thehealthcare system paradigm is undergoing its transfor-mation, not its demise. All parties to the process of carehold immense resources and answers for the quest forbetter healthcare; hence, American Health & DrugBenefits™ gives all full respect and invites them toshare their needs, data, systems, and ideas for change.The positive outlook of American Health & DrugBenefits™ is predicated on the notion that challengesto healthcare are as fixable now as they were whenscrubbing before surgery was a new idea. Right now, thelooming question is financing for the many healthcare

From the Editor

What Kind of Healthcare Debate Do We Want?

LETTER FROM THE EDITOR

3www.AHDBonline.com

interventions that have been devised. This is not acause for pessimism but for innovation: It means onlythat our ability to discover cures has lately outpacedour systems for paying for them. It would be infinitelymore disturbing if the problem were the reverse.

Thus, American Health & Drug Benefits™ offers afresh look at the forces of change to healthcare benefitsand their downstream effects on Cost, Quality, andAccess. What will be the impact of value-based benefitdesigns? What, in fact, does this new term even meanin practical terms? How much regulation is for the goodof healthcare innovation, and how can governmentcontribute to an environment wholesome to R&D?How can payor models balance the needs of patientsand investors alike? How can quality control standardsprovide doctors helpful guidelines without taking fromthem the professional latitude they require to avoiddevolving into “healthcare vendors”?

The answer is that there are no simple answers, onlylots of them, and they require a healthy, informed, 3-dimensional perspective on the part of all parties.Ultimately, the Great Healthcare Transformation isunder way, and the system of care is going to requireadept management of overall resource allocation, theHoly Grail of today’s value-based healthcare system. Inthe following pages and issues of American Health &Drug Benefits™, you will encounter practical solutionsand experiences advanced by different sectors. We areproviding a repository of ideas for wresting healthcareimprovement out of the countless forces and playersdriving benefits decisions. And we invite you here andnow to contribute your articles and bring your visionand its outcomes to the table where all can assess them.

The editorial approach to achieving a managerialperspective in American Health & Drug Benefits™ fol-lows, therefore, a paradox that begins with the RomanEmpire’s “divide and conquer” tactic—identify theforces and players and their systems and the measurableeffects of same—and then turns on its heel to alignthese forces and systems. The goal: a realistic unityamong stakeholders based on taking the high road inevery facet affecting the process of care. This amountsto “divide and reunite,” always keeping the interven-tions under the magnifying glass to see how adequatelythey really serve Cost, Quality, and Access to care.

So let the debate continue, in the spirit of good willand common interest: the patient, the patient, thepatient. American Health & Drug Benefits™ will en -deavor to help chronicle it. By balancing the Clinical,Business, and Regulatory forces in each benefits deci-sion, by respecting and accommodating valid needs of

every stakeholder group, we will continue groping for-ward in the search of the humane treatment of thosewho are ill or injured. And that is not a cause for alarm,but for unceasing, united action. �

Robert Emmett HenryEditor-in-Chief

For editorial queries and submissions, please contactrhenry@AHDBonline.com.

“You’ve got to hand it to Charles –he really thought outside the box on this

anesthesia step therapy initiative.”

Unmanaged Moment

LETTER FROM THE EDITOR

4 AMERICAN HEALTH & DRUG BENEFITS February 2008

9 Creating a 21st-Century Intelligent Health SystemNewt Gingrich, Nancy Desmond

15 Interview: The Impact of CMS on Biotech Drug Coverage (Part 1)Joseph Antos

22 Disruptive Innovation: Value-Based Health PlansF. Randy Vogenberg

28 Role of NCCN in Integrating Cancer Clinical Practice Guidelines into the Healthcare DebateAl B. Benson, Elizabeth Brown

34 Measuring the Value of Treatment to Patients: Patient-ReportedOutcomes in Drug DevelopmentRichard J. Willke

Continued on page 6

FEBRUARY 2008 VOLUME 1, NUMBER 1

BUSINESS

REGULATORY

CLINICAL

™ ™

PublisherNicholas Englezos

Associate PublisherMaurice Nogueira

Editor-in-ChiefRobert Emmett Henry

Managing EditorSandy Paton

Production ManagerAlaina Pede

Director of Human ResourcesBlanche Marchitto

PresidentBrian F. Tyburski

American Health & Drug Benefits™ isfounded on the concept that health anddrug benefits have undergone a transfor-mation: the econometric value of a drug isof equal importance to clinical outcomesas it is to serving as the basis for securingcoverage in formularies and drug benefitdesigns. Drug benefit designs are greatlyaffected by numerous clinical, business,and policy conditions.This publication will provide drug bene-fit decision-makers the integrated industryinformation they require to devise formu-laries and drug benefit designs that standup to today’s special healthcare deliveryand business needs.

Contact Information:For reprints and subscription informationand editorial queries, please contact:Robert Henry - rhenry@AHDBonline.com

For advertising inquiries, please contact:Nick Englezos - nick@engagehc.comMaurice Nogueira - maurice@engagehc.comBrian Tyburski - brian@engagehc.com

Mission Statement

Coming Soon...

©2007 Abbott Laboratories Abbott Park, IL 60064 306 60908 December 2007 Printed in USA

6 AMERICAN HEALTH & DRUG BENEFITS February 2008

Clinical EditorThomas McCarter, MD, FACPChief Medical OfficerMain Line Health tmccarter@AHDBonline.com

Business/Government EditorKip Piper, MA, CHEPresidentHealth Results Groupkpiper@AHDBonline.com

Editorial BoardPharmacy Reimbursement PolicyMichael R. Schaffer, PharmD, MBA

EmployersF. Randy Vogenberg, RPh, PhD

Specialty PharmacyRebecca M. Shanahan, Esq.

Managed Care Pharmacy PolicyCynthia J. Pigg, RPh, MHA

Managed Markets MarketingJeffrey A. Bourret, RPh, MS, FASHPCharles E. Collins, Jr., MS, MBA

Clinical Research: Hypertension andPreventive CardiologyMichael A. Weber, MD

Managed Care and Government AffairsSharad Mansukani, MD

Research & DevelopmentMichael F. Murphy, MD, PhDWayne A. Rosenkranz, Jr., PhD

Healthcare OutcomesGary M. Owens, MD

Outcomes ResearchGordon M. Cummins, MS

Pharmacy & Specialty ProductsJames T. Kenney, RPh, MBA

Policy & Public HealthAlex Hathaway, MD, MPH, FACPM

ActuaryDavid Williams

2 Letter From the Editor

8 Letter to Readers

3 Unmanaged Moment: Cartoon

41 FDA Watch

42 Unmanaged Moment: Cartoon

43 Industry Trends

48 Executive Summaries

52 Information for Authors

FEBRUARY 2008 VOLUME 1, NUMBER 1

EDITORIAL

Editorial correspondence should be addressed to Editor-in-Chief, American Health & Drug Benefits, PO Box 432, Long Valley, NJ 07853.E-mail: editorial@AHDBonline.com. POSTMASTER: CORRESPONDENCE REGARDING SUBSCRIPTIONS OR CHANGE OFADDRESS should be directed to CIRCULATION DIRECTOR, American Health & Drug Benefits, PO Box 432, Long Valley, NJ 07853.Fax: 732-656-7938. YEARLY SUBSCRIPTION RATES: One year: $99.00 USD; Two years: $149.00 USD; Three years: $199.00 USD.Correspondence regarding permission to reprint all or part of any article published in this journal should be addressed to REPRINT PER-MISSIONS DEPARTMENT, Engage Healthcare Communications LLC, PO Box 432, Long Valley, NJ 07853. The ideas and opinionsexpressed in American Health & Drug Benefits do not necessarily reflect those of the Editorial Board, the Editor-in-Chief, or the Publisher.Publication of an advertisement or other product mentioned in American Health & Drug Benefits should not be construed as an endorse-ment of the product or the manufacturer’s claims. Readers are encouraged to contact the manufacturer with questions about the featuresor limitations of the products mentioned. Neither the Editorial Board nor the Publisher assumes any responsibility for any injury and/ordamage to persons or property arising out of or related to any use of the material contained in this periodical. Please convey any errors tothe Editor-in-Chief. ISSN# applied for January 2008.

American Health & Drug Benefits is published 9 times a year by Engage Healthcare Communications, LLC, PO Box 432, Long Valley, NJ07853. Telephone: 732-656-7935. Fax: 732-656-7938. Copyright © 2008 by Engage Healthcare Communications, LLC. All rightsreserved. American Health & Drug Benefits and The Peer-Reviewed Stakeholders’ Forum for Drug Benefit Design are trademarks of EngageHealthcare Communications, LLC. No part of this publication may be reproduced or transmitted in any form or by any means now orhereafter known, electronic or mechanical, including photocopy, recording, or any informational storage and retrieval system, withoutwritten permission from the Publisher. Printed in the United States of America.

COLUMNS

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For editorial queries and submissions, please contact rhenry@AHDBonline.com.

Healthcare may be a numbers game,

but we’re only interested in one number.

At Lilly, helping you manage your

patients requires a shared commitment to

delivering initiatives, ideas, and

positive outcomes. So we keep our focus

on those who count on our medicines.

From diabetes and mental health

education, to patient adherence efforts, to

simply offering the best answers we can,

Lilly is working towards one focus...

one patient at a time.

1happier,healthier, more compliantpatient

All numbers current as of December 2006. MG45572 COPYRIGHT © 2007 ELI LILLY AND COMPANY.

550 thousand patients enrolled in pharmacyadherence programs10 medicines for

diabetes and mental health

8 AMERICAN HEALTH & DRUG BENEFITS February 2008

LETTER TO READERS

Election years are always a great time totake our country’s pulse with regard to anissue, and this year healthcare has emergedas the major topic on the nation’s collec-tive mind. We have enjoyed excellenthealthcare in the United States for quitesome time, yet today the system seemsunstable. Record numbers of uninsuredpatients populate our delivery system dur-ing an era in which few would argue thataccess to insurance coverage is equivalent toaccess to good healthcare. Within the delivery system inmost disease states, disparities exist with regard toaccess to excellent care and excellent outcomes.Providers endure the lower ratcheting of revenues andrising overhead costs (especially in the areas of liabili-ty insurance and labor costs). Yet in this environmentof low margins, expectations are higher than ever, withpatients, payors, and employers demanding evidenceof quality care, safer care, more customer-focused care,and more efficient care.

Payors are struggling to maintain costs to managetheir risks and to limit expenses that are paid byemployers or purchasers. Employers again are facinghigh costs reminiscent of the early 1970s, when costpressures drove the mainstreaming of managed caredelivery systems. Employers also are demanding morefrom their health and drug benefit programs anddesigns. They expect excellent care when theiremployees are ill, but they also want a workforce thatfeels that the benefit is competitive, and one that istreated fairly and compassionately during a time of ill-ness. Some sophisticated employers will also demandnot only treatment of illness, but also prevention of ill-ness and improvements in the overall health and well-being of their employees to stimulate a positive work-place culture and to engender a more healthy, efficient,and productive workforce.

Patients demand respect from this faceless system. Intimes of illness, they want a system they can navigateand that will lead them to the best possible outcomes.They want a system where prevention of illness and per-petuation of wellness are equally important as the treat-ment of disease. Out-of-pocket expenses are continuingto rise, and year after year, patients must accept a greaterpersonal risk in managing these healthcare costs.

Our government is facing its own healthcare battles.As a growing number of baby boomers reach the age of

eligibility, will the Centers for Medicare &Medicaid Services (CMS) and SocialSecurity be able to generate the fundingnecessary to maintain the level of benefits?Will a Food and Drug Administration criti-cized a decade ago for being too slow inallowing new agents to come to market—and now criticized for safety flaws allowingunsafe drugs to reach the market—be ableto achieve a level of review and safety thatdoes not limit discovery of new agents? As

CMS has become a if not the major purchaser of phar-maceuticals in the United States, can we measure areturn on investment? Has the cost of providing phar-macy benefits generated reductions in other costs in theprogram? And will pharma, biotech, and device manu-facturers receive clear and unambiguous messaging fromall stakeholders to give them the guidance and incen-tive to produce innovative products that are relevant topressing disease states and that exceed the expectationsof government, payors, providers, and patients—bydelivering true value? When they do develop impor-tant new medications, will formulary and benefitdesigns accommodate or inhibit their utilization, andwill these utilization parameters be evidence-baseddecisions or cost-minimization policies at work?

Can we balance Quality, Access, and Cost, so thatin the end we will have a system that meets our coun-try’s needs? Can we generate a benefit design thatwill allow payors, purchasers, patients, and providersto share a WIN? These are some of the questions withwhich we will wrestle within the pages of AmericanHealth & Drug Benefits™. We want you to participatein these discussions and to help shape the presentand the future of healthcare. Although I guaranteethere will be white water ahead, I also guarantee thatit will not get better until the stakeholders engageone another in intelligent discussion and problemsolving and begin to chart the course. I look forwardto engaging with you—through the pages of our jour-nal—in this vital process.

Thomas McCarter, MD, FACPClinical EditorAmerican Health & Drug Benefits™

tmccarter@AHDBonline.com

Welcome to our community

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The Urgency of HealthTransformation: Not a

Choice, but a Necessity

The area of health andhealthcare is one wheretransformation is not a

choice, but a necessity. Thatreality has been driven homeby a number of recent eventsand ever-growing challenges:

Health and Homeland SecurityHurricane Katrina served as a wake-up call. By

homeland security standards, it was not an unexpectedor exceptionally large event. Yet we witnessed a collapseof the healthcare system in the Gulf in its aftermath.Millions of paper records were lost at the very time theywere most needed. If we were incapable of re sponding

to a disaster on the scale ofKatrina, imagine what wouldhappen if we were required towithstand multiple crises si -multaneously—something thatwe have to accept as a very realpossibility in today’s world.

Demographic Changes:The Aging of America In 1965, the average life

expectancy was 70.2 years.Today it is older than age 77

and is expected to increase to 78.5 years by 2010. It is atestament to American innovation and values that weare living longer. Our ability to extend life is a great suc-cess but presents some enormous challenges. We mustface the reality that 76 million baby boomers are near-ing retirement and consider how their retirement willaffect the future of our health and healthcare system.

Medical Errors and Unnecessary DeathsA 1999 report by the Institute of Medicine revealed

that as many as 98,000 people die in our hospitalsannually due to medical error.1 That’s the equivalent ofa jet crashing and killing 250 Americans every day. Weare 2,000 times more likely to die in a hospital from a

Creating a 21st-CenturyIntelligent Health SystemNewt Gingrich, PhDNancy Desmond, MEd, EdS

In most areas of life, Americans enjoy the ease and convenience offered by advances in technology, communications, andtransportation. Every day we experience the 21st-century model of America, which is one of effectiveness, accuracy, speed,flexibility, efficiency, lower cost, more choices, and greater achievement. We can shop online, compare prices for goods andservices, and when decisions need to be made, we have access to a wide array of information sources to assist in making thosedecisions. In short, Americans enjoy great latitude in our power to determine what is best for us.

This is not, however, the case when it comes to health and healthcare. In our current healthcare system, individuals aredependent on a structure that has resisted the natural progress and modernization achieved by market-oriented, 21st-cent uryindustries. The information age has been leaving health behind.

Although it is the nature of a science- and technology-based entrepreneurial free market to provide more choices of high-er quality at lower cost, in the healthcare sector, prices continue to rise, quality is inconsistent, and individuals lack the infor-mation, incentives, and power to make choices.

Dr. Gingrich is Founder of the Center for HealthTransformation; Ms. Desmond is President and CEO of the Center for Health Transformation, Washington, DC.The two are authors of the book The Art ofTransformation, from which they adapted this article.

Newt Gingrich, PhD Nancy Desmond, MEd, EdS

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medical error than in a civilian air crash. Furthermore,nonfatal medical errors often lead to illness or disabili-ty. In America, statistics like these are simply unac-ceptable. And, with public awareness increasing, thereis a growing demand that our leaders do something tofix our ailing system.

Disparities in OutcomesThe increasing evidence of disparities in outcomes is

a critical factor that makes a compelling and tragic casefor why a new system of health and healthcare is notjust a choice but an absolute necessity. At the top ofthe list are racial disparities. Recent studies have shownthat, relative to whites, infant mortality rates are 2.5times higher for blacks, life expectancy is 10 years less,and blacks have significantly higher mortality ratesfrom heart disease, stroke, and cancer.2 The racialdivide when it comes to health and healthcare is amoral issue that simply cannot be dismissed, and a trag-ic reality that is at the heart of the need for change isour current system.

The Epidemic of Diabetes and ObesityThe number of type 2 diabetes cases in the United

States has doubled in the past 2 decades to an estimat-ed 20 million (when undiagnosed cases are included).This makes diabetes the country’s fastest-growing pub-lic health problem. Furthermore, the Centers forDisease Control and Prevention (CDC) predicts that 1in 3 American children born in 2000 will join theranks of those afflicted with type 2 diabetes.3 Diabetesis the only major disease with a death rate that is stillrising—up 22% since 1990. It is also the leading causeof kidney failure, blindness, and nontraumatic amputa-tion, and a major contributing cause of heart diseaseand stroke. The American Diabetes Association esti-mates that, when we include both treatment and lostproductivity, diabetes costs the U.S. economy about$132 billion per year.4

Obesity, primarily a result of Americans’ eatingand exercise habits, is a major contributor to the

increase in diabetes. The most recent figures from theCDC show that 66% of U.S. adults—or about 130million people—are either overweight or obese.5 Thepercentage of overweight young people has morethan tripled since 1980. Among children aged 6 to 11years, 18.8% are overweight; of those aged 12 to 19years, 17.4% are overweight.

Shortage of Healthcare WorkersOur 20th-century system of healthcare has created

an environment that has led to a growing and criticalshortage of healthcare professionals. The U.S.Department of Labor predicts that the shortfall of nurs-es, which has existed since 1998, will increase to ashortage of 400,000 to 800,000 by 2014. Meanwhile,the U.S. Council on Graduate Medical Education,Physician Workforce Policy Guidelines for the UnitedStates, 2000-2020 projects a shortage of 85,000 physi-cians by 2020.6

The UninsuredTo put it simply, coverage for all Americans is a

moral imperative. Access to health insurance is theequivalent of access to healthcare. Eighteen thousandpeople die every year because they are uninsured.According to the Institute of Medicine, uninsuredadults younger than age 65 have a 25% higher deathrate than their insured counterparts.7

The ripple effects of being uninsured and havingpoor health are felt throughout society. Uninsuredchildren have impaired development and poorschool performance. Uninsured adults have moreabsences from work, more unscheduled sick days,and greater rates of disability. The cost of treatingthe uninsured is listed as one of the major challengesfacing hospitals today.

Unsustainable Increase in CostsThe cost of healthcare is going to force us to rethink

the entire system. Government healthcare spendingalone is currently 6.6% of the gross domestic product7;however, at the current trend, it is predicted to climbto over 32% by 2050!8

Meanwhile, employers are seeing healthcare spend-ing become a major corporate issue. According toGeneral Motors, $1,500 of the cost of every car is aresult of the cost of providing healthcare to theiremployees.9 Small businesses are increasingly makingthe decision not to insure their workers because thecosts of doing so have become unsustainable. And,with more and more of the costs of insurance passed on

According to the Institute of Medicine, uninsured adults younger than age 65 have a 25% higher death rate than their insured counterparts.

