Leading up to the Annual Personalized Medicine Conference hosted in Boston this November, Slone Partners presents its exclusive interview series featuring two industry trailblazers.

This special series shares the unique insights of these thought leaders as the field of personalized medicine is increasingly changing the nature of healthcare and offering new treatment perspectives.

To set the stage, our first interviewee, Dr. Michael Sherman, discusses the benefits of adopting an outcome-based framework along with the future of coverage and reimbursement for therapeutics and diagnostics. He also addresses health plans enhancement, the potential for payers to drive appropriate adoption of usage, and ultimately improving patient care.

Slone Partners: How can value assessment and reimbursement decisions for personalized medicine be improved?

Dr. Sherman: Fundamentally, value assessment and reimbursement are not conceptually different from other types of diagnostics and therapeutics. Like other areas, we need evidence of clinical effectiveness and safety, preferably from real world settings which does not necessarily characterize many clinical trials, which are optimized to demonstrate success. Moreover, it is particularly helpful to understand the value proposition from the perspective of an objective value assessment framework. An example would be the framework put out by ICER, the Institute for Clinical and Economic Review. One recent trend is that companies, including organizations launching leading edge therapeutics in areas such as gene therapy and CAR-T, are proactively supporting ICER in reviewing their data and in rendering an assessment with respect to value. That is critically important because it is something that payers really care about, and these types of objective assessments can be used by all parties and can inform value-based agreements. What is different about personalized medicines is that they are more targeted, and in most cases, have a higher success rate, and/or improved side effect profile through a better understanding of how the individual is likely to respond. In theory, it should be easier for these value assessment frameworks to demonstrate reasonable value in a clearly defined population. Much of the value arguably gets diluted by those individuals who appear to be appropriate for treatment, but who would not have been treated had we better understood the molecular mechanisms of action. These are game-changing. They really offer a lot of opportunities to actually improve our ability to provide the highest value therapeutics to our members.

Slone Partners: How does the value-based payment framework apply to personalized medicine?

Dr. Sherman: Value assessment frameworks are critical to payers because payers are so focused on balancing access and affordability. Most payers want to do the right things for their members. What they are seeking to avoid is spending dollars in areas where the therapy fails to generate the desired outcome. There are also questions as to what a given therapy is worth. What is fair? What is egregious? These are emotional discussions, and obviously where one stands depends on where one sits. Having effective, impartial arbiters, whether ICER or others, that can help craft objective assessments of value, can inform the coverage discussions that take place. Part of the benefit to pharma companies and manufacturers is that when their offerings are seen as high value by ICER, payers are showing a propensity to support the provision of these drugs in appropriate circumstances and not create additional hurdles.

Another important benefit of value-based payment frameworks is supporting outcomes-based pharmaceutical agreements, which is an area where Harvard Pilgrim has been leading the way. One misconception is that a value-based agreement, perhaps with a partial return of cost if an appropriate outcome is not achieved, in itself demonstrates value. That may or may not be true; for example a product priced at twice what is seen as reasonable and for which 20% of the price is at risk, would still not be priced appropriately. Without these objective third-party frameworks, it is very challenging to agree on exactly what price is fair.

Slone Partners: How can we improve patient access to personalized medicine?

Dr. Sherman: That is a good question, and it’s one that is frequently asked of people in my role by both consumer groups and from companies who want to better understand our thought process. There is nothing mystical or magical about our process. What we are looking for, first and foremost, is high quality evidence and proof of safety. We are also frequently challenged though by questions relating to clinical utility (the “so what”), particularly with regard to diagnostic tests.

For example, consider diagnostics with the potential to provide information that might differentiate who might need aggressive treatment from those best served by careful, active surveillance. Obviously, avoiding treatment with the inherent side effects is something of interest to anyone who is being treated for a complicated condition like cancer. One challenge is that we see many health economic outcome models which suggest that treatment would change if the results of a test were made available, but there is often a lack of evidence as to how it will play out in the real world by busy physicians who are not experts in that therapeutic area. Physicians may also have biases that may impact how this information is used in a physician-patient discussion.

