In this week’s New England Journal of Medicine the most widely publicized article reported on the findings of the PARADIGM-HF study, which tested Novartis’s experimental drug LCZ696 against enalapril, a commonly used ACE inhibitor, in the treatment of heart failure (HF). The double-blind study randomized over 8,442 patients with moderate to severe HF to a regimen of the experimental drug plus standard therapy or of enalapril plus standard therapy. The primary outcome was a composite of deaths from cardiovascular disease and first hospitalizations for HF. After 27 months, the trial was halted because an interim analysis showed a very large benefit for the experimental drug group. The LCZ696 patients had an approximately 20 percent reduction in the primary outcome (914 patients versus 1,117 patients in the enalapril group: “hazard ratio in the LCZ696 group, 0.80; 95% confidence interval [CI], 0.73 to 0.87; P<0.001”). The experimental drug group also had comparably substantial and significant reductions in the risk of death from any cause and the risk of death from cardiovascular disease. The results of the study have been reported on widely and it is clear that Novartis hopes LCZ696 will achieve blockbuster revenues. For purposes of this post, I would like to focus on two of the study’s findings with obvious pharmacoeconomic ramifications for calculating the drug’s costs and benefits, which are the reductions in both hospitalizations and in deaths:
Over the duration of the trial, the numbers of patients who would need to have been treated to prevent one primary event and one death from cardiovascular causes were 21 and 32, respectively.
The reason for focusing on this finding is that many of the general and business media reports on the study discussed the predicted pricing and revenues for the drug and whether or not insurers will balk at paying for the drug. Andrew Pollock’s article in The New York Times included a discussion of the pricing issue:
As a proprietary drug, LCZ696 is likely to be expensive. Tim Anderson, an analyst at Sanford C. Bernstein & Company, estimates that it might cost $7 a day in the United States, or about $2,500 a year. Existing drugs are generic, costing as little as $4 a month, so insurers might balk at paying for the new drug.
Pollock also quoted Dr. David Epstein, head of Novartis’s Pharmaceutical Division, who was understandably optimistic about the drug’s future in the marketplace: “It’s very rare that a drug like this comes along,” he said, “one where people live longer, have less hospitalizations and other costs and feel better.” So, while longer-term data on the drug’s effectiveness on HF will be very interesting to see, it is already worth taking a preliminary look at the pharmacoeconomics of LCZ696 based on the PARADIGM-HF study. If the cost of the drug will in fact be $7,000 per patient per year, then the total cost for a period equal to “the duration of the trial” would be $15,750 per patient. The cost per death avoided on an annual basis is $224,000.
So, even assuming that the life-years gained by LZC696 treatment are valued at 100% (in other words, not discounted at all for any reductions in the quality of life of patients with HF as opposed to the qualify of life of persons of similar age without HF), where does the $224,000 cost per QALY fit within the range of values for other life-extending treatments? It is not an off-the-charts price in terms of the costs of other treatments in the U.S., but it is very high. Another very recent New England Journal of Medicine article looked at the issue of QALY cost boundaries and suggested this:
Given the evidence suggesting that $50,000 per QALY is too low in the United States, it might best be thought of as an implied lower boundary. Instead, we would recommend that analysts use $50,000, $100,000, and $200,000 per QALY. If one had to select a single threshold outside the context of an explicit resource constraint or opportunity cost, we suggest using either $100,000 or $150,000. [citation omitted]
While $7,000 a year seems like a relatively modest price for a drug that, as Dr. Epstein said, helps people “live longer, have less hospitalizations and other costs and feel better,” in this era where Sovaldi’s $84,000 price tag has generated endless discussion, health insurers may take a very cold-hearted look at the impact on their bottom lines. HF is one of the common serious diseases in the aging U.S. population. In 2010 HF costs in the U.S. were estimated at more than $39 billion, representing approximately 2% of all U.S. health care spending. Heart failure is a “big disease” and accordingly drugs that can significantly reduce the economic burden of HF are an attractive target for drug development, with the potential for large markets and significant revenues. But, with estimates of hospitalization costs for HF ranging between $18,086 per hospitalization in a 2008 study to $23,000 per hospitalization in a larger 2010 study, LCZ696 coverage does not necessarily look very attractive from an insurer’s bottom line perspective. Nor has the drug been studied long enough to ascertain the median survival for those on the drug compared to those receiving the alternative therapies. It is, of course, difficult to put a price tag on the improved functional ability and quality of life that LCZ696 provides. The data released to date from the PARADIGM-HF study does not include quality of life and functional assessment measurements. This quick look at hospital costs and death is not meant in any way to minimize the value of those qualitative endpoints or the value of the drug overall. However, Novartis’s efforts to drive insurance formulary adoption will not necessarily be easy. Seven thousand dollars per year may not seem like a high price for a drug that helps people “live longer,” but insurance companies’ and their PBM’s analyses of the data can be cold calculations.