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to individuals from their employers, Americans arebecoming increasingly aware of the exorbitant cost ofthe system. Premiums for family coverage in employer-sponsored health insurance plans have increased by78% since 2001.10

The Solution: Replacing the CurrentHealthcare System With a 21st-Century

Intelligent Health System That Saves Livesand Saves Money for Every American

In a 21st-Century Intelligent Health System, theindividual is the center of knowledge, decision-making,and responsibility for his or her own health. Knowledgeof health and finances is available in the most accurate,least expensive, and most convenient manner possible.In a 21st-Century Intelligent Health System, individu-als have accurate, timely, personalized knowledge abouttheir health and treatment options, including informa-tion about cost and quality. They have the assurancethat their treatment is based on the most up-to-dateevidence-based medicine, and the focus is on preven-tive care and early intervention. The system encour-ages and rewards wise healthcare purchasing decisionsand offers more choices of higher quality at lower cost.

A key test for any new system is its ability to provideaffordable access to quality care for the poorest and sick-est among us. The elimination of health disparities mustbe a critical goal: No one can be left behind. A 21st-Century Intelligent Health System must provide accessto affordable coverage for those currently uninsured.

A 21st-Century Intelligent Health System has 3essential components.

Component One: Centered on the Individual

Putting individuals at the center of the system requiresthat they be given the incentives, the information, andthe power to make wise choices. However, the 20th-cen-tury system we inherited is one in which individuals sel-dom have information about cost or quality, have nofinancial incentives for wise consumption, and generallyhave decisions made for them rather than choosing forthemselves. Starting with the decision in 1943 to go to athird-party system, we’ve turned healthcare into a rentalcar. The problem is, almost no one washes a rental car.

Right to Know Allowing individuals to choose will work only if we

also provide them with the information needed to make

informed choices. Yet the current healthcare system isabsurdly secretive. When it comes to healthcare,Americans typically have no way of comparing the costand the quality of the various health services, products, orproviders they are considering. This situation is tanta-mount to asking someone to shop for a car when the deal-er hides the prices, rolls back the odometers, and does notdisclose that the lot is filled with a fleet of rental cars.

Personal Responsibility In a 21st-Century Intelligent Health System, indi-

viduals have certain rights, including the right to knowcost and quality information and the right to be assuredthat their providers are practicing the best standards ofcare. But they also have responsibilities.

First, individuals are expected to be informed and touse that information to make wise decisions. Second,individuals are expected to engage in (and encouragetheir children or family to engage in) healthy behav-iors, related to both nutrition and exercise, that areproven to prevent illnesses and complications. If theydevelop a chronic illness, they are expected to learnand follow best standards of care to avoid costly com-plications. Third, individuals are expected to help payfor their care. Everyone should be required to partici-pate in the insurance system. Those whose incomes aretoo low should receive vouchers or tax credits to helpthem buy insurance. Those who oppose the concept ofinsurance should be required to post a bond to covercosts. Allowing individuals to pass their health costs onto others reinforces the attitude that it’s not their prob-lem and adds to the irresponsible, unhealthy behaviorsthat are bankrupting the current system.

Personalized Health SystemThe 21st-century individual-centered system will be

a personalized system of health, resulting in dramati-cally better health for everyone. Imagine a future wheretests will allow us to know exactly what combination ofmedicines will protect us from the specific diseases or

In a 21st-Century Intelligent Health System,individuals have certain rights, including theright to know cost and quality information and the right to be assured that their providersare practicing the best standards of care.

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conditions to which we are most susceptible, based onour genetics. Consider a world where we know thathealth and treatment regimens are designed specifical-ly for each individual.

We are already seeing glimmers of how the future ofmedicine is likely to change as we move toward a morepersonalized system. Not long ago, the newspapers ran astory about a drug that scientists learned, in reviewingyears of data, had a stunning impact on preventing heartattacks in African American males. This was not theoriginal purpose of the drug. Moreover, the drug had nosuch impact on white males. In a 21st-century, IT-rich,intelligent system, we will be able to recognize these pat-terns much more quickly and to share them more wide-ly to prevent illnesses, thereby saving lives and money.

Component Two: IT and Quality

The personalized system of health we just describedcannot be possible without a system that is IT-rich. Thesystem must allow easy but secure sharing, analysis, andusage of information about health and health historyand about the cost, quality, and outcomes of treatmentswe are considering. The difference between health andhealthcare and other sectors of society when it comesto IT is dramatic. And it has had a dramatic impact onthe lives—and deaths—of the American people.

Paper KillsPaper kills. It is that simple. Instead of saving lives, our

current paper system is often taking lives. With as many as98,000 Americans still dying as a result of medical errorsevery year, ridding the system of paper-based records andquickly adopting health IT will save lives and money.

Each day that we refuse to move from a paper-basedto an electronic system, people are dying needlessly.This is not just conjecture—health IT’s tremendouspotential to saves lives and money is real and is hap-pening in some of the most forward-looking practicesand transformational institutions in our country.

Component Three: Health, Not Healthcare:Prevention, Early Detection,

Self-Management, and Best Practices

The need to transform the current system from anacute care–focused system to one of prevention andearly detection is evident.

Heart disease, the leading cause of death for bothmen and women in the United States, accounted for

nearly 700,000 deaths in 2002. In 2005, heart diseasewas projected to cost $393 billion. It is the leadingcause of death for American Indians, Alaska Natives,blacks, Hispanics, and whites. More than 300,000 peo-ple have bypass surgery in the United States each year,yet heart disease and its complications can often beprevented. Among people with heart disease, studieshave shown that lowering cholesterol and high bloodpressure can reduce the risk of dying of heart disease,having a nonfatal heart attack, and needing heartbypass surgery or angioplasty. For people without heartdisease, studies have shown that lowering high bloodcholesterol and high blood pressure can reduce the riskof developing heart disease in the first place.

A system focused on prevention rather than onacute care would provide the incentives and policiesto support lifestyle changes needed to control choles-terol and blood pressure. A culture of physical activi-ty and healthy diet choices would replace the currentepidemic of inactivity and “fast food.” However, ourcurrent system, by providing reimbursement for vol-ume of care rather than outcomes, discourages thetype of care that prevents disease, complications, andacute episodes.

The same mindset is evident when it comes to thewillingness of the system to pay for technologies anddiscoveries to keep us healthy. Using diabetes as anexample, the current system’s tendency is to pay fordialysis and amputations but to refuse to pay for theeducation, the tools, or often the medications that canprevent these costly and tragic consequences. A systemthat takes advantage of 21st-century opportunities willbe able to provide us with a whole new range of tech-nologies, tools, and screening mechanisms that willallow us to stay healthier, avoid or delay many illness-es, and manage the illnesses we develop.

Two Futures

If Dr. Andy von Eschenbach is right, we may beable to eliminate cancer as a cause of death in the next10 years. But even if we find the breakthroughs thatwould allow us to do this, if our current 20th-centurysystem of delivery has not been transformed, it is like-ly that our own doctor might not adopt the necessarylife-saving treatment for 17 years. In those 17 years,how many people will have died needlessly? Howmany wives or husbands, sisters or brothers, childrenor grandchildren?

It’s a potential scenario that gives us a startlingglimpse into 2 futures: one in which we cling to the sta-

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tus quo (or even magnify it through a single-payor,totally government-run system) and another in whichwe save countless lives and millions of dollars byreplacing the current system with a 21st-CenturyIntelligent Health System.

The opportunities exist, the choices are clear, andthe time for choosing is now. The choice is not justimportant, it’s a matter of life and death—not only forus but for our children, our children’s children, andAmericans everywhere. �

References1. Kohn LT, Corrigan JM, Donaldson MS, eds; Committee on Quality

of Health Care in America, Institute of Medicine. To Err is Human:Building a Safer Health System. Washington, DC: The NationalAcademies Press; 1999.

2. Consumer Health: Collection Development Services for PublicLibraries. Healthy People 2010. A Systematic Approach to HealthImprovement. http://www.healthypeople.gov/Document/html/uih/uih_2.htm#deter. Accessed January 14, 2008.

3. Centers for Disease Control and Prevention. Number (in Millions) ofPersons with Diagnosed Diabetes, United States, 1980-2005. http://

www.cdc.gov/diabetes/statistics/prev/national/figpersons.htm. AccessedJanuary 13, 2008.

4. Centers for Disease Control and Prevention. November is AmericanDiabetes Month. http://www.cdc.gov/Features/LivingWithDiabetes/.Accessed January 13, 2008.

5. Centers for Disease Control and Prevention. Overweight and Obesity.http://www.cdc.gov/nccdphp/dnpa/obesity/childhood/prevalence.htm. Accessed January 13, 2008.

6. Cooper RA. Weighing the evidence for expanding physician supply.Ann Intern Med. 2004;141(9):705-714.

7. Institute of Medicine. Care Without Coverage: Too Little, Too Late.May 2002. www.iom.edu/CMS/3809/4660/4333.aspx. AccessedJanuary 14, 2008.

8. Hagist C, Kotlikoff LJ. Health Care Spending: What the Future WillLook Like. National Center for Policy Analysis. NCPA Policy ReportNo. 286, June 2006. http://www.ncpa.org/pub/st/st286. AccessedJanuary 14, 2008.

9. Connolly C. U.S. firms losing health care battle, GM Chairman says.Washington Post. February 11, 2005:EO1.

10. The Kaiser Family Foundation. Employer Health Benefits 2007 AnnualSurvey. http://www.kff.org/insurance/7672/index.cfm. AccessedJanuary 14, 2008.

For inquiries or comments, please e-maileditorial@AHDBonline.com.

AHDB Stakeholder PerspectiveThe needs and tactical methods behind the trans-

formation of the healthcare system are based on theinjury it has inflicted to all 3 points of the value tri-angle: cost, quality, and access. Transforming thehealthcare system involves changes to the categories,number, and function of every stakeholder to theprocess. Since human nature traditionally shuns radi-cal change for fear of unexpected consequences, thereexists considerable clamor by nearly all stakeholdersectors for transformation of the U.S. healthcare sys-tem, despite the increased life span in evidence today.

The cause for transformation can be ascribed, inpart, to the number of major obstacles threateninghealthcare: demographic challenges of the grayingbaby boomers, medical errors and unnecessarydeaths, disparities in outcomes, epidemic of diabetesand obesity, shortage of healthcare workers, theuninsured, and unsustainable increases in costs.

The other reason for support for transformationinvolves the prospects for success if certain changes canbe made: individual-centered medicine; informationtechnology; health promotion; and disease prevention,early detection, self-management, and best practices.

The stakeholders who join the inevitable trendwill tend to be winners, since healthcare transforma-

tion is now a given, the only question being thedetails of the next system.

• MANUFACTURERS: Having resisted changeto the healthcare system ever since the 1980s, pharmais learning how to adapt by developing new drugs thatdeliver evidence-based, patient-centered, healthimprovements.

• PAYORS: No less conservative than pharmaduring this period, payors have learned that changecan be good and have introduced a continuum ofmember-friendly plans to replace those that greatlylimited choices and access. Indispensable players inthe transformation process, payor autonomy willcontinue to erode in favor of increased transparencyand collaboration with purchasers.

• PURCHASERS: Health-based medicinestrategies are proving their financial worth to largeem ployers, who can exercise control over their costs,while CMS must contend with underfunding. UntilCMS receives sufficient government funding to pur-sue health-based models, cost-minimization remainsa priority.

• PROVIDERS: Considerable work needs to bedone to motivate recruitment of physicians and nurs-es. Cost-minimization casualties of payors and pur-chasers, providers will continue to be in short supplyuntil new reimbursement models are in place.

Pull up a seat at theGREAT HEALTHCARE DEBATE!

We invite you to join us each month at American Health & Drug Benefits™, where you will have a firsthand view ofthe clinical, business, and regulatory systems driving healthcare resource allocation. Each issue brings the exper -tise of leading authorities from the many sectors involved in the process of care. Our goal is to help encourage ben-efit design competency that meets the 3 components of value: cost, quality, and access. We also recognize the needfor the alignment of stakeholders, and each issue will bring transparency to their needs, data, and agendas. FromR&D to actuarial models, from regulatory trends to value-based benefit designs, from healthcare reform propositionsto evidence-based medicine, American Health & Drug Benefits™ will bring you the mosaic that is the healthcare“ecosystem” in motion.

We invite you to subscribe to our forum and become an interactive participant. Let us know how our articles touchon the realities of your healthcare sector. Please subscribe online at www.AHDBonline.com or send yourcheck to Engage Healthcare Communications, LLC, PO Box 423, Long Valley, NJ 07853.

1 year: $99 | 2 years: $149 | 3 years: $199

We look forward to meeting with you every issue!

Sincerely,

Thomas McCarter, MD, FACP Kip Piper, MA, CHE Michael Schaffer, PharmD, MBAClinical Editor Business/Government Editor Pharmacy Editor

Engage Healthcare Communications, LLCPO Box 423

Long Valley, New Jersey 07853

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Robert Henry: At a recent Institute ofMedicine annual meeting, Elliott Fisherof Dartmouth quoted Uwe Rhinehart

referencing something that you had discussed inthe book you co-authored with Alice Rivlin,Restoring Fiscal Sanity 2007: The HealthSpending Challenge. You make the point thatthe same level of care or the same procedureprovided in 2 different locations in the UnitedStates can vary dramatically in price (eventwice as much or more). Dr. Fisher quoted Dr.Rhinehart as saying that, “Isn’t it amazing that the besthealthcare in the world can cost twice as much as the besthealthcare in the world?”

Joseph Antos: Yes, this is a colorful way of makinga very important point. Elliott Fisher, Jack Wennberg,Jonathan Skinner, and others have been trackingMedicare data to put this geographical variation intoperspective. In Restoring Fiscal Sanity 2007, Alice and Iemphasized 3 conclusions from this research into geo-graphical differences in resource utilization. First, vari-ations in resource use are huge—much larger than canbe explained by differences in patients or practice tra-ditions. Second, resource consumption follows local

resource supply availability. So geographicareas with large concentrations of a givenspecialty group will witness higher utiliza-tion of that specialty than areas with spars-er concentrations. Third, and most surpris-ingly, higher healthcare expenditures donot necessarily translate into better patientoutcomes. And that finding has everyonelooking for ways to rein in unnecessaryhealthcare costs.

Robert Henry: Medicare has undergone a tremendousdegree of change since the passage of MMA. Do you see thisas a “sea change” in the role of CMS as a purchaser andregulator, especially with regard to pharmaceutical agents?

Joseph Antos: Yes and no. Medicare has alwaysbeen a regulator, and Medicare has always been a payor.It started to interact with the drug industry with theintroduction of Part B drugs. CMS now has a muchgreater role as payor and regulator with the addition ofthe Part D benefit and outpatient drugs.

CMS is well on its way to learning how to deal withthe drug industry. They hired hundreds of pharmacistsand other experts to help them get the drug benefit

Medicare Coverage Strategies:Impact of the MMA and PBMsPart 1 of an interview with Joseph Antos, PhD, of the American Enterprise Institute

American Health & Drug BenefitsÛ has been created to act as an ideological melting pot focusing on health and drugbenefit decision makers, as well as those who may affect or may be affected by those decisions. By engaging in conversationswith payors, regulators, employers, and other stakeholders, our journal hopes to enable decision makers to view the impactof benefit designs from as many perspectives as possible. Through this open dialogue, we hope that better decisions may bemade, and that the greater healthcare marketplace will be positively impacted.

In following our editorial mission, American Health & Drug BenefitsÛ has sought thought leaders who have influencedand will continue to influence the healthcare marketplace. During a fall visit to Washington, DC, Dr. Joseph Antos was kindenough to host a visit to the American Enterprise Institute and provide his thoughts to Robert Henry, editor-in-chief, on howthe Centers for Medicare & Medicaid Services (CMS) exerts its influence on drug coverage in the wake of the MedicareModernization Act (MMA) and in the face of evidence-based medicine standards. Following a chronology of CMS’s rolefrom its inception to current events, Dr. Antos offers a lively insight into CMS’s strategy and its tactical effects on theAmerican healthcare system.

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started and to help them understand formulary issues.They have also had to deal with the United StatesPharmacopeia (USP), but it is not at all clear what usethat particular cul-de-sac has been for the past coupleof years.

Robert Henry: It didn’t really produce a consensus, did it?

Joseph Antos: It did not produce a consensus. It didnot produce a simple, logical, and useful structure fordeciding how to create a formulary or what is necessaryfor a specific group of patients. As far as I can tell, nonew information has come out of that process, but USPwill continue to refine its model formulary year afteryear, perhaps indefinitely.

It is difficult to detect any substantial effect of USP onCMS regulation or on the plan sponsors in developingtheir formularies. However, the USP relationship wasnecessary politically. Congress needed an external bodyat the center of the process that was not wholly owned byeither the government or by the pharmaceutical industry.

There was confusion and concern about the role thatpharmacy benefit managers (PBMs) would play in man-aging Part D. Congress and other stakeholders wereworried that formularies might be biased against sickerbeneficiaries. An overall structure imposed by a suppos-edly neutral third party was the answer to this problem.The resulting USP guidance was used only to the degreethat it made sense. PBMs were already operating in asimilar framework, so the net impact was minimal.

The future for CMS’s pharmaceutical regulation andits regulation of coverage and payment for health ser -vices more generally is likely to be contentious. That isillustrated to some extent by the ongoing struggle overMedicare coverage of ESAs, the erythropoiesis stimu-lating agents.

Robert Henry: They would serve as a pretty goodposter child.

Joseph Antos: They are a poster child for the finan-cial pressures in the health system and also serve as acautionary tale about what could happen in the future.The current situation points to some deficiencies inknowledge, to some deficiencies in decision-making.The situation sheds light on major deficiencies in theway drugs are paid for under Part B.

In 2007, CMS substantially reduced Medicare cov-erage of ESAs, narrowing the range of diseases forwhich payment would be made and, in effect, imposingtighter dosing regimens. The cancer community feltblind-sided by what they said were budget-driven rulesthat interfere with medical decisions. The uproar overthe new rules reached all the way to Congress, butCMS has softened its position only modestly.

The ESA debate is a microcosm of what is going onin healthcare in general, and points in directions thatMedicare could go, but might also point in directionsthat Medicare should go.

This is a classic, big money Washington problem.Every party has its own particular concerns, and thepolitical and financial incentives are misaligned.Obviously, the pharmaceutical and biotechnologycompanies that create these products have money atstake, but there are also concerns about what consti-tutes good patient care. In addition, there is a new andevolving relationship between the U.S. Food and DrugAdministration (FDA) and CMS, as it becomes clearthat there is no sharp line separating scientific judg-ment about safety and effectiveness from business deci-sions regarding insurance benefits and reimbursement.

