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“It’s unsustainable to suggest that we’re just going to simply add another therapy at $8,000 to $10,000 a month on top of each other and expect constrained health care systems to be able to pay for that. So we have to be a bit more creative about it,” he said.

It’s a change that’s been a long time coming. As expensive drugs like Avastin (bevacizumab) move into new settings with longer treatment periods and are used across lines of therapy, Roche brought up the concept of indication-based pricing (“ASCO Data Support Roches Grand Plan For NonStop Avastin Treatment” “The Pink Sheet” Jun. 11, 2012). And the firm has acknowledged the need to address the so-called “stacked biologics problem" as multiple high-priced oncologics start to be used in combination (“Roches Oncology Output Could Lead To Reimbursement Problems Down The Line” “The Pink Sheet Daily” Jan. 30, 2013).

Of course oncology prices have been a topic for years – and yet with so much unmet need, they have steadily risen with remarkably little pushback in the U.S. (“Many New Oncology Drugs In 2012 With Prices That Test The Limits” “The Pink Sheet” Jan. 28, 2013). Avastin has been a frequent poster child for excessive pricing, but Roche has been at the forefront of pricing experiments, with a price cap for Avastin’s FDA-approved indications. For U.S. patients with incomes less than $100,000 a year, regardless of insurance, the company covers any cost above $62,000 (10 g) a year.

In Europe, however, Roche has encountered resistance from government payers that necessitated alternate pricing strategies. The U.K.’s National Institute for Health and Care Excellence (NICE) has rejected Avastin several times based on cost-effectiveness analyses, most recently for ovarian cancer (“NICE Rejects Avastin For Ovarian Cancer On Cost Okays Lucentis” “The Pink Sheet Daily” May 22, 2013).

On the other hand, Roche has actually benefited from payer pushback on higher-priced competitor drugs, such as Sanofi / Regeneron Pharmaceuticals Inc. ’s Zaltrap (ziv-aflibercept); Memorial-Sloan Kettering decided to stick with Avastin for colorectal cancer because of Zaltrap’s high price tag, which was ultimately lowered (“Role Of Cost And Evidence In ValueBased Purchasing Highlighted By Zaltrap Price Adjustment” “The Pink Sheet” Dec. 24, 2012).

Even though prices have been higher than expected for Roche’s recent breast cancer launches, Perjeta (pertuzumab) at $5,900/month (plus $4,500 for concomitant Herceptin) and the antibody-drug conjugate Kadcyla (ado-trastuzumab emtansine) at $9,800/month, the firm maintains it has not faced major reimbursement obstacles in the U.S. (“emKadcylaem Positioned For Wide Use In Metastatic Breast Cancer” “The Pink Sheet” Feb. 25, 2013). That situation could change, however, when the MARIANNE trial concludes in 2014; the study could support combination use of Kadcyla and Perjeta.

It’s A New Day?

The company’s new pricing focus will include indication-based pricing, pricing for combination therapy and eventually, in some countries, outcome-based models, O’Day indicated. Roche has started this shift, “but it will advance,“ he said.

In Germany, where novel medicines must show an added benefit as they go through a two-tier system of health technology assessment, Roche uses a capitation program where everything over 10 grams in an annual period is covered by the company. A similar program is used in Italy, and the idea is similar to the price cap in the U.S. (for labeled indications only).

However, “there is no one size fits all here,” O’Day cautioned. “Every health care system has different dynamics, they have different needs.“ Risk-sharing arrangements that make payment contingent on pre-specified outcomes are also part of the Avastin policy in Italy for the first dosing schedule.

Indication-based pricing is facilitated by stronger data sources at the country level and the approach allows Roche to monitor patients by indication.

“This is exciting for us, because I think this opens up the ability for patients in those countries to get our products, and it allows us to look at the value that our products bring to different indications in different ways, as well,” O’Day pointed out. “For instance, in Italy today, we price the therapy of Avastin differently in colorectal cancer than we do in lung cancer, because arguably that has very different value equations. It also gives us the potential to look at metastatic and adjuvant in very different ways,” he added.

Pricing For Emerging Markets

The need for pricing reform is also tied into Roche’s push in emerging markets. The firm has come up with a number of tailored approaches that are being tried in emerging markets, but there could be broader lessons learned.

For Avastin, the cervical cancer data presented at ASCO will force that issue (“emAvastin emTakes One Step Forward One Step Back At ASCO” “The Pink Sheet Daily” Jun. 3, 2013). The drug was shown to have a significant effect on survival when added to chemo, enough that the independent reviewer on the trial suggested that the study should change practice. However, cervical cancer is predominantly an issue in the developing world, and both the discussant and the lead investigator who presented the results said cost-effectiveness was an issue.

During the same plenary session, a large study conducted in India showed that screening with vinegar – at a cost of less than $1 per patient – also yielded a significant reduction in mortality as an early intervention.

In India, Roche adopted a second-brand strategy, launching rituximab as Ristova and trastuzumab as Herclon in addition to Herceptin and Rituxan/MabThera. The use of alternate brand names and a local partner allows the company to come in at a lower price and block export of the low-cost versions to other countries, as well as shielding the company from compulsory licensing and other policies (“Set For Price War In India Roche Renames Brands Drops Prices Of MabThera Herceptin By More Than H” “The Pink Sheet Daily” Sep. 7, 2012).

With rituximab and trastuzumab, Roche cut the Indian brand prices by about half. The company is using a similar approach with Pegasys, with potential expansion to Avastin and Roche’s long-acting epoetin, Mircera.

Former Pharma COO Pascal Soriot (now CEO of AstraZeneca) previously highlighted the Indian second-brand strategy as an experiment that could be expanded to other markets, and noted that Roche had put out an open-call for flexible pricing ideas. The firm has also adopted a second-brand strategy for Pegasys in Egypt, a patient assistance program for Herceptin in China, income-based pricing in the Philippines and a discount in Brazil for MabThera in exchange for government reimbursement.

O’Day reported at the ASCO event that the company has introduced “a different type of capitation program for China, which has really expanded the use of Avastin in China significantly.“

The Complications Of Combinations

The biologic stacking problem is coming to a head as Roche begins to launch Herceptin and Perjeta outside the U.S. O’Day noted the firm is looking at combination pricing, not just simply stacking the two products. “Of course, where we have a combination price, we will tend to give up the price on Herceptin and protect the price on Perjeta.”

The exec noted that he thinks Roche is at an advantage when it comes to combination pricing because the company can achieve so much in-house. “When you have so many of these compounds within one company,“ O’Day said, “it allows you to look at pricing strategies, access strategies, very differently than if you’re trying to combine therapies from multiple different companies moving forward.”

Roche intends to retain some flexibility as it deals with different lines of therapy, specifically, “as we look at things like Perjeta and Kadcyla moving from the metastatic setting, where it has a certain value equation, to potentially, depending on our data, moving that to the adjuvant setting, where you get to curative-type value equations,“ O’Day explained.

Though Roche has moved from thinking about creative approaches to pricing to applying them, “we’re still at the beginning of exploring how do we penetrate even further into the marketplace,” O’Day noted, “but I think the potential is quite large here.“

By Mary Jo Laffler