CMS itself is in a continuing struggle to limitgrowth in the costs of the program without seeming todictate the practice of medicine. One of Medicare’sguiding principles laid out in the Social Security Actis a prohibition against federal interference with med-ical practice. Now, that is a bit of a façade, becausepayment does determine to a large extent what doc-tors will do. Like private health insurers, Medicareestablishes in its coverage rules the circumstancesunder which they are willing to pay for various inter-ventions. If the insurer’s payment rules are clear andknown in advance, they certainly influence decisionsmade by the doctor and the patient regarding thecourse of treatment.

Robert Henry: In other words, doctors and patientscannot keep demanding unlimited availability of interven-tion resources while expecting the insurer to find the moneyto pay for them? Eventually, the insurer or payor is going tostep in and practice cost containment.

The ESA debate is a microcosm of what isgoing on in healthcare in general, and pointsin directions that Medicare could go, but might also point in directions that Medicareshould go.

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Joseph Antos: Well, you could put it that way, butthat is more cosmic than what I had in mind. I am talk-ing about the normal business of insurance companies,whose job it is to make payments for a defined set ofbenefits. Ideally, the criteria for payment should makesense to providers and patients alike and not foreclosenecessary treatment.

These benefit and payment decisions should be sup-ported by scientific evidence, but health insurance hasbeen a fairly unscientific business for much of the past40 or 50 years. That is beginning to change withimprovements in our ability to collect and analyze clin-ical data on treatments and outcomes. Traditionally,Medicare and private insurers based their financialdecisions on prevailing medical practice, reasoningthat the provider is in the best position to judge whatis appropriate for the patient.

Robert Henry: This prevailing view would seem to rec-ognize the reality implementing any new technology wherethere tends to be innovators, early adapters, late adapters,and traditionalists.

Joseph Antos: It does recognize the way most newtechnology is adopted in the health system. The inno-vator tries a new treatment approach. If it offers advan-tages over conventional methods, a combination ofpublished studies and word of mouth result in adoptionby other physicians. However, some new approachesoffer minimal benefits to the patient, and insurers(including Medicare) generally pay higher prices forthe new technology. Even when an innovationimproves patient outcomes or has other clinical value,that does not necessarily mean the additional value isworth the additional cost. Medicare has traditionallyleft the decision to cover new medical treatments to itscarriers, who base their judgments on the prevailingmedical practice in their local areas. This was the sys-tem Medicare used when the program was created in1965, and it is largely the system under which Medicareoperates today.

This is one of the complications facing Medicarebeneficiaries, who are sometimes surprised to find thatthere are regional differences in what is covered by thisnational insurance program. Physicians in Boston arelikely to have a different therapeutic strategy thanphysicians in Minneapolis for the same disease, andMedicare is likely to reimburse differently in the 2 cities.

Another factor driving technology adoption is therole of the specialist. Specialists are likely to use moretechnology, and use it more aggressively, than general-

ists. Medicare pays primary care physicians significant-ly less than specialists, reflecting a long-standing biasthat favors surgery and other interventions over cogni-tive services. The unmanaged fee-for-service nature oftraditional Medicare provides an incentive to expandthe use of ancillary services (such as diagnostic testsperformed in the physician’s office) and to increasereferrals to specialists (which increases a primary carephysician’s capacity to see more patients in shorter vis-its). That drives up Medicare spending but may notimprove health outcomes—a point that JackWennberg, Elliott Fisher, and their colleagues havebeen making for sometime.

Over 30 years ago, Wennberg discovered variationsin clinical practice that could not be explained on thebasis of illness, patient preferences, or scientificallygrounded treatment standards. Much of his work hasrelied on Medicare claims data, which have been theonly source of information on health treatment that isnational in scope and reasonably complete and accu-rate. It has taken all of that time for policymakers torealize the serious implications for cost and quality ofcare of clinical variations, but there is now the techni-cal capability to analyze large databases and a growingpolitical interest in using that analysis to informMedicare policy.

Robert Henry: Because the data were only slenderlyunderstood, can we say with confidence that the decisionto get a handle on practices and to provide more stan-dardization is tied into evidence-based medicine? Is it tiedinto the fact that new data methodologies are emergingthat are permitting people to draw accurate resource allo-cation conclusions?

Joseph Antos: Absolutely. Jack Wennberg’s work 30years ago was path-breaking, but the greater availabili-ty of billing and clinical data and 3 decades of methodsdevelopment now make it possible in concept to sys-tematically assess what we are buying in healthcare andhow well it works. Of course, there is more to be done

Medicare has traditionally left the decision tocover new medical treatments to its carriers,who base their judgments on the prevailingmedical practice in their local areas.

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if we hope to use the information generated by thehealth system to best advantage, and electronic med-ical records would improve our data collection capabil-ities. However, an equally important change is thegrowing realization that we can and should use evi-dence to make coverage decisions that previously werebased on a consensus of providers rather than systemat-ic analysis of treatments and outcomes. We will see amovement away from local coverage determinations inMedicare toward national decisions as analysis of thedata becomes more routine, and those national cover-age decisions are likely to become more nuanced as wedevelop better information on the effects of treatmenton specific patient populations.

Robert Henry: Medicare has followed an almost intu-itive process?

Joseph Antos: Yes. Without an ability to systemat-ically analyze the data, coverage decisions relied onlimited information about the effectiveness of newtreatments. A treatment that seemed effective basedon initial studies and reports from physicians in thelocal area would be covered. Sometimes, that intuitionproved to be wrong. That might have resulted in a for-mal decision to deny coverage, but the same technol-ogy diffusion also works in reverse: Ineffective treat-ments ultimately fall into disuse, although that couldtake years unless payments are stopped.

Rising healthcare costs in the early 1990s led to themanaged care revolution, as spending was outrunningemployers’ and families’ willingness to pay. Vigorousmanaged care generated a backlash a few years later asa growing economy and tightening labor markets madeemployers rethink their health benefits. Rather thanrisk losing good employees disgruntled by a health planthat relied on direct controls on the use of services,employers sought less intrusive cost containmentoffered by PPOs, or preferred provider organizations.The managed care revolution took a vacation, at leasttemporarily. Managed care is not dead because health-

care costs keep rising. The interest in evidence-basedmedicine stems from the need to find better ways ofdelivering the right kind of care, allowing us to contin-ue to provide top-quality healthcare without breakingthe bank.

Robert Henry: Let me ask you one question about thatpoint. Shouldn’t the decisions that are made, the formularydecisions and the drug benefit designs, be made ideally toprovide the sweet spot of cost, quality, and access, as wellas to find and hit the second sweet spot of clinical, business,and regulatory drivers?

Joseph Antos: Correct.

Robert Henry: How adept are the professionals who aremaking these decisions at the payor and purchaser levels?Has there, to your observation, been increased acumen?

Joseph Antos: Absolutely. The big PBMs run large,efficient distribution systems to push product to theconsumer. But they make their money by designingsmart benefits that can lower prescription drug cost forBlue Cross, General Motors, the small employer, andthe individual insurance subscriber. PBMs recommendformularies and coverage rules, but ultimately theemployer or insurer decides how generous the benefitwill be based on what he is willing to pay.

Robert Henry: The purchaser, not the payor.

Joseph Antos: Right.

Robert Henry: And not the PBM.

Joseph Antos: Well, let’s be careful, because thepurchaser is a lot of people, including me as an indi-vidual insurance subscriber, and I am certainly notmaking a specific decision about what the formularyshould be in my health plan—and I probably did notselect my plan solely on the basis of the prescriptiondrug benefit. We are really talking about the employeras the decision maker, since the employer selects theplan or plans offered to workers. Insurers offer theemployer a variety of insurance products that typicallyinclude a pharmacy benefit. That benefit might varyaccording to the breadth of the formulary, the structureof cost-sharing, the aggressiveness of cost managementmethods (such as requiring the use of generics whereavailable), and the availability of retail and mail ordersales outlets, among other considerations. The employ-

We will see a movement away from local coverage determinations in Medicare towardnational decisions as analysis of the databecomes more routine...

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er decides what he is willing to offer his workers giventhe total premium cost, the generosity of benefits, theadequacy of the provider network, the reputation of theinsurer, and his judgment about employee reaction toany benefit changes.

Robert Henry: You are describing this combination ofclinical, business, and regulatory.

Joseph Antos: It all has to go together.

Robert Henry: And they are getting better at it.

Joseph Antos: And they are getting better at it,partly because PBMs can use data from their own oper-ations to understand physician prescribing patterns,shifting demands among drug classes, and other factorsthat determine the cost of pharmacy benefits and thevalue received by patients. Companies such as ExpressScripts, Medco, and Caremark are very large organiza-tions with data on millions of covered lives spanningmultiple years, which provide them with the ability tomake sensible recommendations about benefit designand the effectiveness of specific drugs for specific dis-eases. With some modest changes in the informationprovided on the prescription, particularly the inclusionof the patient’s diagnosis, these databases could evengive us systematic information about the effectivenessof drugs in off-label uses. That capability to learn fromour own experience will increasingly lead to improve-ments in patient care and ultimately could lead to ver-ifiable improvements in health status. The PBM indus-try has the potential to become a major source of sensi-ble advice to the rest of the healthcare industry aboutcoverage, and then through coverage to actual treat-ment decisions by physicians.

In Part 2 of our interview, Dr. Antos follows up hisobservations about Medicare strategy with a discussionof Medicare tactics regarding biologics coverage. Heexamines the rise of virtual regulations that increasing-ly determine payment and the interaction of CMS, theFDA, and the biotech industry. �

Dr. Antos is the Wilson H. Taylor Scholar in Health Careand Retirement Policy at American Enterprise Institute(AEI) for Public Policy Research. He is also a Commissionerof the Maryland Health Services Cost Review Commission,and an Adjunct Professor at the School of Public Health ofthe University of North Carolina at Chapel Hill. Before join-ing AEI, Dr. Antos was Assistant Director for Health andHuman Resources at the Congressional Budget Office,Director of the Office of Research and Demonstrations, andDeputy Director of the Office of the Actuary at the HealthCare Financing Administration (currently CMS). He servedas Health Financing Consultant to the World Bank and theOrganisation for Economic Co-operation and Development,as well as Senior Economic Advisor to the U.S. Agency forInternational Development. He currently is a member of thePanel of Health Advisors to the Congressional Budget Office,and is Commissioner of the Maryland Health Services CostReview Commission.

The American Enterprise Institute for Public Policy Researchis a private, nonpartisan, nonprofit institution, based inWashington, DC, that is dedicated to research and educationon issues of government, politics, economics, and social wel-fare. Founded in 1943, the institute sponsors research andconferences, and publishes books, monographs, and periodi-cals. More information may be found at the institute’s Website, www.aei.org.

For inquiries or comments, please e-maileditorial@AHDBonline.com.

AHDB Stakeholder Perspective

CMS and Prescription Drugs: Winners and Losers

The Part D outpatient prescription drug benefit hasratcheted up CMS’s direct involvement and influenceon every aspect of the pharmaceutical industry, fromresearch and development of new products to pricingand distribution to the end-user. The immediate impact

of Part D has largely been beneficial to manufacturers,distributors, health plans, employers, and Medicare ben-eficiaries. However, the substantial shift in pharmaceuti-cal spending from private payors and Medicaid toMedicare will focus intense political pressure on everypart of the supply chain. More money is at stake, but therisks have also risen sharply. Here is how the winners andlosers stack up:

• MANUFACTURERS: In the near term, phar-maceutical manufacturers may be the biggest winners.First, the trans fer of Medicare dual eligibles into Part D

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plans shifted a substantial share of the market from theMedicaid “best price” world of mandated rebates into aless regulated market. Second, Part D plans are requiredto cover essentially all drugs in 6 protected classes,including antidepressants and antipsychotic drugs. Thatrequirement virtually eliminates plan leverage on manu-facturers, allowing them to increase their prices and prof-its. Third, Part D expanded the number of Medicarebeneficiaries with drug coverage, bumping up demandfor the products. A quarter of Medicare beneficiaries hadno prescription drug coverage prior to Part D, and per-haps another quarter had less generous coverage (main-ly through Medigap or other private insurance).

That good news for manufacturers is tempered byconcerns from Congress that Part D plans may not begetting the best possible prices. Critics have called fordirect price negotiation authority for CMS. Suchauthority might be granted under a Democratic presi-dent, possibly focusing negotiation on new innovativedrugs that can run tens of thousands of dollars per treat-ment. In addition, concerns about the effectivenessand safety of pharmaceuticals could cause CMS toexpand its “coverage with evidence development” pro-gram, slowing the adoption of new products for the eld-erly. As Part D spending grows, expect greater pressureon manufacturers to prove the effectiveness of theirdrugs and justify their prices.

• PBMs AND HEALTH PLANS: Concern inCongress that PBMs and private health plans might notbe willing to offer drug-only benefits led to provisionsthat substantially reduced the financial risk of enteringthis new kind of business. Those provisions, the promiseof increasing drug spend fueled by government subsidies,and the demand from many employers for seamlesshealth coverage for their retirees led to an explosion ofinterest by firms seeing new marketing opportuni-ties. The big players—including Humana, UnitedHealthCare (cobranded with AARP), Caremark, andothers—captured the lion’s share of the market. Despiteaggressive bidding in a highly competitive market, prof-itability was good for many plan sponsors and severalwrote checks to CMS because their net earnings exceed-ed the upper limit on the risk corridors. Somewhat sur-prisingly, there has been no consolidation in the Part Dmarket, which continues to offer most consumers 50 ormore plan options.

Medicare Advantage plans also appear to havecome out on top, despite the new competition fromstand-alone prescription drug plans. During the 1990s,private health plans in Medicare became popular pri-

marily because they could offer a prescription drug ben-efit unavailable in traditional Medicare. That advan-tage is gone with Part D, but the private plans havegreater flexibility to offer more comprehensive drugbenefits that are coordinated with coverage for inpa-tient and outpatient services. Some sponsors, includingHumana, offered low-premium drug plans in the hopeof later shifting those enrollees to their more profitableMedicare Advantage plans.

Many in Congress remain skeptical about a Medicarebenefit delivered by competing private plans without agovernment default plan. Such a plan might be givenspecial authority to negotiate prices, and might be desig-nated the default plan for Medicare beneficiaries who donot explicitly select another option. That could signifi-cantly erode the market position of existing Part D plansponsors. At the extreme, existing risk-bearing Part Dplans might be replaced by a few regional drug carriersthat administer a benefit dictated by Washington.

• CONSUMERS: Despite the early difficulties someseniors encountered in the enrollment process, most PartD beneficiaries seem satisfied with the benefit. Out-of-pocket costs have been reduced for many, particularly forthose who did not previously have drug coverage, and theuse of pharmaceuticals is up. Fears that employers woulddrop their retiree drug benefits have not materialized,partly because employers offering equivalent coverage areeligible for a subsidy. Low-income beneficiaries are eligi-ble for special subsidies and low out-of-pocket costs, but asubstantial number of those people have not come for-ward to claim their subsidy. In addition, beneficiaries whoare dually eligible for Medicare and Medicaid may haveto shift enrollment to another Part D plan to avoid hav-ing to pay premiums. CMS has exercised temporaryauthority to minimize such disruptions, but this problemhas not been permanently resolved.

Consumers face an uncertain future with Part D.CMS will be under growing pressure to contain pro-gram costs, and that could translate into higher premi-ums and cost-sharing requirements for Part D enrollees.Higher-cost drugs are likely to move to third andfourth (specialty) tiers on plan formularies, andaccess may be further restricted through the use ofprior authorization. Cost cutting could also chill theatmosphere for financially risky drug development.Seniors have gained a drug benefit, but poorly-tar-geted policies could reduce their access to the break-through drugs and biologics of the future.

Joseph Antos, PhD

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Like the everyday person, definingvalue for a payor of healthcare servic-es varies depending on your perspec-

tive and application of the meaning. For apatient or employee, value means there issome worth in the usefulness of the sub-ject or importance to possessing it. To aclinician, value relates to a standard ofquality or a principle that is not onlyworthwhile, but also desirable. For anattorney, value is defined in contractualterms connoting an economic exchange or equiva-lence in goods or services. Thus, it is important for anemployer, as a payor of healthcare services, to definevalue and its resulting business proposition to theorganization’s mission or goals.

Healthcare has traditionally been a contracted serv-ices arrangement for employers who “purchase” itthrough health plans and/or pharmacy benefit managers(PBMs). Costs for these services, however, have grownover time along with continual double-digit increases inthe cost associated for a healthcare plan that is pur-

chased (fully insured) or funded through aself-insurance plan. Consequently, there isintense interest in the value associated witha health plan for the business enterprise andits associated value proposition.

Enter the Value-Based Health Plan

There are several so-called “early inno-vating” employers who began looking foralternative healthcare funding or contract-

ing approaches that would address the cost trend andvalue question to their organization. Today, approxi-mately 100 companies have begun or implemented var-ious aspects of what is known as a value-based health plan,which may use a wide variety of tactical concepts underthat umbrella.

The foundation for a value-based health plan startswith identifying the goals. Like any business plan, theemployer, through their human resources (HR) team,must determine the organizational goals for theirhealth plan. They should also identify goals that arein alignment with the mission and business goals oftheir organization.

Next come the objectives for the health plan. Basedon the goals in the plan, clear, obtainable, and measur-

Disruptive Innovation:Value-Based Health PlansF. Randy Vogenberg, RPh, PhD

Value and a Complex Healthcare Market

What Is Value to an Employer?“Worth in usefulness or importance to the possessor; utility or merit.” American Heritage Dictionary

“A principle, standard, or quality considered worthwhile or desirable.” American Heritage Stedman’s Medical Dictionary

“A fair return or equivalent in goods, services, or money for something exchanged.” Merriam-Webster’s Dictionary of Law

Dr. Vogenberg is Chief Strategic Officer, Employer-basedPharmaceutical Strategies, LLC, Cranston, RI.

23www.AHDBonline.com

able objectives should be identified for implementationthrough the health plan. This can be done easierthrough a self-insured program, but can increasingly beaccomplished with fully insured programs as part of adefined incremental strategy over time.

When the goals and objectives have been deter-mined, the next step is to incorporate well-establishedpatient behavior principles to design a health benefitprogram. This requires measuring and providing feed-back, rewarding valuable or desired behaviors, assuringvisible senior leadership and environmental supportsthroughout the organization, and engaging employeesto promote their own accountability.

Although Pitney Bowes (PB) is among the mostwell-known innovative companies in this area, thestrategy goes beyond PB value-based benefit design;Asheville, North Carolina, pharmacist interventions ofcounseling, collaborative care, and proactive medica-tion monitoring; and Marriott or University ofMichigan copay reduction and elimination tactics.There are health plans and PBMs who are talkingvalue-based concepts from coast to coast.

There are several key messages from PB’s more than10 years of experience in benefit design evolution(Table 1).

Messages 5 and 6 are perhaps the most important foran employer, because they relate to business strategy.For most employers who seek to implement a value-based health plan for their organization, they pursue itthrough some form of value-based benefit design. Thatmay include some type of enhanced access to medicalcare or medications by tactics such as reducing thecopay amount paid by the patient or pay-for-perfor -mance contracting with the provider network. It canalso include some form of enhanced access to medica-tions that have been shown to improve health out-comes for patients and that result in value to theemployer, not necessarily the health plan, by loweringtotal healthcare claims cost.

Complexity and Technological Advances

Challenges to moving to a value-based approachrelate back to human nature and the difficulty of deal-ing with complex issues or topics that may not be fullyunderstood. In 1946, George Marshall had to deal withthe enormous complexity of postwar Europe. The warand related events in those countries made it difficultfor people to understand how they could rebuild theircountry or implement change. It kept people from act-ing on an issue, which was the postwar rebuilding effort,

and made Marshall famous for his plan that provided aclear, understandable road map for people to follow.

Just as technology in computing that has advancedthrough companies such as Microsoft, technologicaladvances also confer benefits by improving health andincreasing longevity. These advances coupled withthe complexity of healthcare in the United Statesmake it even more difficult for the individual tounderstand, let alone select, an approach for reform-ing the healthcare system.

These and other employers have begun to assesstheir own value proposition regarding medical andpharmaceutical health programs, and what they arewilling to pay or share for the cost of those benefits totheir employees. A common thread among most ofthese employers is recognizing in their employee popu-lation where there may be an opportunity to containthe cost of their benefit program while achieving the

Bill Gates, in a 2007 commencement address at Harvard,described not only the role of financial complexity inEnron that ordinary people could not grasp, but alsohealthcare itself, which has a complexity similar to post-war Europe. Like the Marshall Plan, the Bill & MelindaGates Foundation has set out on a clear, understandableeffort to make a difference in healthcare that people cancomprehend.

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1. Most tools now give you a fine view throughyour rear window

2. Identify key medical conditions using data3. Data are valuable even if you have little 4. Benefits designs do drive consumer behavior5. Wellness/prevention should be redesigned

to include care for chronic conditions and member engagement

6. Prescription drugs, routine office visits, and screenings have value in managing chronic care

7. Benefits planning can create a strategic advantage

8. Benefits decision makers can make a difference

Mahoney J, Hom D. BeneFIT Design™: Seven Steps to Value-BasedHealth Benefit Decisions. www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/04-23-2007/0004571608&EDATE=. Accessed January 7, 2008.

Table 1.

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same or better health outcomes that ultimately keepsbenefit costs under control.

For example, Marriott and the University ofMichigan followed a similar strategy as PB in looking atdisease conditions with their treatments in their popu-lation to determine where the best overall results for

cost and clinical outcomes could occur. For diabetes, itwas in the unstable or brittle diabetics where creativebenefit designs to lower financial barriers could beestablished. Such benefit coverage is important to keeptheir condition managed on an outpatient basis. To doso includes enhanced coverage for testing equipmentand supplies along with medications for the primarydiabetes condition as well as secondary conditionsinvolving vascular, cardiovascular, and vision that areestablished co-risk factors.

Value-Based Messages: Disruption, Eruption,or a Sustaining Market Trend?

In the past decade, there was an accumulation ofexperience and general direction toward value-basedhealth plans. A partial list of employers (Table 2) andother key stakeholders (Table 3) in the marketplaceprovide an example of not only the number involved inthese concepts, but also the diversity and significantplayers who are currently engaged.

Based on the marketplace experience, a logical ques-tion for pharmacy-related benefits then would bewhether value-based plans have really changed howmedications are utilized in plan design(s), and whetherwe have moved beyond identifying cost alone whenspeaking of “value” in healthcare.

A conventional health plan program follows thetenets of insurance underwriting that are based on alarge enough population sufficient to cover the cost ofthose few needing health services versus the many whodo not, while all are paying insurance premiums basedon the general risks in the covered population pool.The excess dollars paid into premiums are invested formeeting future estimated payments that are based onactuarial tables of morbidity and mortality in popula-tions. This is a reactive strategy to meet the costdemands driven by the healthcare delivery system andinnovation with little ability to “manage” populations.

A value-based health plan takes the conventionalapproach into a proactive scenario to increase the abili-ty to manage a population and engage the patient inboth their own health status and use of healthcare ser -vices. It is built on a base of clearly established goals forthe health plan; objectives determined for their abilityto achieve the stated health plan goals; and a behav-ioral-based benefit design that incorporates incentivesand disincentives designed to achieve the health plangoals. Information sharing and feedback to plan mem-bers is a critical component to a value-based health planto achieve a successful behavioral-based benefit strategy.

• City of Asheville, North Carolina• Caterpillar, Illinois• State of Colorado, Colorado• Dow Chemical, Michigan • Florida Power & Light, Florida• HEB, Texas• Intel, California• Marriott, Washington, DC• Mohawk Industries, Georgia• Pitney Bowes, Connecticut• Quad Graphics, Illinois• SCANA, South Carolina• Sperian Protection, Rhode Island• University of Michigan, Michigan

Table 2. Partial List of Employers Known to Be Involved inValue-Based Health or Health Designs

• University of Michigan Schools of Businessand Public Health

• Harvard Medical School/School of Public Health

• Thomas Jefferson University Medical School, Health Policy Center

• Rand• University of Rhode Island, Health Research

& Outcomes Center• MedStat, Ingenix, Abacus Health Solutions • Cigna, Great West Life• Express Scripts, Medco Health• National Business Coalition on Health,

Washington, DC, and state member groups representing areas such as Kansas City,Honolulu, Chicago

• Integrated Benefits Institute, California• National Business Group on Health,

Washington, DC

Table 3. Several Key Stakeholders Working on Value-Based Health or Health Designs in the United States

25www.AHDBonline.com

Many would argue that the market view of value forpharmaceutical products remains focused on who con-trols the drug. By extension, who controls the drugrelates not only to physical distribution but also to themeans by which to pay for the product. Applying theprinciples of a value-based health plan addresses bothviews of value for pharmaceutical products. Such anapproach would disrupt the current interrelationshipsand functioning of the healthcare system around phar-maceutical products.

In further considering the concept of healthcare dis-ruption, it is useful to compare the potential for so-called hyperdisruption, similar to what has been expe-rienced by the information technology (IT) market. Adisruptive event occurs when a technological advanceresults in a breakthrough application, such as therecent Apple iPhone that disrupts the normal marketpace or movement. The disruption accelerates furthermarket changes in addition to competition, followed byevolution, until the next disruption.

In early 2007, IT market watchers provided insightinto what should be anticipated by 2010. By compari-son, anticipated changes in 2010 in healthcare areoffered in the same 3 categories selected to illustratethis concept for healthcare decision makers. The rela-tionships across similar burgeoning industries are notedin Table 4. IT and healthcare provide understandableexamples of change as well as challenges being faced bythose inside and out of these industry segments.

Clearly we have seen marketplace “eruption” trendsthrough “early innovating” employers and health plansalong with local communities and state governmentswho are now exploring a value-based approach foremployees who are plan members. In the past 10 years,at least a 10-fold increase in known marketplace value-based benefit coverage strategies has been reported. Atnational conferences today, many of the presentationscover various applications of a value-based strategy inthe implementation of a particular benefit design orhealth program for employees.

Recent surveys, however, conducted in several citieshave indicated a more conservative and incrementalstrategy that involves a more traditional approach thanthat represented by a value-based health plan. Surveyresults from one business group in the Southwesternstates noted that familiarity and senior managementinterest in value-based benefit was high. Upper man-agement interest in a value-based approach linked withhow it can track to their organizations’ strategic objec-tives. HR and user understanding and access to medicaland pharmacy claim data was low. How benefit change

affected medical and pharmacy utilization was not clear.Finally, the 2007-2008 trend was thought to reveal “lit-tle to no change” for planned benefit design changes.

These results indicate the extent and type of discon-nects that currently exist in health benefit plans anddecision-making within an organization. HR-managedbenefits are not in sync with corporate goals or objec-tives that may result in lost productivity, job turnover,or recruitment delays. Lack of accessible data and itsinterpretation limit the ability of HR decision makersto determine if a program is successful, a failure, orneeds limited modification to improve on success.

Translating Plan Performance Evidencefor the CFO

Private sector companies have moved toward avalue-based health plan because it offers a more effec-tive way to better manage healthcare costs as well as thehealth status of their working employees. The privatesector is not alone in this debate, and with the intro-

The Information Explosion• Information technology will see a 100-fold

increase in data• Consumerism in healthcare and knowledge

derived from the human genome project will result in a significantly increased number of applications

Explosion of Devices• Mobile devices available and used in the

market will double • Biotechnology product availability and

subsequent utilization grows 4-fold

Transaction Explosion• Information technology has moved from

concerns around platform stability for connection to concerns around interaction or interactive capabilities for users in multiple applications

• Healthcare claims adjudication or simple financial transactions transforming to more real-time, interactive transactions, incorporating components for a value-based health plan

Table 4.

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duction of Medicare Part D, the prescription drug pro-gram for seniors, the Centers for Medicare & MedicaidServices (CMS) is on its own search for value. CMS hasalready moved toward creating a better value proposi-tion with an integrated benefit program administered bythe Medicare Advantage and Prescription DrugPrograms (MA-PDPs) evolving over PDP stand-alonesthat represent an old paradigm, a silo cost-managementtactic that is not cost-effective for the “ultimate” payorof all healthcare benefits. Value includes the cost of care(purchasing or payment) as well as management of careover time that produces both predictable cost withknown outcomes. This view of costs associated withhigher level care can have far-reaching implications forthe commercial market as CMS continues movingtoward a more value-based strategy.

This strategy can be further demonstrated by thevarious payor population-based initiatives by third-partypayors that are aimed solely at controlling medicationutilization and costs from their perspective and not thatof the employer payor. Initiatives are driven throughplan design administered by third-party payors (healthplans, insurers, and PBMs). Some are linked to a healthrisk appraisal instrument that could be useful in overallhealthcare cost trend management; however, what isgenerally seen are efforts to maximize generic medica-tion usage, especially through mail order, which bene-fits PBM stakeholders, and step therapy for theapproval of medication usage that incorporates easyedits online during claim adjudication or what isknown as a soft prior approval (ie, a paper submissionbarrier to getting the medication).

Employers must begin moving beyond PBM/MCOpopulation initiatives to control prescription utilizationand cost initiatives that primarily benefit the third-party payor. Following a value-based approach, thestrategy must acknowledge that healthcare costs arelargely driven by a small group of patients with chronicillness, representing 5% of patients and 50% of healthplan costs. From a management strategy perspective,

the prudent path is to follow the dollar. One trend thatwill be uncovered is the rising cost share of the severelyill within a covered health plan population.

Healthcare spending falls into a few key buckets(hospital, medical/physician, pharmacy, and other).For pharmacy, the cross-bucket effects of more or lessspending on medications can be dramatic. Using newbiotechnology therapy as one example, the U.S.healthcare dollar can be broken down to show phar-macy representing approximately $0.12, of which $0.10or less goes for traditional medications and approxi-mately $0.02 for biotechnology products. Typically, thebiotechnology category is aggressively managed, result-ing in higher out-of-pocket costs and possibly requiringmore approvals before or during their use. At the sametime, these new technology-driven applications ofgenome knowledge represent what medical treatmenthas become. Many times a $0.01 to $0.02 slice of thehealthcare cost pie is denied, requiring employers topay almost another dollar of healthcare—a cost thatcould be avoided.

Another example lies in the impact resulting fromplan design or human behavior barriers to taking med-ication that had been prescribed for a chronic medicalcondition. Many studies have documented the nearly$1-trillion impact on the U.S. economy resulting fromthe cost of lost productivity alone. For a companyCEO, improved medication-taking behavior can resultin some of the following quantifiable benefits:

• Improvement in employee health status and pro-ductivity

• Reduction in total cost of health• Improved return on health investment for work-

force• Reduction in hospital and emergency room use• Reduced short-term disabilities/workers compen-

sation• Employee accountability achievement (the

employee no longer feels entitled to dependence onemployer/health plan support) and employee self-man-agement behaviors

A Call to Action

Many questions remain unanswered:• Is it possible to rearrange the rocks currently

arrayed in our health-related benefits, or are theseboulders unmovable?

• Do employee wellness programs and retireehealth go together for an employer anymore? If so,what is the value proposition?

Employers must begin moving beyondPBM/MCO population initiatives to control prescription utilization and cost initiatives that primarily benefit the third-party payor.

27www.AHDBonline.com

• What is the impact of benefits tactics on humancapital assets and what is the value proposition?

• Do acute versus chronic episodes of care requiredifferent strategies and how are they linked to recruit-ment/retention?

• What will the role of the employee benefit man-ager/HR department be in the future? Will that positionbe considered in or out of healthcare management?

Technological advancements challenge employersin many ways; however, consider that medication andmedical technology is advancing patient treatment aswell as escalating diagnostic costs today. Cost-sharingburdens from medication formulary managementstrategies are not always advantageous to an employerand lack a value-based behavioral plan componentbeneficial for the employer.

Examples discussed in this article on value-basedhealth plans demonstrate that achievement of value isor should be a major part of your business strategy. Dataalone are not sufficient. It is important also to know

how to aggregate data and interpret them. The goal isto change value proposition by truly tying benefitdesigns for enhanced outcomes performance to behav-ioral-based health plan goals.

Costs continue to increase while the issues remainthe same. There is an employer opportunity to beproactive and “disrupt” the marketplace to its advan-tage. An employer or health plan sponsor must (1)understand the total cost. This is important for a valuedetermination and represents the shift from traditionalsilo cost management to a total cost of care model; (2)understand plan members’ behaviors using their owndata to create a value proposition that can work; and(3) finally, determine if their healthcare advisor(s) pro-vide innovative strategies and solutions. There must bea positive alignment and direction for the health planprogram to your business goals and objectives. �

For inquiries or comments, please e-maileditorial@AHDBonline.com.

AHDB Stakeholder PerspectiveValue-Based Drug Benefit: Implicationsfor Manufacturers

The impact of value-based drug benefit designs onmanufacturers will depend on how quickly individualfirms adapt their business thinking and communica-tions strategies.

Until recently, the path to success for a drug manu-facturer was based largely on product novelty, physi-cian-centric marketing, and pricing strategies, balanc-ing the unit prices and concessions against formularyposition. To maximize market share and margins in theworld of value-based drug benefit designs, manufactur-ers will need to (1) demonstrate the clinical and eco-nomic case for each product and therapeutic class; (2)

build absolute and comparative evidence on a contin-uous basis; (3) develop new value-based pricing modelsand market partnerships; and (4) communicate farmore effectively with public and private payors.

For many firms, this will require a significant,even scary change in thinking and tactics, payor-cen-tric communications, comfort with a massiveincrease in transparency, and a greater willingness topartner. Therefore, while the financial risks of mov-ing to a value-based world are daunting, ultimatelythe greatest challenges are intellectual.

Value-based drug benefit designs will pose thegreatest challenges to manufacturers with productlines (or pipelines) dominated by “me too” drugs;rigid, risk-averse organizational silos; and outdated,prescriber-centric communications.

Kip Piper, MA, CHE

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28 AMERICAN HEALTH & DRUG BENEFITS February 2008

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The data regarding healthcare costsare clear, persistent, troubling at theleast, and truly frightening at worst.

It is estimated that by 2014, nearly 20% ofthe nation’s economy will be consumed byhealthcare, and the growth in healthcarespending will outpace economic growththrough the next decade.1 The NationalInstitutes of Health estimated that theoverall cost of cancer in 2006 was $206.3billion. Of this total figure, $78.5 billionrepresents direct medical costs, includinginpatient and outpatient care, drugs, anddevices.2

The Cost of Improving Care

The rising cost of cancer care is in part related tomany new and expensive antineoplastic drugs that havereached the market in the past 7 years, including thosethat specifically target tumor cells. These drugs are col-

lectively known as targeted therapy, andinclude such drugs as imatinib (Gleevec®),erlotinib (Tarceva®), ri tuximab (Rituxan®),bevacizumab (Avastin®), cetuximab (Erbitux®),and trastuzumab (Herceptin®). Many othersare in the pipeline. Some of these drugs aretargeted to specific proteins only expressedon tumor cells, and thus their application islimited to those tumors expressing theseproteins. For example, trastuzumab is tar-geted to a tyrosine kinase overexpressed in25% to 30% of early-stage breast cancercells. As an adjuvant therapy, trastuzumab

reduces the risk of recurrence by 50% in women withsurgically treated breast cancer. A full course oftrastuzumab treatment costs approximately $50,000.3

Another example is imatinib, a monoclonal antibodydirected at another tyrosine kinase, but one specific tochronic myelogenous leukemia (CML) and stromaltumors of the gastrointestinal (GI) tract. Imatinib hasrevolutionized the treatment of CML and GI stromaltumors, essentially turning these malignancies intotreatable diseases requiring lifelong maintenance ima-tinib therapy. The impact on GI stromal tumors is par-ticularly noteworthy, since prior to imatinib, therewere no effective chemotherapy options. The annualcost for imatinib is in the range of $30,000,4 but the

Role of NCCN in IntegratingCancer Clinical Practice Guidelinesinto the Healthcare DebateAl B. Benson III, MD, FACPElizabeth Brown, MD

Many new drugs and drugs in the pipeline are referred to as targeted therapy. Targeted therapies have revolutionized thecare of certain cancers, such as chronic myelogenous leukemia, but for other common malignancies, such as colon cancer,the impact on survival has been more modest. These seemingly incremental improvements coupled with the high cost of tar-geted therapy have focused the debate about the cost of healthcare squarely on oncology. Clinical practice guidelines are acommon baseline starting point for this debate. Guidelines reflect clinical evidence and expert judgment, which is necessaryto fill in the gaps when clinical evidence is not yet available or is evolving quickly. In addition, clinical guidelines inform otherkey aspects of oncology care, such as establishing a standard of care, which can then be translated into quality measures.Guidelines can also be reformatted to create an oncology drug compendium or rewritten to provide patient information.

Dr. Benson is Professor of Medicine, Associate Director forClinical Investigations, Robert H. Lurie Comprehensive CancerCenter of Northwestern University, Feinberg School ofMedicine, Chicago, IL; Dr. Brown is Senior Oncology Scientist,National Comprehensive Cancer Network, Chicago, IL.

Al B. Benson III, MD, FACP

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total population of patients who are candidates forimatinib is small compared with the large population ofpatients with breast cancer.

The effectiveness of imatinib has somewhat stifledthe debate surrounding its high cost. Other targetedtherapies have not been as clearly effective, in partbecause the multiple biologic pathways underlyingother malignancies are not as well defined. For exam-ple, many targeted therapies are directed at biologicpathways that may play a part in a wide variety ofmalignancies, such as epidermal or vascular endothelialgrowth factors. Elegant preclinical work has definedthese pathways, but there are still gaps in understand-ing how these pathways may interact in individualtumors and individual patients. For common epithelialtumors, such as colon cancer, it is quite likely thateffective biologic therapy will require targeting multi-ple underlying pathways. Further refinement of patientselection criteria will be needed to ensure that thesecostly drugs are optimally used. This necessary phase ofdevelopment requires research linking the biologic pro-file to treatment response. For example, molecularanalysis of resected tumor specimens has now been rou-tinely integrated into clinical trial protocols.

Another unique aspect of imatinib is that this drugis effective as a single therapy because the underlyingtyrosine kinase target dominates the tumor biology ofCML and GI stromal malignancies. In contrast, othertargeted therapies are typically used with conventionalchemotherapy. For example, in 2006, the U.S. Foodand Drug Administration (FDA) approved the drugbevacizumab as an option for second-line therapy ofcolorectal cancer in 5-FU–based chemotherapy regi-mens. This FDA approval was based in part on a ran-domized study comparing the survival outcomes ofpatients treated with a regimen known as FOLFOX(the combination of oxaliplatin, leucovorin, and 5-FU)with or without additional bevacizumab.5 The medianduration of survival for the group treated with FOLFOXand bevacizumab was 12.9 months compared with 10.8months for the group treated with FOLFOX alone, astatistically significant difference (P = .0011). It is esti-mated that bevacizumab adds about $10,000 to theFOLFOX regimen per every 8-week cycle.6

Similarly, cetuximab, another monoclonal antibodydirected at epithelial growth-factor receptors, has beenFDA approved as a second-line therapy for metastaticcolon cancer. This approval was based on a randomizedtrial that showed the combination treatment of cetux-imab and irinotecan (Camptosar®) delayed tumorgrowth by approximately 4.1 months compared to 1.5

months in patients who received cetuximab alone.7 It isestimated that an 8-week course of the irinotecan-cetuximab combination would cost about $30,790.6

Oncology—Focus of Debateon the Cost of Healthcare

These examples of seemingly incremental improve-ments at high cost have focused the debate about thecost of healthcare squarely on oncology. As Schragnoted, this debate puts individual oncologists caring forindividual patients in an increasingly difficult position;the oncologist’s first responsibility is to be an advocatefor their patients, and not the arbiter of what is consid-ered cost-effective from a societal perspective.6 Duringthe consultation with the patient, the oncologist mustevaluate and recommend those therapies that bestmeet the patient’s goals, whether it be in terms of cure,survival, or palliation, and dismiss, albeit temporarily,the cost issue.

Outside the individual physician/patient relationship,the oncology community as a whole takes a leadershiprole as one of the many stakeholders in the politicaldebate regarding the pricing of drugs and the complexissue of cost-effectiveness and what a society may bewilling to pay; however, all stakeholders recognize thatthe debate must first be grounded in clinical data andexpert judgment. From the payor’s perspective, a tech-nology assessment is typically used to analyze the clini-cal data. These technology assessments are focused on asingle technology, such as a new drug, device, or proce-dure, and their many potential clinical indications.Although this approach fits the need to develop tech-nology-specific coverage policies, it does not reflect theway cancer care is delivered across a continuum. Forexample, what the oncologist sees is not that a singledrug may add a median of 2 to 6 months of survival, butrather the incremental gains of multiple different drugsand other supportive therapies that can collectivelyresult in a significant impact on the patient’s duration

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For common epithelial tumors, such as colon cancer, it is quite likely that effective biologic therapy will require targetingmultiple underlying pathways.

30 AMERICAN HEALTH & DRUG BENEFITS February 2008

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and quality of life. Furthermore, a debate that merelyfocuses on median survival as the key outcome mayobscure the fact that some patients respond to noveltherapies remarkably well, although others do not, aperspective that only an oncologist can provide.

Clinical Practice Guidelines—Function Before Form

Clinical practice guidelines function to review andsynthesize the data across the entire continuum ofcancer care, and thus are a better reflection of howcancer care is delivered. There is probably no field ofmedicine that is evolving more rapidly than oncology,thus practicing oncologists must always recommendtherapies to their patients in a setting of therapeutic

uncertainty. Although technology assessments typi-cally do not incorporate expert judgment, this is a keyelement of clinical guidelines necessary for providingreal-world and timely guidance to practicing oncolo-gists. Chronic lymphocytic leukemia (CLL) has beentraditionally thought of as an indolent disease wherethe treatment goals are primarily palliative in nature,and thus past research has focused on drug toxicitiesand quality of life. Management of CLL, however, israpidly evolving based on 3 converging factors: (1)the availability of specific monoclonal antibodieslike rituximab and others in the pipeline; (2) theemergence of novel prognostic factors that willenable risk-adapted therapy; and (3) the ability tomore closely monitor the presence of residual disease.Controlled studies are the basis of many technologyassessments, but such studies integrating all of theseadvancements will always lag behind their clinicalavailability, particularly given the lengthy naturalhistory of CLL. Clinical practice guidelines integrat-ing both the available clinical data and expert judg-ment provide a flexible, nonprescriptive approachthat best serves the needs of practicing oncologistsand their patients.

Standardizing CareClinical guidelines can also provide important guid-

ance in standardizing care to ensure that clinicaladvances that are developed in academic settings willtranslate to community settings. As previously men-tioned, trastuzumab therapy has emerged as a standardadjuvant therapy for early-stage breast cancer that over-expresses a tyrosine kinase protein called human epider-mal growth factor receptor 2 (HER-2); however, theeffectiveness of this new treatment option is absolutelydependent on the accurate assessment of HER-2 in tumorcells. As the therapy moved from the academic settingsto the community setting, it became apparent that differ-ent laboratory techniques and interpretations resulted inpatients being variably categorized as candidates fortrastuzumab therapy depending on where or how theirHER-2 status was evaluated. In 2007, the AmericanSociety of Clinical Oncologists (ASCO) published clin-ical guidelines to establish standards for optimal testingperformance.8 This example illustrates one of the assump-tions underlying the development of clinical guidelines;guidelines have the potential to identify unnecessary testsand services, leading to improved patient quality of care.

Identifying Relevant OutcomesThe initial starting point for a clinical guideline is

similar to a technology assessment (ie, a review of theavailable evidence). A key element of this initial step isidentification of the most relevant outcomes—the yard-sticks by which a therapy will be measured. Althoughthe primary outcome of interest is often overall survival,disease-free survival may be the key outcome in somesituations, reflecting the flexible approach of clinicalguidelines. Evaluation of diagnostic technologies isoften challenging because the final health outcome isbased on how the diagnostic information, such as serumtumor markers or prognostic indicators, might influencepatient management, which could be many years andmany therapeutic interventions down the road. The ini-tial review establishes the state of the evidence, whichis then interwoven with expert judgment to address theliterature gaps and incorporate real-world clinical expe-rience. Throughout this process, it is important to clear-ly define the guideline development process, and toindicate to what extent the guideline recommendationsare based on clinical data versus expert judgment.

The Development Process

A variety of different oncology organizations havedeveloped clinical practice guidelines. In the United

It is important to clearly define the guidelinedevelopment process, and to indicate to whatextent the guideline recommendations arebased on clinical data versus expert judgment.

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States the 2 leading organizations are the NationalComprehensive Cancer Network (NCCN), a group of21 preeminent cancer care centers, and ASCO. ASCOhas been publishing clinical guidelines since 1994. Theguideline process is initiated with a systematic litera-ture review, which is then reviewed by a panel ofexperts followed by development of specific recom-mendations. As of January 2007, 33 guidelines hadbeen published by ASCO, of these 19 were consideredactive, and 14 were considered inactive. In addition, 19new guidelines or updates to existing guidelines were inprogress. ASCO guidelines are specifically focused onemerging technologies, interpretation of major clinicaltrial results, common clinical management problems,and perceived misuse or overuse of technologies. Theguidelines are not designed to address the entire spec-trum of cancer care.

In contrast, the NCCN guidelines address the entirecontinuum of cancer care. The NCCN has developed110 different guidelines that cover 98% of all cancers.Additional guidelines focus on screening, early detec-tion, and supportive care. The NCCN process isdesigned to be both multidisciplinary and comprehen-sive across all stages of cancer including all modalitiesof treatment. Guideline development incorporates anevidence-based approach when evidence is available,and evidence-based expert consensus when high-levelevidence is lacking.9

The NCCN guidelines are unique in that the rec-ommendations are not presented in a tabular list, butcomprise a series of algorithms that address the entirecontinuum of cancer care, ranging from initial diag-nosis to end-of-life care. Extensive footnotes and amanuscript accompany the algorithms, both of whichprovide supporting references, background informa-tion, and discussion of ongoing controversies. A levelof evidence/consensus is assigned to each recommen-dation (Table 1).

It is interesting to note that the majority of recom-mendations in the NCCN guidelines are consideredCategory 2A, illustrating that the minority of cancertreatments are based on the results of high-level evi-dence, such as randomized controlled trials.

Updating Guidelines

Every guideline is updated yearly. Before the panelmeeting, the existing guidelines are distributed to panelmembers for broader review in their institutions and foridentifying specific areas that require discussion andpotential revision. The panel meets face-to-face or by

• Category 1: Uniform consensus of the NCCNpanelists based on high-level evidence

• Category 2A: Uniform NCCN consensus, based on lower-level evidence

• Category 2B: Nonuniform NCCN consensus (but no major disagreement), based on lower-level evidence

• Category 3: Major NCCN disagreement that the recommendation is appropriate

NCCN indicates National Comprehensive Cancer Network.

Table 1. NCCN Levels of Evidence/Consensus

• Extensive breadth of listing• Quick throughput from application for

inclusion to listing• Detailed description of the evidence reviewed

for every individual listing• Use of prespecified published criteria for

weighing evidence• Use of prescribed published process for making

recommendations• Publicly transparent process for evaluating

therapies• Explicit “not recommended” listing when

validated evidence is appropriate • Explicit listing and recommendations regarding

therapies, including sequential use or combination in relation to other therapies

• Explicit “equivocal” listing when validated evidence is equivocal

• Process for public identification and notification of potential conflicts of interest of the compendia’s parent and sibling organizations, reviewers, and committee members, with an established procedure tomanage recognized conflicts

3/30/2006–Compendia for coverage of off-label uses of drugs andbiologicals in an anti-cancer chemotherapeutic regimen.http://www.cms.hhs.gov/mcd/viewmcac.asp?where=whatsnew&mid=33#agenda.

Table 2. Medicare Coverage Advisory Committee:Desirable Characteristics for a Drug Compendium

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teleconference on alternate years. Each panel memberis asked to disclose any potential conflict of interest,which typically consists of pharmaceutical researchsupport or participation in a pharmaceutical advisoryboard. It should be recognized that most panel mem-bers are likely to have conflicts. The conflicts of inter-est are disclosed in aggregate in every guideline. Theguidelines are then discussed at the meeting andrevised accordingly.

One of the strengths of the NCCN guideline processis that the guidelines can also be updated on an ad hocbasis to respond to particularly important trial results ornew drug approvals by the FDA. Initial results of influ-ential, high-profile phase 3 studies are often presentedat the annual meetings of either ASCO or theAmerican Society of Hematology. The NCCN guide-lines can rapidly incorporate these important clinicaldata into their guidelines, giving it high visibility toboth practicing oncologists and payors, who increas-ingly depend on the NCCN guidelines as a resource fortheir own coverage policy development process.Aspects of cancer care that cut across multiple differentmalignancies are not well addressed by cancer-specificguidelines. These topics have been addressed by sepa-rate NCCN task forces that bring together members ofdifferent NCCN guideline panels and other experts asnecessary. Recent task force reports have included bonehealth, focusing on the prevention and management ofosteoporosis in patients with cancer, PET scans in avariety of malignancies, and oral mucositis as a compli-cation of either chemotherapy and radiation therapy ina variety of malignancies. The multidisciplinaryapproach is another distinguishing feature of theNCCN guidelines.

Leveraging Guidelines

The guidelines and task force reports are publiclyavailable on the NCCN Web site (www.nccn.org), andin collaboration with the American Cancer Society,

the NCCN guidelines have been reformatted intopatient versions for the most common malignancies.The NCCN has also sought other ways to leverage theclinical guidelines to improve cancer care and qualityof care. For example, based on the clinical guidelinesfor breast cancer, colorectal cancer, and non-Hodgkin’slymphoma, the NCCN initiated the NCCN OncologyOutcomes Database Project. The project is designed toidentify the most efficacious and cost-effective strate-gies for the management of these common cancers, andmonitor and benchmark the member institution’s con-cordance with the guideline recommendations. Thedatabase will be able to describe patterns and outcomesof care, and will serve as the basis of a feedback loop tophysicians and their member institutions. Breast cancerwas the initial focus of the database project and hasnow accrued some 30,000 patients.

Drug Compendium

The clinical guidelines have also served as thebasis for the development of the NCCN Drugs &Biologics Compendium. Although the parent clinicalguidelines look at the treatment of the patient acrossthe continuum of care, the drug compendium refor-mats this information to list all the indications for agiven drug and cancer type in a tabular format. Usersseeking additional information are referred to theclinical guidelines. Every NCCN clinical guidelinenow has a correspond ing entry in the NCCN Drugs &Biologics Com pendium, and the compendium is revisedat the same time as the guidelines. The MedicareCoverage Advisory Committee (MCAC) has evalu-ated different compendia for cancer care and identi-fied desirable characteristics for an optimal com-pendium (Table 2).10 The criteria describe a compre-hensive compendium based on a well-defined andtransparent evidence-based process. Drugs can becategorized as recommended, not recommended, orequivocal, based on the evidence.

The MCAC reviewed and scored 6 different com-pendia, including NCCN, the American HospitalFormulary Service Drug Information, and the UnitedStates Pharmacopeia. The NCCN scored highest of anyof the 6 compendia on each criterion. Increasingly, theNCCN clinical guidelines and drug compendium areused by many payors as the basis for their coverage poli-cies. A 2006 survey by the Blue Cross Blue ShieldAssociation of 49 senior medical directors reported that78% indicated that the NCCN guidelines should be thestandard for clinical policy in centers of excellence.11

The NCCN has developed 110 different guidelines that cover 98% of all cancers.Additional guidelines focus on screening, early detection, and supportive care.

33www.AHDBonline.com

The original impetus for the development of oncolo-gy clinical guidelines was simple—to provide guidanceto practicing oncologists to improve the care of theirpatients; however, the above examples illustrate thatthe synthesis of data and expert opinion that is thebackbone of clinical guidelines can be leveraged inmany ways to inform the larger debate regarding health-care costs and access to healthcare. From third-partypayors’ coverage policies, pharmacy formularies, qualitymeasures, pay for performance, to the debate surround-ing the cost of new biologic therapy—all of these ini-tiatives will be grounded in clinical guidelines. �

References1. Borger C, Smith S, Truffer C, et al. Health spending projections

through 2015: changes on the horizon. Health Aff (Millwood).2006;25(2):w61-w75.

2. American Cancer Society. Cancer facts and figures 2006. 2006update. http://www.cancer.org/download/STT/CAFF2006PWSecured.pdf. Accessed January 7, 2008.

3. Kurian AW, Thompson RN, Gaw AF, et al. A cost-effectivenessanalysis of adjuvant trastuzumab regimens in early HER2/neu-posi-tive breast cancer. J Clin Oncol. 2007;25(6):634-641.

4. Goldman G. Is imatinib a cost-effective treatment for newly diag-

nosed chronic myeloid leukemia patients? Nat Clin Prac Oncol.2005;2(3):126-127.

5. Giantonio BJ, Catalano PJ, Meropol NJ, et al. Bevacizumab in com-bination with oxaliplatin, fluorouracil, and leucovorin (FOLFOX4)for previously treated metastatic colorectal cancer: results from theEastern Cooperative Oncology Group Study E3200. J Clin Oncol.2007;25(12):1539-1544.

6. Schrag D. The price tag on progress—chemotherapy for colorectalcancer. N Engl J Med. 2004;351(4):317-319.

7. Cunningham D, Humblet Y, Siena S, et al. Cetuximab monothera-py and cetuximab plus irinotecan in irinotecan-refractory metastaticcolorectal cancer. N Engl J Med. 2004;351(4):337-345.

8. Wolff AC, Hammond ME, Schwartz JN, et al. American Society ofClinical Oncology/College of American Pathologists guideline rec-ommendations for human epidermal growth factor receptor 2 testingin breast cancer. J Clin Oncol. 2007;25(1):118-145.

9. Browman GP, Makarski J, Robinson P, et al. Practitioners as experts:the influence of practicing oncologists “in-the-field” on evidence-based guideline development. J Clin Oncol. 2005;23(1):113-119.

10. 3/30/2006–Compendia for coverage of off-label uses of drugs and bio-logicals in an anti-cancer chemotherapeutic regimen. http://www.cms.hhs.gov/mcd/viewmcac.asp?where=whatsnew&mid=33#agenda. Accessed January 7, 2008.

11. Blue Cross Blue Shield Association. Oral communication. December 2007.

For inquiries or comments, please e-maileditorial@AHDBonline.com.

AHDB Stakeholder PerspectiveCancer therapy is experiencing an astonishing

rate of new breakthrough therapies that succeed inboth prolonging life and improving the health-relat-ed quality of life. This amounts to a society-wide par-adigm shift involving all stakeholders in the processof care. The principal drivers are the high quality ofnew drugs and the correspondingly high costs, requir-ing new tactics to balance quality with cost andaccess to care. The sequence of events is as follows:

• Growth in number and quality of new cancer agents =

• Increases in healthcare resource consumption ($$) =

• Call for new efficiency measureso Preventive medicineo Personalized medicine

• STRATEGIES: predetermine respond-ers, eliminate waste usage of expensivebiologic drugs

• METHODS: molecular mapping andimaging

o NCCN guidelines: updated continually, di-recting providers and payors to best prac-

tices, especially needed in the complex fieldof oncology

• PUBLIC: must decide if it wants the new personalized medicine model and if so, whether they will finance it by paying more of their income into healthcare; this requires a major educational initiative so that lay persons will understand the issues to make an informed strategic public policy shift

• GOVERNMENT: must find new systems for financingo Coverage for new cancer drugs, molecular

mapping, and imagingo Equitable reimbursement models for pro-

viders and provide appropriate income and incentives to administer optimal care

• MANUFACTURERS: must align research closely with provider organizations, FDA, andCMS

• PAYORS: must pursue efficiency measuresappropriate to cancer care, not simplistic cost-containment measures, which have not been shown to reduce costs or otherwise take effec-tive advantage of the new breakthroughs in cancer drug therapy

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34 AMERICAN HEALTH & DRUG BENEFITS February 2008

CLINICAL

Although improving survival remainsa key target for much of drug devel-opment, finding new treatments

that improve how the patient feels or func-tions is an increasingly important goal.Even treatments that improve survival maybe differentiated by how much theyimprove functionality or health-relatedquality of life (HRQOL), or may be of lim-ited value if they significantly diminisheither one. Thus, these outcomes can be animportant gauge of the role of new medicines in thetreatment process for many diseases and patients. Insuch cases, drug development must include appropri-ate, rigorous measures of such patient outcomes toproperly represent and communicate the value of a newmedicine when it is introduced to the market.

The science and practice of measuring patientfunctionality, HRQOL, or any other “subjective” end-point reported by the patient has been developingrapidly. Indicatively, the term patient-reported out-

comes (PROs) has recently come into reg-ular use to encompass the range of end-points that are based solely on patientresponses to questions or instruments.1,2

This range includes patient diary-baseddata, simple visual analog scores (eg, forpain severity), many symptom measures,questions about activities of daily living,and treatment satisfaction questions, aswell as the more complex multi-item, mul-tidomain instruments measuring aspects of

HRQOL. HRQOL is a multidimensional measure ofthe health and treatment experience of the patient,generally involving physical, social, and emotionaldomains. Thus, “PRO” is a much broader term than“HRQOL,” and the 2 terms are not used interchange-ably. For clarity’s sake, it should be noted that “quali-ty of life”—without the “health-related” qualifier—isviewed as including non–health-related, or only indi-rectly health-related, aspects of well-being (eg, finan-cial status) and is not appropriate for use in the drugdevelopment or promotional context.3

Best practices for incorporating PRO measures intodrug development and communicating the results will

Measuring the Value ofTreatment to Patients:Patient-Reported Outcomes in Drug DevelopmentRichard J. Willke, PhD

Dr. Willke is Senior Director, Global Outcomes Research,Pfizer, Inc., Bridgewater, NJ.

Patient-reported outcomes (PROs) can be important measures of the impact and value of new drug treatments to patients.Recently, both multisector stakeholder groups and the U.S. Food and Drug Administration have carefully considered andissued guidance on best practices for the use of PROs in measuring treatment impact. When best practices are followed andPRO data are appropriately included in drug development strategy and clinical trials, these data can be part of the evidencesubmitted for drug approval and included in drug labeling. One study showed that PRO data were included in 30% of a sam-ple of new drug labels and were more concentrated in certain therapeutic areas, such as anti-inflammatory agents, vaccines,gastrointestinal agents, and respiratory and urologic agents. PRO data included in labeling, or generated in a similar scien-tific manner, may often then be used in other communication vehicles, such as formulary submission dossiers, journal ordirect-to-consumer advertisements, publications, or continuing medical education. Meaningful and reliable PRO resultsregarding the effects of new treatments on how patients feel and function provide useful information to those who must makedecisions about the availability and utilization of such treatments.

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be the focus of this paper and go well beyond gettingthe terminology correct. Key aspects will include: (1)identification of the appropriate role of PROs in drugdevelopment and early commercial strategy; (2) estab-lishment of a clear conceptual basis for the PRO instru-ments to be used; (3) successful implementation of thePRO measures within the clinical trial program; and(4) effective and timely communication of the PROstudy objectives and results, both with regulators andother stakeholders. An overview of how PRO resultshave been used in recent labeling for new drug productsapproved in the United States, as well as some specificexamples, will also be given.

Identifying the Role of PROs in the DrugDevelopment Program

As with any other aspect of a drug developmentprogram, PRO endpoints should be included onlywhen there is clinical and/or practical medical value tothose endpoints. Although clinical and practical med-ical value are closely related, the clinical value isderived from the information to be gained from PROsabout treatment effects on symptoms and physiologicalmea sures per se, while the practical medical value isbroader and includes the effects of treatment onpatient well-being, as well as the relevance of thisinformation to patients, payors, and others involved indecisions about treatment. Since practical medicalvalue contributes to market access and uptake of aproduct, PRO endpoints are relevant to the early com-mercial strategy as well.

The value of PROs and their role in clinical trials inparticular was outlined by the PRO HarmonizationGroup, an assemblage of stakeholders from academia,industry, and regulatory agencies, in a series of meetingsin 2000-2002.4 The general value of the patient’s per-spective was summarized along 4 lines, determined bywhether the PRO was: (1) a unique indicator of theimpact of disease, (2) essential for evaluating treatmentefficacy, (3) useful for interpreting clinical outcomes,and/or (4) a key element in treatment decision-mak-ing.4 In other words, the PRO must be important forunderstanding the benefits of treatment for the patient.Furthermore, PROs can be “essential endpoints” forclinical trials when: (1) the patient’s self-report is theprimary or sole indicator of disease activity; (2) thetreatment may have a small impact on survival but mayhave a significant impact, positive or negative, onHRQOL; (3) the treatment may adversely affectpatient functionality or well-being; (4) the treatment

arms offer equal efficacy but differential PRO benefits;or (5) treatment-related decisions are based on a com-bination of objective and patient-reported subjectiveparameters.4 These describe the most common situa-tions when PROs complement or replace other clinicalendpoints in measuring the treatment benefits (oradverse impact) to the patient. In such situations,PROs can be useful, and perhaps instrumental, to regu-lators when deciding whether a new treatment shouldbe approved for public use.

The role of PROs in decisions about treatments inregular medical practice is the other major considera-tion in their selection for use in drug development pro-grams. As is well-known, appropriate cancer treatmentmay be selected based on a tradeoff between likelyimprovements in survival, sometimes small, versus itsimpact, sometimes negative, on patient HRQOL. Aless critical but nonetheless important example are thechoices among the many arthritis treatments available,made in part based on pain relief and the effects on thepatient’s ability to perform normal daily activities. Aneven more common example would be selection ofallergy medication, which is often made based ondegree of symptom relief versus drowsiness—bothPROs. Thus, it is important for providers—physicians,pharmacists, nurses, and others—as well as patients tohave meaningful and reliable information about theseeffects derived from clinical trial data.

PRO data can be useful to managed care decisionmakers in evaluating the mix of drugs needed on for-mulary to best suit the variety of their patients’ needs.In a given category it may be important to have both adrug with maximum efficacy and one that may be notquite as efficacious but more tolerable or “patient-friendly” to encourage adherence and to allow thephysician some options in patient treatment (eg,chemotherapy, certain anti-infectives, and pain med-ications). There is some evidence that payors do usethis type of information. In a survey of managed caremedical and pharmacy directors, 54% thought

CLINICAL

As with any other aspect of a drug development program, PRO endpoints shouldbe included only when there is clinical and/orpractical medical value to those endpoints.

36 AMERICAN HEALTH & DRUG BENEFITS February 2008

CLINICAL

HRQOL information was “important” or “very impor-tant,” and 76% felt it would increase in importance.5 Asimilar survey found that, among factors considered inthe drug benefit decision-making process, the HRQOLeffects of the drug were more important than physiciandemand for the drug, rebate arrangements, and con-sumer demand.6

Developing PRO Claims—Not for Amateurs

To provide meaningful and reliable information forregulators, providers, patients, and payors, PRO datamust be generated in a scientific way. The scientificprocess includes appropriate endpoint and instrument(aka, questionnaire) selection—and, when needed,instrument development—as well as data collection,analysis, and interpretation.7 In February 2006, theU.S. Food and Drug Administration (FDA) issued a36-page draft guidance8—not yet finalized at the timeof this writing—that lays out much of the scientificprocess for generating PRO data, which the FDAexpects sponsors to follow before such data can beincluded in product labeling.

The first step in this process is ensuring that thePRO endpoints used properly capture the aspects oftreatment benefit that are most relevant to thepatient, an exercise that begins with identifying thespecific concepts of patient well-being that are both

impacted by the disease and likely to be affected bytreatment (Figure 1). For example, in the treatment ofosteoarthritis, specific concepts considered importantoften include a “simple” one such as pain, as well as amore complex one such as limitations on activities ofdaily living. These PRO endpoints generally should belogical counterparts to other clinical or physiologicalendpoints; the interrelationships of all these endpointsmay be described in what is called an “endpointmodel.”9 In some cases, however, the PRO measuresmay be stand-alone primary endpoints if other typesdon’t apply; for example, migraine treatments rely pri-marily on PRO endpoints, since making objectivemeasurements of pain and other symptom relief is dif-ficult. When the PRO endpoint is of the more com-plex variety (ie, consisting of a summary score basedon a number of individual questions), it needs to havean underlying “conceptual framework” that relateshow the simpler concepts explored in the individualquestions (eg, dressing oneself or bathing oneself)combine to form a more complex concept (eg, activi-ties of daily living) represented by the summary score.Proper delineation of the relationships among con-cepts and endpoints is important both to good mea -surement and to clear interpretation and communica-tion of treatment benefit.10

Asking patients about specific concepts relating tohow they feel or function is not quite as simple as itmay seem. PRO instruments must go through carefuldevelopment based on input from patients with the rel-evant condition and characteristics, item (question)selection and testing, piloting, psychometric testing forseveral aspects of reliability and validity, as well asresponsiveness to treatment effects, and then perhapsmodification and re-testing. The draft FDA guidancedepicts this process in a “wheel and spokes” diagram(Figure 1).8 PRO instrument development can be anexpensive and time-consuming process, and sponsorswill generally first seek to use existing, well-validatedinstruments in their programs.11 If no existing instru-ment applies precisely to the target population ornature of the treatment benefit, the second choicewould be to modify an existing instrument, althoughsome additional validation work must then be con-ducted. As a last resort, a new instrument may need tobe developed from scratch—to be validated beforephase 3 trials, this development must begin early dur-ing human clinical trials. Recently the FDA has beenapplying increasingly rigorous standards for PROinstruments, such that instruments previously thoughtto be validated may no longer pass muster. In particu-

Figure 1. The Process for Generating PRO Data

Identify concepts & domains that are important to patients.Determine intended population and research application.

Hypothesize expected relationships among concepts.

i. Identify Concepts & DevelopConceptual Framework

iii. Assess Measurement PropertiesAssess score reliability, validity, and ability to detect change.

Evaluate administrative & respondent burden. Add, delete, or revise items.Identify meaningful differences in scores. Finalize instrument formats,

scoring, procedures & training materials.

iv. Modify InstrumentChange concepts measured,populations studied,research application,response options,recall period,or method of administration.

ii. Create InstrumentGenerate items.

Choose administrationmethod, recall period &

response scales.Draft instructions.

Format instrument.Draft procedures for

scoring & administration.Pilot test draft instrument.

Refine instrument & procedures.

PRO

FDA, 2007.8

37www.AHDBonline.com

lar, recall periods commonly used in questions (eg,“Over the past week…”) have been a subject of scruti-ny. The FDA has shown a strong preference for shortrecall periods as a guard against recall bias; however,only a limited amount of research has been done on theextent to which recall bias affects the comparative esti-mates of treatment effect. This regulatory pressure,together with the increasing availability and feasibilityof electronic patient diaries, has triggered a new roundof development of instruments better suited for use insuch circumstances.

Because of the importance of regulatory judgmentson the suitability of PRO instruments and results foruse in product labeling, regular interaction with theFDA about the PRO strategy and studies during thecourse of the development program is advisable. Thisinteraction should include discussion of the potentiallanguage to be used in the product label if the studiesare successful. Whereas the FDA therapeutic areareview divisions retain the ultimate authority for thelabeling of individual products, the FDA StudyEndpoints and Labeling Development Team is thefocal point of the agency’s PRO expertise and will oftenbe involved in consultations concerning PRO end-points. These interactions may start as early as phase 1,when human trials first begin, through phase 3 and thenew drug application (NDA), and extend into post-marketing periods. The end-of-phase-2 meeting is gen-erally an important point for the sponsor to review theplans for PRO endpoints in detail with the FDA. Ateach stage of interaction, including the final NDA sub-mission, the sponsor typically submits a briefing docu-ment or dossier with the background on the PROinstruments used and any data available to date; a pro-posed outline for this dossier is expected to be includedwith the final FDA PRO guidance.

Diligent implementation of PRO studies in clinicaltrials is also crucial. Without reasonably complete,properly collected data, even the best PRO instrumentcannot yield reliable and meaningful results. Planningthe logistics of the data collection during or betweenpatient study visits, training the investigational sitestaff on administration procedures, early and ongoingcommunication with sites and monitoring of the suc-cess of the data collection, and quick remediation ofproblems are the hallmarks of successful studies. Eventhough the inclusion of PRO data in clinical studieshas become relatively common, study sites may stillconsider such data to be of secondary importance andnot place sufficient priority on good data collectionprocedures unless proactively managed by the sponsor.

Inadequate attention to these concerns often results intoo much missing or poor quality data and has resultedin the failure of many PRO studies.

Given valid, concept-based instrumentation andcomplete, high-quality data, the third major steptoward a PRO claim is defensible analysis and interpre-tation of the data.12 Major endpoint hypotheses andanalysis methods are declared in the original protocol;a full statistical analysis plan for the PRO data mustalso be established, preferably at the beginning of thestudy and absolutely before the data blind is broken.Key issues to address in this plan typically include, butaren’t limited to, approaches to multiple endpoint test-ing, missing data (hopefully minimal but rarely zero),and clinically meaningful differences.8 Since differentapproaches to these issues exist and can yield differentresults, it is important to prospectively declare theapproaches to be used to avoid the appearance, or real-ity, of data-mining.

Assuming successful studies and an approvable drug,the final step is negotiating final PRO label languagewith the FDA. Although draft language should havebeen discussed earlier in the development program, theFDA will want to ensure that the final labeling to beused with the general public appropriately communi-cates the concepts tested and the strength of the data,based on current standards for PROs. Shifting stan-dards can be, and have been, an issue here since PROstudy decisions made early in a development programmay not yield results for 5 years or more. The issuanceof the draft guidance was a big step forward in that itsolidified a number of standards that had been evolvingfor some time. Even though not all current issues areresolved there—the science is always evolving—itgives sponsors a much clearer basis for planning PROstudies during development. Standards for PRO datahave essentially become at least equivalent to thoseapplied to more traditional clinical data. These devel-opments should give users of that information—the

CLINICAL

Diligent implementation of PRO studies in clinical trials is also crucial. Without reasonablycomplete, properly collected data, even the best PRO instrument cannot yield reliable and meaningful results.

38 AMERICAN HEALTH & DRUG BENEFITS February 2008

CLINICAL

providers, patients, and payors—a greater degree ofconfidence that PRO claims made for new drugs aremeaningful and reliable and represent treatment bene-fits of value to patients.

Actual PRO Claims

PRO data are not new to drug development andlabeling. In studies for pain medications, for example,patients have always had to be asked about how muchpain or pain relief they experienced, and those resultswere included in labeling as efficacy measures. (Itshould be noted that listings of side effects in labelingas evidence regarding safety are often patient-reportedbut have not been the focus of this discussion.) Broaderhealth status measures also have a long history in bothclinical trials and health policy,13 but it was not untilabout 20 years ago that sponsors began to regularly con-sider collection of such broader measures in clinical tri-als and as having potential for labeling claims; the firstapparent HRQOL claim appeared in a U.S. label in1989 (a number of HRQOL endpoints, for erythropoi-etin alfa).14 Since that time, a variety of simple andmore complex PRO claims have been cited in labeling.

In a study of 215 new drugs approved in the UnitedStates from 1997 to 2002, we found that 64 of theseproducts (30%) included PRO data in the clinical trialssection of the label as a measure of treatment benefit(Figure 2).3 As can be seen in Figure 2, PROs are not as

commonly used as more traditional clinician-reportedoutcomes (eg, mortality, fractures, tumor response, theUnified Parkinson’s Disease Rating Scale) or laboratorytests and device measurements (eg, FEV1, HbA1C,blood pressure); however, 23 of these drugs are used onlyin PRO endpoints as measures of treatment benefit,including antimigraine products and some drugs forpain relief, antiepileptics, antiflu, and 3 drugs for aller-gic conjunctivitis. Other types of drugs that relied heav-ily, but not exclusively, on PRO endpoints includedanti-inflammatory agents, gastrointestinal agents, vac-cines, and respiratory and urologic agents.3

In some cases, these PRO endpoints were relativelysimple patient-experienced events (eg, patient recall ofangina attacks, partial epileptic seizures, and days withbowel urgency). Also common were symptom ratings—simple questions about influenza symptoms, ocularitching, bloating, headache severity, nausea, and soon—generally in a Likert scale or visual analog scaleformat. Responses for related symptoms were some-times combined to get a symptom score, such as inasthma, pruritus, or allergic rhinitis. Such endpointsare not considered HRQOL measures but, given theirsubjective nature, may be affected by the same validityissues as more complex scales and thus have an impor-tant place in the PRO spectrum. More formal, complexPRO scales were represented in 16 of these labels,including both disease-specific scales (eg, WalkingImpairment Questionnaire,15 WOMAC OsteoarthritisIndex,16 and International Index of Erectile Function17)and more general health status measures (Short Form-3618 and Sickness Impact Profile19). The most commonscale used in 6 labels of arthritis drugs was the ModifiedHealth Assessment Questionnaire,20,21 a physical func-tion and health perception instrument particularly rel-evant to that disease.

No comprehensive assessment of PROs in labelssince 2002 is available, but an examination of labels ofrecently approved drugs shows that their use continues.The label for ciclesonide, a treatment for allergic rhini-tis, says that patients treated with it “exhibited statisti-cally significantly greater decreases in total nasal symp-tom scores than placebo-treated patients.” The labelfor varenicline, a smoking cessation product, indicatesthat it “reduced urge to smoke compared to placebo inall studies.” The label for eculizumab, a product for pri-mary nocturnal hemoglobinuria, includes the state-ment “after 3 weeks … patients reported less fatigueand improved health-related quality of life.” These 3examples range from a very disease-specific scoreimportant to efficacy measurement to a general

Figure 2. Types of Endpoints in U.S. Product Labels for215 New Drugs Approved 1997-2002*30% of new product labels included PRO endpoints

140

120

100

80

60

40

20

0

116

64

Lab tests & devicemeasures

Clinician-reportedoutcomes

Patient-reportedoutcomes

*Some products have more than one type of endpoint.

Reprinted from Willke R, Burke BL, Erickson P. Measuring treatment impact: a review of patient-reported outcomes andother efficacy endpoints in approved labels. Control Clin Trials.2004;25(6):535-552, with permission from Elsevier.

129

39www.AHDBonline.com

HRQOL claim; the varenicline example is unusual inthat “reduced urge to smoke” is related to how the drughelps achieve the ultimate outcome of treatment ratherthan being the ultimate outcome per se.

Communicating the Value ofTreatment-Reported Outcomes

The presence of the PRO claim in the approved labelis important for 3 reasons: (1) it indicates that the FDAjudged the information to be valid, reliable, and worthyof mention; (2) it makes the results widely available ina public document; and (3) it enables further use of thedata in a variety of postlaunch communications. Suchpostlaunch communications are often intended for avariety of stakeholders and may include formulary sub-mission dossiers, journal or direct-to-consumer adver-tisements, publications, or continuing medical educa-tion. They may contain more detail about the PROresults than present in the label per se (eg, results ofindividual items in a scale), as long as they are consis-tent with the labeling and are scientifically supportable.By reaching a wider audience, with more relevantdetails, the practical medical value of the PRO resultscan be more completely realized via these communica-tion vehicles than through the label alone.

Under some conditions, PRO data can still be utilizedeven if it doesn’t appear in the original approved label.Postlaunch communications about marketed drugs,outside of scientific publications per se, are regulated bythe FDA Division of Drug Market ing, Advertising, andCommunications (DDMAC). DDMAC may deem thatoff-label PRO data are appropriate for use in communi-cations if supportive data are brought forward that werenot present in the original NDA, such as subsequent val-idation work, or data from phase 3B or phase 4 trials. Incases where development and validation of a new instru-ment cannot be completed before the phase 3 trials, orwhere the phase 3 trials reveal a potential PRO effectthat must be confirmed with further trials, DDMAC-sanctioned use of nonlabel PRO data may be the mostfeasible route.

For those wishing to obtain more information aboutPRO results from a drug development program, severaloptions are available. The most direct method is tocontact the Medical Information Department of thedrug sponsor, which is responsible for responding toexternal information requests. Many of the results willalso be published in the scientific literature, either asconference abstracts or full journal publications. PROresults are also sometimes included in documents post-

ed on ClinicalTrials.gov or ClinicalStudyResults.org.In summary, PRO endpoints included in drug trials

may capture treatment benefits that can only be mea -sured by obtaining patient input. They can translate theeffects of a new drug from the very disease-specific,objective clinical measures traditionally used in trials toeveryday concepts that are meaningful to patients andthose who care for them. They can help make decisionsabout whether a treatment should be started, or aboutwhich treatment should be chosen. Recent regulatoryguidance for, and enforcement of, standards for PRO evi-dence, together with the increased attention by sponsorsto well-considered use of PROs in drug development,allows patients, providers, and payors to be confidentthat PRO data included in product labeling or seen inpromotion are meaningful and reliable. When properlycommunicated, PRO results can help the full value ofmedical treatments to patients be realized. �

Acknowledgments: The thoughts expressed in this paperhave benefited from many discussions in recent yearswith Penny Erickson, Laurie Burke, and several Pfizeremployees and other colleagues; however, none of thembear any responsibility for what is written here, nor doesit reflect an official position of Pfizer, Inc.

References1. Burke L. Acceptable evidence for pharmaceutical advertising and

labeling. DIA Workshop on Pharmacoeconomic and Quality of LifeLabeling and Marketing Claims. October 3, 2000 [presentation].

2. Revicki D. Consistent patient-reported outcomes. Value Health.2002;5(4):295-296 [editorial].

3. Willke R, Burke LB, Erickson P. Measuring treatment impact: areview of patient-reported outcomes and other efficacy endpoints inapproved labels. Control Clin Trials. 2004;25(6):535-552.

4. Acquadro C, Berzon R, Dubois D, et al, for the HarmonizationGroup. Incorporating the patient’s perspective into drug develop-ment and communication: an ad hoc task force report of the Patient-Reported Outcomes (PRO) Harmonization Group Meeting at theFood and Drug Administration, February 16, 2001. Value Health.2003;6(5):522-531.

5. Crawford BK, Dukes EM, Evans CJ. The value of providing quality-of-life information to managed care decision makers. Drug BenefitTrends. 2001;13:45-52.

6. Motheral BR, Grizzle AJ, Armstrong EP, et al. Role of pharmacoeco-nomics on drug benefit decision-making: results of a survey.Formulary. 2000;35:412-421.

7. Leidy NK, Revicki DA, Geneste B. Recommendations for evaluatingthe validity of quality of life claims for labeling and promotion. ValueHealth. 1999;2(2):113-127.

8. U.S. Food and Drug Administration. Guidance for Industry. Patient-Reported Outcomes Measures: Use in Medical Product Developmentto Support Labeling Claims. U.S. Department of Health and HumanServices, Food and Drug Administration, Center for Drug Evaluationand Research (CDER), Center for Biologics Evaluation and Research

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(CBER), Center for Devices and Radiological Health (CDRH).February 2006. www.fda.gov/CDER/guidance/5460dft/pdf. AccessedDecember 11, 2007.

9. Patrick DL, Burke LB, Powers JH, et al. Patient reported outcomes tosupport medical product labeling claims. Value Health. 2007;10(suppl2):S125-S137.

10. Rothman ML, Beltran P, Cappelleri JC, et al. Patient-reported out-comes: conceptual issues. Value Health. 2007;10(suppl 2):S66-S75.

11. Snyder CF, Watson ME, Jackson JD, et al. Patient-reported out-comes: designing a measurement strategy. Value Health. 2007;10(suppl 2):S76-S85.

12. Sloan JA, Dueck AC, Erickson PA, et al. Analysis and interpretationof results based on patient-reported outcomes. Value Health.2007;10(suppl 2):S106-S115.

13. Patrick DL, Erickson P. Health Status and Health Policy: Quality of Lifein Health Care Evaluation and Resource Allocation. New York, NY:Oxford University Press; 1993.

14. Shah SN, Sesti AM, Copley-Merriman K, et al. Quality of life ter-minology included in package inserts for US approved medications.Qual Life Res. 2003;12(8):1107-1117.

15. Regensteiner JG, Steiner JF, Panzer RJ, et al. Evaluation of walkingimpairment by questionnaire in patients with peripheral arterial dis-ease. J Vasc Med Biol. 1990;2:142-152.

16. Bellamy N, Buchanan W, Watson G, et al. Validation study of

WOMAC: a health status instrument for measuring clinically impor-tant patient relevant outcomes to antirheumatic drug therapy inpatients with osteoarthritis of the hip or knee. J Rheumatol.1988;15(12):1833-1840.

17. Rosen RC, Riley A, Wagner G, et al. The international index oferectile function (IIEF): a multidimensional scale for assessment oferectile dysfunction. Urology. 1997;49(6):822-830.

18. Ware JE Jr, Sherbourne CD. The MOS 36-Item Short-Form HealthSurvey (SF-36); I. Conceptual framework and item selection. MedCare. 1992;30(6):473-483.

19. Bergner M, Bobbitt RA, Carter WB, et al. The Sickness ImpactProfile: development and final revision of a health status measure.Med Care. 1981;19(8):787-805.

20. Fries JF, Spitz PW, Kraines RG, et al. Measurement of patient out-come in arthritis. Arthritis Rheum. 1980;23(2):137-145.

21. Pincus T, Summey JA, Soraci SA Jr, et al. Assessment of patientsatisfaction in activities of daily living using a modified StanfordHealth Assessment Questionnaire. Arthritis Rheum. 1983;26(11):1346-1353.

For inquiries or comments, please e-maileditorial@AHDBonline.com.

AHDB Stakeholder PerspectiveWhen the American public rebelled against man-

aged care in the late 1990s, it was demanding ahealthcare delivery system that addressed their spe-cific, or personal, healthcare preferences. Todaythere is terminology to describe this goal: personalizedmedicine. The public outcry against managed care is auseful backdrop for examining the phenomenon ofpatient-reported outcomes (PROs), which can beviewed as a part of personalized medicine.

PROs offer both challenges and opportunitiesto various stakeholders. Physicians incorporatingPROs into their treatment strategies may seeimproved patient satisfaction, but the benefit comeswith some costs: first education on the process, thenobtaining PRO data, and finally interpreting it.However, if PROs put the clinical picture in fullrelief, it will be attractive to providers and theirpatients alike. Obviously, physicians must be givenincentives to learn PROs, including increased com-pensation from plans.

If physician interest in PROs is the pursuit ofquality, payors have a higher hurdle to climb becausethey do not practice medicine but manage overallresource allocation. Their concern is the pursuit ofvalue, which is a composite of quality, cost, and

access. Hence, payors need objective evidence thattheir professional interests are served in implement-ing PROs in order to face their more complex learn-ing curve involved in incorporating them into theircorporate paradigm: education, implementation,and then interpretation of PRO data.

Large employers and CMS have similar incentivesto pursue personalized medicine, as both want healthypatients. But again, they must be able to finance itand establish value. Funding must be secured forCMS to pursue PROs.

Manufacturers will pay more to incorporate PROdata into their labeling, but the resulting product willhave a more compelling value proposition than tra-ditional safety/efficacy labeling. Demonstrating valueof new drugs is essential in today’s climate, and inappropriate disease states PROs can form an impor-tant part of the value proposition.

The basic tenet of PROs is that healthcare is amultilateral process, not a unilateral one. It involvesreally involving the patient into the process. Thepublic has been criticized for not appreciating thevalue proposition of healthcare intervention.Perhaps PROs are a means of integrating patientsinto the decision-making process, and finally achiev-ing that elusive goal of being a responsible healthcarecoparticipant.

41www.AHDBonline.com

FDA WATCH

FDA Watch

Approvable Letters in 2007and the Outlook for 2008Mark Senak, JD

Even the most casual observer of the pharmaceuti-cal and biotechnology industries will havenoticed that in 2007, the U.S. Food and Drug

Administration (FDA) issued an overwhelming num-ber of approvable letters and a corresponding under-whelming number of approval letters for new productapplications. In fact, according to a recent publicationby Sagient Research, the number of approvals fell by13% from 2006, while the number of approvable lettersincreased by 40%.

An approvable letter is sometimes also called aComplete Response Letter, and it means that the FDAhas cited some conditions that a drug sponsor mustattend to before a product will be approved for themarket. Sometimes, companies try to spin this as goodnews, and although it is better than a nonapprovalresponse from the agency, it is still short of an approval.

The conditions on which the FDA demands actionmay be very easily addressed by the sponsoring compa-ny, involving such mundane considerations as labelchanges or data inclusion or even the development ofa risk management plan; however, the conditions mayalso include new data that necessitate new clinical tri-als—meaning added expense and time before approvaland marketing.

There are many implications related to the issuanceof so many approvable letters. The current approvalenvironment represents more than an inconvenienceto companies and to patients who are awaiting thera-pies with serious implications for both, as well as forinvestors in companies, particularly smaller companiesthat do not yet have a product on the market. Here arejust a few of the effects:

• An Erosion of Intellectual Property—When acompany files its application with the FDA, its patenthas already begun, and the clock is ticking on thatpatent. The longer the FDA takes to consider and toapprove a new compound, the less valuable the com-pound is when (and if) it is finally approved and entersthe marketplace, because there is less time for the drugto have market share and recoup the investment costsrepresented in its development. That means either (1)

the drug will have to be priced more expensively (whichis counter to patient and public interest), or (2) thecompany may not get back as much funding to reinvestinto new research and development (again counter topatient and public interest, as well as those of investors).

• Small Companies Particularly Suffer—In 2007,both small and large companies were well representedamong those who received approvable letters; however,if a company with no product yet on the market receivesan approvable letter for an investigational compound, itcan be devastating to the company. Consider that anapproval means that a company wants to move to themarket quickly, which requires, among other things, ageared up and trained sales force. An approvable letternecessarily means that a company has to either maintainthat force without sales to support it or to lay them off.Needless to say, the return for investors is not thereeither. If the FDA is moving the goal posts on approv-ability, the standards should be clear so that the impacton companies, employees, and investors can be mini-mized. Otherwise, startup and innovative companiesmay find it harder to raise the cash needed to producetomorrow’s miracles today. It is in the public interest tohave policies that encourage America’s innovation increating new compounds, not to hinder it.

Also according to the same Sagient Research report,the average stock price change that was the result of anapprovable letter dropped in 2007 to 12.89% from21.42% in 2006, which would mean that approvableletters are having less of an impact and that perhapsinvestors are adjusting to this new paradigm.

• Setbacks to the FDA Modernization Act andPrescription Drug User Fee Act—In the 1990s, with theHIV epidemic whirling out of control and no treatmentsfor people diagnosed with AIDS, there was a tremen-dous public appetite (and hence policymaker action) toget drugs approved more quickly. Consequently, therewas policymaker action in response. Hence, FDA reformin the form of 2 pieces of legislation accomplished justthat by shortening approval times and allowing for FastTrack and Accelerated Approvals. Now, however, wehave a situation where the public priority is focused onrisk aversion and safety issues, not quick access to newtreatments. That means that policymaker actions arelikely to follow public angst about drug safety with addi-tional FDA reforms that direct and scrutinize agencyapproval actions. Although that is happening, it is high-ly likely that the agency will continue to operate in amode of operations that lends itself to caution overspeedy drug access and approval.

In short, there is every reason to believe that the

42 AMERICAN HEALTH & DRUG BENEFITS February 2008

FDA WATCH

pharmaceutical, biotech, and even device industriesare operating in a new approval environment, whetheror not they realize it. Safety signals anywhere along theclinical trial trail or pop meta-analyses conducted onthe class or the specific compound can mean seriouscomplications for approval, when just a few years ago,they would not have been of serious concern.

There is no reason to believe that the situation isgoing to improve in 2008. The FDA reform that began

Mr. Senak is Sr. Vice President at Fleishman-Hillard in Washington, DC, and author of Eye on FDA,www.eyeonfda.com.

“My payors don’t understand me.”

Unmanaged Moment

in 2007 is likely to continue in 2008 with a great dealof oversight scrutiny by Congress. In the past month,more than one letter has left Congress sent to the FDAto inquire about specific drug approvals and potentialconflicts of interest among advisory committee mem-bers, the proposed behind-the-counter status of drugs,and whether the system for quicker approval of drugsunder Fast Track has been misused. Complicating thesituation further will be the election cycle, which hasnow begun in earnest. It will not only provide a plat-form for some pharmaceutical industry-bashing, it willalso be a showcase for the proposal of further reforms,some of which may be designed to slow down theapproval process even more in favor of perceived safe-ty enforcement. �

Upcoming in

ESAs in a Meta-stable State: Guidelines,Economics, and Policy in FluxSamuel M. Silver, MD, PhD, and F. Randy Vogenberg, RPh, PhD

Not Waiting for Godot: The Evolution of HealthPromotion at PPGAlberto Colombi, MD, MPH

Patent Reform Proposals to Raise the Stakes forResearchers, Manufacturers of BiologicsRosemary Frei and Shayna Kravetz

The Role of Meta-Analysis in ComparativeDrug EvaluationNirav R. Shah, MD, MPH

Managed Care Pharmacy Emerging Trends: Second Annual SurveyCynthia J. Pigg, RPh, MHA

Cost-Containment Strategies for Cancer DrugsGary M. Owens, MD

When Novelty Is Not EnoughMichael F. Murphy, MD, PhD

43www.AHDBonline.com

INDUSTRY TRENDS

The BioPharm Insight 2007pipeline data summary (see Tables) accentuatesa theme that has been repetitively voiced with-

in the research and clinical development communityfor a number of years:

• Basic science is the engine of innovation in drugdiscovery

• There is a return to “deep science” within the phar-maceutical community with a commitment to character-izing both normal and pathophysiological processes at themolecular level in order to develop potential therapeutics

• The more permissive and informative the sciencethe more compounds within discovery that can transi-tion into clinical trials (see cancer, infectious disease, andcentral nervous system disorders for example)

• Drug discovery and early phase clinical develop-ment are increasingly enmeshed phases conceptually,with “discovery within development” used as a vehicle toselect compounds for registration programs

There is no economy of scale regarding innovation.Novel therapeutics may be derived from academic insti-tutions, and small and medium-sized pharmaceuticalcompanies, as often as from the larger research organiza-tions. Given an increasingly prolific process, competitivedrug discovery demands an ability to eliminate com-pounds as early in discovery as possible, in a fashion that

INDUSTRY TRENDS—CLINICAL

The 2007 Pharmaceuticaland Biotech PipelineYear-End Summary:What it Says About the State of theArt of Discovery & Development

Michael F. Murphy, MD, PhD

NDA/BLA Filed 858Phase 3 1,962Phase 2 4,231Phase 1/IND Filed 4,577Preclinical/Discovery 11,553No. of Products Launched 4,017Status Unclear 306Total 27,504

BLA indicates biologic license application; IND, investigational newdrug application; NDA, new drug application.

does not stifle creativity. Across the industry, “potentialhits” are triaged using virtual and actual biodispositionand toxicity paradigms with criteria consistent withpotential as a drug candidate. Additionally, enhancedscreening is introduced earlier in the discovery/development algorithm, ie, more upstream (closer) to theprimary and secondary biological assays leading to candi-date selection for clinical testing. In an entirely analo-gous fashion, integration of early phase clinical researchinto the drug discovery process requires an ability to effi-ciently evaluate different compounds simultaneously,rather than sequentially. The objective of this integratedstratagem is to maximize the value of the early phaseportfolio considered in aggregate, rather than the valueof individual projects contained within the portfolio,minimizing resource utilization and expenditures untilprogram risk is significantly reduced.

A comparison of the attrition pattern for compoundsfrom preclinical/discovery to registration programs(phase 3) is illustrative. Innovative science permits iden-tification of an increasingly large array of novel newmolecular entities. Given the uncertain homology thatmay exist in some therapeutic areas between animalmodels and biological effects in man even for basicattributes such as pharmacokinetics and safety, the needto render an early decision about a compound’s potentialutility in man, as opposed to extensive testing in animals,is increasingly recognized as key. Therefore, there is animpetus to begin limited human experimental evaluationas expeditiously as possible in phase 1 (including first inman studies) then phase 2 studies (dose ranging, proof ofconcept trials) placing considerable emphasis upon deci-sion-making paradigms with an efficient allocation ofresources. The more compounds within the discoveryportfolio (see cancer for example), the more innovativethe clinical and biostatistical methodology employed.This process is accelerating.

For example, no therapeutic area has contributedmore to the development of clinical trial methodology,broadly defined, than has oncology. This phenomenon isin part due to an explosion in basic science that has facil-itated the identification of very innovative therapeuticsfor which traditional trial methodology in a “proof ofconcept” study might be inappropriate. In oncology, andincreasingly in other therapeutic areas, an ability toupdate and modify trial design as new clinical data areaccrued, can allow a trialist to “prune” uninformativedosage groups from multi-arm dose-ranging trials prior totrial conclusion, terminate research on a clinical candi-date as “futile” within constraints defined at study incep-tion, and continuously update the information support-ing the rationale for a study (ie, the hypothesis) as data

44 AMERICAN HEALTH & DRUG BENEFITS February 2008

INDUSTRY TRENDS

accumulates. Utilization of biomarkers including imagingtechnology rather than clinical endpoints, and enrollinga highly “leveraged” patient sample (patients with char-acteristics likely to enhance signal detection based upongenotypic or phenotypic information) additionally maxi-mizes sensitivity in a proof of concept motif. All of thesecomplementary approaches provide a conduit for earlyphase translational research supporting an active drugdiscovery process.

Indeed, innovative trial design methodology is facil-itated by the existence of relatively new regulatory guid-ance both in the United States and Europe that willpermit compound evaluation in man, with certainrestrictions, following submission of a comparatively lim-ited portfolio of preclinical studies. Limited “exploratoryIND investigations” in humans can be initiated with less,or different preclinical support than would be required fora traditional application as these studies present fewerpotential risks to subjects or patients than traditional tri-als that specifically look for dose limiting toxicities. Anexploratory IND program may permit an understandingof a compound’s mechanism of action relevant to a par-ticular disease state, characterize the pharmacokinetic orbiodisposition profile of a candidate drug, or enable theselection of promising lead products from a group of can-didates that interact with a therapeutic target in humans.Should a compound prove “interesting” in small elegant

clinical trials, traditional safety and toxicological studiesin animals that enable large-scale clinical trial testing arecompleted. This concept is closely related to a “fail fast”thematic that places considerable valence on the elimina-tion of compounds early in development, prior to the allo-cation of the resources required to obtain regulatoryapproval. Parenthetically, this strategy is far more appro-priately utilized in those pharmaceutical companies witha robust pipeline as opposed to organizations with limit-ed resources and potential therapeutic agents.

The implications for the healthcare environment areconsiderable.

• First, of necessity, the system continues to placeconsiderable emphasis upon novelty, not potential clini-cal value during the discovery process and the early phas-es of clinical research. By definition, it is the chemicaland biological novelty of the compound, and a confirma-tion of activity in man that provides the catalyst for adecision to transition from “discovery in development” toa prototypical development program. For example, it isan unusual company, perhaps only one with a cornucopiaof compounds for potential evaluation, that will heavilyweight reimbursement decisions late in discovery or veryearly in clinical research.

• Secondly, in the ultimate expression of the art, theclinical trial methodology upon which early developmentdecisions can be based increasingly uses experimental

Total No. of No. ofInvestigational NDA/BLA Phase Phase Phase 1/IND Preclinical/ Products Status

Therapeutic Area Drugs Filed 3 2 Filed Discovery Launched Unclear

Cancer 7,020 104 527 1,540 1,473 2,859 437 80Infectious Diseases 2,957 89 196 348 423 1,327 542 32Central Nervous System 2,900 155 211 394 397 1,217 507 19Cardiovascular 2,135 75 219 300 287 740 480 34Hormonal Systems 1,515 72 124 222 265 513 309 10Miscellaneous 1,490 8 8 18 168 1,232 44 12Immune System 1,434 48 93 126 214 732 214 7Gastrointestinal 1,096 48 98 208 176 347 212 7Musculoskeletal 1,089 38 84 177 161 388 222 19Pain 956 58 99 172 147 236 231 13HIV Infections 874 17 43 99 171 454 70 20Respiratory 870 27 56 167 163 310 135 12Diagnostic/

Imaging Agents/Delivery 832 17 23 47 125 508 106 6Genitourinary 670 32 57 134 90 165 186 6Dermatology 660 27 43 140 109 173 151 17Hematological 579 24 39 78 124 198 111 5Eye and Ear 427 19 42 61 84 154 60 7Total 27,504 858 1,962 4,231 4,577 11,553 4,017 306

45www.AHDBonline.com

INDUSTRY TRENDS

paradigms and endpoints that are not transparent to thenon-trialist and non-scientist. This process essentiallyprecludes the informed observation and participation ofmany consumers of this research until peri-approval stud-ies are launched.

• Thirdly, the database that enables health technolo-gies assessments can be increasingly populated bypatients and physicians who may not be representative ofthose ultimately utilizing the product. Although poor“generalizability” has always plagued the drug develop-ment process, the current development environment fre-quently does not encourage evaluation of patients in the“deep end of the swimming pool” until very late in theprocess; ie, those less than optimal patients from aresearch perspective with the co-morbidities, diverseconcomitant medications, and complicated medicalmanagement requirements that ultimately drive health-care utilization. Given that many discovery programsfocus upon indications where “chronicity” is characteris-tic, where physicians and patients must form a dyadicrelationship for healthcare decisions, the inability formany healthcare professionals and patients to participatein the evaluation of a potential therapeutic until its com-mercialization is notable.

• Finally, given that rare but clinically importantsafety observations are a reflection of the extent ofpatient exposure, duration of therapy and disease charac-teristics, accelerated development efforts particularly forserious or life-threatening illnesses virtually assure thesubmission of a database with highly circumscribedimplications regarding safety and other pragmatic appli-cations in a more relevant healthcare environment.Accelerated clinical development processes thereforeprovide an impetus for the initiation of post approvalstudies (post marketing, phase 4 commitments) that aredesigned to detect safety signals, characterize optimal use,and generate other hypotheses for definitive prospectivetesting. An emerging “science of safety” will facilitate anability to target a specific drug to an appropriate popula-tion, maximizing its potential as a therapeutic at everyphase of testing. As important as translational medicinehas become for first in man investigations, a comple-mentary concept also recognizes that “translational med-icine” is mandated at the interface of a development pro-gram with its commercial transition.

Data are provided by BioPharm Insight (http://www.biopharminsight.com); reproduced with permissionfrom Infinata, Inc. All rights reserved. �

Dr. Murphy is an Editorial Board member of AmericanHealth & Drug Benefits™.

INDUSTRY TRENDS—BUSINESSUNITED HEALTHCARE BECOMES FIRSTCOMPANY TO BASE CHEMOTHERAPY DRUGCOVERAGE ON NATIONAL COMPREHENSIVECANCER NETWORK COMPENDIUM• NCCN Compendium provides independent sourcefor chemotherapy coverage decisions• Reflects United HealthCare’s commitment to evi-dence-based medicine by partnering with leadingmedical societies and physician organizations

MINNEAPOLIS—(Jan. 16, 2008)—United Health -Care, a UnitedHealth Group (NYSE: UNH) company,announced that, effective March 15, it will base its ben-efit coverage for chemotherapy drugs used in outpatientsettings on the National Comprehensive Cancer Network(NCCN) Drugs & Biologics Compendium.

The NCCN, an alliance of 21 of the nation’s lead-ing cancer centers, is an authoritative source of infor-mation to help patients and health professionals makeinformed decisions about cancer care. The NCCN’scompendium recommends drugs and biologics for themajor types of FDA-approved disease indications andspecific NCCN panel recommendations.

The development of NCCN information is based onthe independent evaluation of available scientific evi-dence integrated with the expert judgment of leadingclinicians. Compendium recommendations are derivedfrom the NCCN Guidelines™, a widely-used source ofinformation recognized as the standard of care foroncology in the United States.

Bill McGivney, PhD, NCCN CEO, said: “We arepleased that United HealthCare is the first company tochoose the NCCN’s compendium as the basis for itsguidelines in reimbursing for chemotherapy drugs admin-istered in an outpatient setting. The compendium isdeveloped based on the explicit evaluation of availablescientific evidence integrated with the expert judgmentof multidisciplinary panels of expert physicians fromNCCN member institutions. The breadth and scope ofthis collaborative effort represents a significant advancebeyond any previously developed guidelines. As a result,the NCCN guidelines have become the most widely usedin oncology practice.”

Previously, United HealthCare based its chemo -therapy-drug policies on a range of medical literatureresources, which, according to Lee Newcomer, MD,United HealthCare’s senior vice president, oncology,has been standard in the industry.

The NCCN Drugs & Biologics Compendium guidelinesrecommend the most appropriate therapy based on clinical

46 AMERICAN HEALTH & DRUG BENEFITS February 2008

INDUSTRY TRENDS

This December 2007 tracking poll finds that Iraq con-tinues to top the list of issues that the public wants to hearpresidential candidates talk about, with more than a third(35%) naming the war as one of the top 2 issues in anopen-ended question. Healthcare (30%) ranks second,followed by the economy (21%) and immigration (17%).

Healthcare ranks second behind Iraq for Repub licans,Democrats, and Independents alike; however, althoughhealth ranks clearly ahead of the economy and immigra-tion for Democrats, it is more tightly packed with theseissues for Republicans.

When asked about the issues that will affect their votefor president in 2008, the list of issues is similar to thosethe public wants to hear candidates discuss—Iraq (29%),followed by healthcare and the economy (tied at 21%),with immigration (12%) somewhat further behind. Iraqis the top voting issue for Republicans, Democrats, andIndependents alike.

The poll also examines the specific aspects of health-care that the public wants candidates to address, as wellas their perceptions of the presidential candidates onhealth issues.

This latest Kaiser Health Tracking Poll: Election2008, the fifth in a series, was designed and analyzed bypublic opinion researchers at the Kaiser FamilyFoundation. A nationally representative random sampleof 1,221 adults was interviewed by telephone betweenNovember 28 and December 9, 2007. The margin ofsampling error for the survey is plus or minus 3 percent-age points; for results based on subgroups, the samplingerror is higher.

Kaiser Health Tracking Poll:Election 2008 - December 2007

evidence and the consensus of leading academic cancercenters. They suggest the correct diagnostic evaluation,such as scans, x-rays and lab tests, optimal therapy—drug,x-ray or surgery—as well as appropriate follow-up tests.

“United HealthCare is the first national health planto incorporate National Comprehensive CancerNetwork guidelines into our chemotherapy-drug bene-fit,” said Dr. Newcomer. “Our collaboration with NCCNreflects United HealthCare’s commitment to partnerclosely with the nation’s leading independent medicalsocieties and physician organizations in order to ensureour members receive quality, evidence-based care.

“This new policy provides clinicians, patients andour customers with a respected, independent reference

INDUSTRY TRENDS—POLICY

Healthcare Cost ConcernsThe Kaiser Health Security Watch reports that

more Americans are personally worried about health-care costs than about paying their rent or mortgage,being a victim of a terrorist attack or a violentcrime, losing their job, or losing money in the stockmarket.

Nearly half of adults (46%) say they are very wor-ried about their income not keeping up with risingprices, and nearly as many say the same about havingto pay more for their healthcare or health insurance(41%). In our 3 years of tracking, income not keepingup with rising prices and having to pay more forhealthcare and insurance have always been the top 2worries; in some months, the concern about incomehas been slightly higher, and in others, healthcare costworries have been slightly higher.

Among other specific healthcare worries, 35% saythey are very worried about not being able to affordhealthcare services they think they need, and 29% ofthose with health insurance say they are very worriedabout losing their health insurance coverage.

Healthcare worries rank ahead of other nonhealthconcerns for the public, including not being able to paytheir rent or mortgage (27%), losing a job (23% ofthose who are employed), being the victim of a terror-ist attack (22%) or a violent crime (21%), or losingmoney in the stock market (21%). �

Kaiser Health Security Watch—December 2007, The Henry J. KaiserFamily Foundation, December 2007. http://www.kff.org/healthpollreport/CurrentEdition/security/upload/HSW1207.pdf.

INDUSTRY TRENDS—BUSINESS (continued) source for use in making chemotherapy coverage deci-sions,” Dr. Newcomer added. “It is one of several pro-grams launched after United HealthCare established adedicated oncology team in 2005 to improve the qual-ity of oncology care for our members. NCCN guide-lines are a trusted source of treatment recommenda-tions, and we value the fact that they are publiclyavailable for both physicians and patients.”

United HealthCare will update its chemotherapy-drugpolicies in conjunction with monthly updates made by theNCCN to its compendium. United HealthCare is cur-rently communicating this change in drug policy regard-ing use of the compendium to its network of physicians.Complete information is available on the company’sphysician portal at www.unitedhealthcareonline.com. �

47www.AHDBonline.com

INDUSTRY TRENDS

We asked people what concerns them most whenthinking about rising healthcare costs. For nearly half thepublic, their biggest healthcare cost–related concern has todo with increases in the amount people pay out of theirown pockets for healthcare and insurance (45%, up from38% in June, the last time the question was asked). This istrue for Republicans, Democrats, and Independents alike.Behind out-of-pocket costs, smaller shares say they aremost concerned about increases in what the nation as awhole spends on health (17%), increased spending on gov-ernment health insurance programs (13%), and increasesin insurance premiums paid by employers (12%). �This information was reprinted with permission from the Henry J. KaiserFamily Foundation. The Kaiser Family Foundation, based in MenloPark, CA, is a nonprofit, private operating foundation focusing on the majorhealthcare issues facing the nation and is not associated with KaiserPermanente or Kaiser Industries. http://www.kff.org/healthpollreport/CurrentEdition/security/upload/HSW1207.pdf.

8%

15%

29%

43%

13%

42%

35%

12%

14%

19%

47%

8%

14%

31%

41%

6%

TotalRepublicansDemocratsIndependents

Which ONE of the following health care issues would you most like to hear the presidential candidates talk about? (Dec. 2007)

Improving the quality of careand reducing medical errors

Reducing spending on government programs like Medicare and Medicaid

Reducing the costs of health careand health insurance

Expanding health insurance coverage for the uninsured

3

-

g , o n p s d r n , e e

When thinking about rising health care costs, which ONE of the following concerns you most…? (Dec. 2007)

Increases in spending on government health insurance programs like

Medicare and Medicaid

Increases in the health insurance premiums that employers pay to

cover their workers

Increases in the amount people pay for their health insurance premiums

and other out of pocket costs

Increases in what the nation as a whole spends on health

11%

15%

15%

46%

12%

21%

46%

18%

14%

16%

41%

12%

13%

17%

45%

10%

TotalRepublicansDemocratsIndependents

Thinking about the campaign for the presidential election in 2008, what 2 issueswould you most like to hear the presidential candidates talk about? (open-ended)

IssueRank Total Republicans Democrats Independents

1 Iraq (29%) Iraq (25%) Iraq (35%) Iraq (30%)2 Healthcare (21%) Economy (18%) Healthcare (28%) Economy (22%)3 Economy (21%)* Healthcare (16%) Economy (23%) Healthcare (20%)4 Immigration (12%) Terrorism (15%) Immigration (10%) Immigration (16%)5 Frustration w/gov’t (11%) Morality issues (14%) Frustration w/gov’t (9%) Frustration w/gov’t (10%)6 Terrorism (8%) Frustration w/gov’t (14%)* Gas prices/energy (6%) Terrorism (9%)7 Taxes (6%) Immigration (13%) Education (5%) Taxes (9%)**Indicates a tie with item directly above.Kaiser Health Tracking Poll—Election 2008: Key Findings (#7728), The Henry J. Kaiser Family Foundation, December 2007.

healthcare

healthcare healthcare

out-of-pocket

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Kaiser Health Tracking Poll—Election 2008: Key Findings(#7728), The Henry J. Kaiser Family Foundation, December 2007.

Kaiser Health Tracking Poll—Election 2008: Key Findings(#7728), The Henry J. Kaiser Family Foundation, December 2007.

48 AMERICAN HEALTH & DRUG BENEFITS February 2008

Executive Summaries

Creating a21st-CenturyIntelligent HealthSystemBy Newt Gingrich, PhD, and NancyDesmond, MEd, EdS

Authors Newt Gingrich, founderof the Center for Health Trans -formation, and Nancy Desmond,President and CEO of same, bringtheir rich experiences with the cur-rent healthcare system to this arti-cle, which is adapted from theirrecently published book, The Art ofTransformation. They describe thefreedom Americans have in shop-ping online for goods and services aswe compare quality and costs. Thetwo have found, however, that thesame freedom does not translate toour healthcare system, in whichindividuals must depend on a struc-ture that has “resisted the naturalprogress and modernization achievedby market-oriented 21st-centuryindustries.” From the consequencessure to be borne by the steady agingof America, a high national inci-dence of obesity, a shortage ofhealthcare workers, and increasedmedical errors, they describe theirsolution—replacing the currentlargely ineffective healthcare systemwith an intelligent system that willnot only save lives but also money.Every American will have the rightto know and the right to choose.There are caveats, however, such aspersonal responsibility. Once in -formed, we need to make the rightdecisions about our health andhealth behaviors, including nutri-

tion and exercise, to prevent illnessand complications. They furtherdescribe “best practices” focusing onprevention rather than acute care.Making the right choices, theymaintain, is a matter of life anddeath, not only for us, but also forour children. We are urged to makethe right choices now.

Medicare CoverageStrategies: Impact of the MMA andPBMs—Part 1 ofan interview withJoseph Antos, PhD,of the AmericanEnterprise Institute

American Health & Drug BenefitsÛopens its first conversation withJoseph Antos about the impact ofdecisions that payors, regulators,employers, and other stakeholdershave on our healthcare system.Robert Henry, editor-in-chief, exam-ines with Antos how the Centers forMedicare & Medicaid Services(CMS) exerts its influence on drugcoverage in the wake of the MedicareModernization Act and in the face ofstandards set by evidence-based med-icine. Dr. Antos offers insight intoCMS’s strategy and its effects on theAmerican healthcare system. Dr.Antos paints an optimistic picture ofimprovements in the treatment ofpatients, maintaining that continuedimprovements would ultimately effectpositive changes in health status.

DisruptiveInnovation: Value-Based Health PlansBy F. Randy Vogenberg, RPh, PhD

Continued advances in medicineand medical technology come witha price, and cost-sharing strategiesare not always successful foremployers and employees. Theauthor offers several examples ofvalue-based health plans thatdemonstrate achievement of valuefrom the perspective of businessstrategy, benefit design, and healthprograms, and translating evidenceto enhance plan performance.Vogenberg notes that data are use-less unless one knows how to aggre-gate and interpret them. He urgeschanging the value proposition bytrying benefit designs (for real) toenhance outcomes and recom-mends “disrupting” the marketplacefor its own good, recognizing thetotal cost of care (beyond your ownsilo of interest), understanding planmembers’ be havior to put a face onthe data, and judging whether planmembers’ healthcare advisors areindeed providing workable strate-gies and solutions. Without positivealignment to business goals andobjectives, health plans will bevalue-less.

Vogenberg also offers a challengeto readers in the form of severalunanswered questions related tohealth-related benefits, wellnessand retiree programs, benefits tac-tics on human capital assets, andstrategies surrounding acute versuschronic episodes.

200 http://www.novonordisk-us.com

Role of NCCN inIntegrating CancerClinical PracticeGuidelines into theHealthcare DebateBy Al B. Benson III, MD, FACP, andElizabeth Brown, MD

The debate surrounding the cost ofhealthcare has landed squarely ononcology owing to the high cost oftherapy. The authors note that theoverall cost of cancer care in 2006was $206.3 billion, of which $78.5billion represents direct medicalcosts. Many new drugs have beendeveloped and still many more are inthe pipeline; however, the applica-tion of these drugs is often limited tospecific tumors, and a course of treat-ment is often extremely high. In addi-tion, targeted patient populations areoften small. Consequently, the effec-tiveness of these new agents is contin-ually debated and thus, the in creasedimportance of clinical practice guide-lines that provide for “real-world andtimely guidance” to practicing oncol-ogists. Clinical guidelines serve sever-al functions: they standardize care,help identify relevant outcomes, andsynthesize data and expert opinion toenlighten the continued debate onthe cost and therefore value of newbiologic therapies.

Measuring the Valueof Treatment toPatients: Patient-Reported Outcomesin Drug DevelopmentBy Richard J. Willke, PhD

Dr. Willke leads us through theburgeoning importance of patient-reported outcomes (PROs) as theyimpact drug development. Thesedata, he maintains, can be used asevidence submitted for drug approval

and included in drug labeling. Otherapplications for PRO data includeformulary submissions dossiers, jour-nals, direct-to-consumer advertise-ments, and continuing medical edu-cation. Including PRO endpoints indrug trials may capture treatmentbenefits that could only have beenobtained from patient input. Regu -latory guidance for the use andenforcement of PRO standardsshould increase the acceptance ofPROs in drug development, allowingpatients, providers, and payors to usePRO data with confidence in prod-uct labeling and promotion. �

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“The guidelines are silent on your condition, Mr. Dougherty.I’m taking a pass on this one.”

52 AMERICAN HEALTH & DRUG BENEFITS February 2008

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