More broadly, beyond showing clinical utility, charge a fair price. Again, “fair” is probably controversial, which speaks to the importance of validation by objective third party value frameworks such ICER, Abacus, or others. In addition, it helps tremendously if the personalized medicine product is contained within credible guidelines from the appropriate professional society, which speaks to standards of care. Payers are very reluctant to restrict access to diagnostics and therapeutics that exist within guidelines.

When the evidence is lacking, or when there is a question regarding clinical utility, outcomes-based agreements can be helpful in bridging the different perspectives. By allowing the manufacturer to take some degree of financial risk should its therapy or test not perform as promised, manufactures can effectively respond to health plans’ concerns as to whether the dollars have been spent wisely. Harvard Pilgrim Health Care has engaged in a number of those outcome-based agreements and has many more discussions under way.

Slone Partners: How do you see the future of coverage and reimbursement for personalized medicine diagnostics evolving in the next 5 years?

Dr. Sherman: This is where the excitement is and, frankly, where the fun lies. We are obviously in the dawn of personalized medicine. There are some great examples of diagnostics and therapeutics that leverage molecular markers. There is much more to come in terms of the number of innovative diagnostics. One challenge is that payers’ policies in most cases reflect traditional categories. They reflect, for example, for oncology treatments, organ systems rather than molecular markers, or they may speak to conditions such as diabetes and hypertension, as uniform entities, which are historically how we have viewed these conditions. We are clearly moving to a world where the question won’t be “Are we treating breast or stomach cancer?” but rather “What are the molecular mutations present in the tissue?”.

The whole framework and policies need to change, which is going to be a complex process. The good news, though, is that payers do get the promise and are hungry for evidence to support creating the types of policies that are molecular-based. This will provide support to drive use of drugs when they are most likely to be effective; we all know of many examples, particularly with regard to common diseases like hypertension, where treatments are tried empirically until one is effective. A more data-driven personalized medicine approach will drive improved quality as well as decreased cost and therefore represents a win-win for all stakeholders.

A big concern is physician education. The physician-patient relationship is powerful, as it should be, and there are concerns that with increasing treatment complexity, a physician who lacks a comprehensive understanding of the data or who may be biased by past prescribing patterns may promote decisions that do not reflect optimal uses of diagnostic tests. For example, with respect to treatment decisions for prostate and other concerns, there are those physicians who seem to be wired for aggressive treatment, and that perspective clearly informs the treatment choices of their patients.

In the future, I believe we will see a greater use of outcome-based payment agreements. They are very useful, particularly when something is costly, where there is lack of consensus or variability with respect to the results, and where the payers are reluctant to cover use because they question the value proposition. If one wishes to think even further out of the box, I can envision payment models where there is fixed reimbursement for testing which provides an answer to a specific question regardless of how complex a test is used. This approach may seem unusual but is analogous to bundled payment agreements that are already in place with providers that provide a fixed reimbursement for a given outcome and thereby incent the system to deliver that outcome most efficiently. Such an approach might address payers’ skepticism about more complex technology being utilized simply because it exists. They wonder if physicians are ordering more complicated tests because it is just as easy to query 256 genes as 64.

I mentioned before that payers often question the clinical utility of diagnostics which are intended to guide treatment decisions. What about a reimbursement model in which there is one payment if the diagnostic changes that treatment course and perhaps a lesser payment if it only affirms the care plan?

Slone Partners: How does Harvard Pilgrim Health Care fit into all this?

Dr. Sherman: When we are sick, we don’t care about the dollars; we do not want to focus on the economics of healthcare. While we all want the appropriate care for ourselves and our loved ones, the reality is that growing costs are significantly impacting insurance premiums, which may challenge the personal economics of many. As payers we have an obligation to balance access and affordability. By such actions as supporting personalized medicine and driving agreements that pay for outcomes rather than volume of services, the latter of which most agree is not the best approach for achieving quality and value, health plans are uniquely positioned to manage this balancing act. As the entity that creates and promulgates policies and receives and distributes the dollars, we are in a unique position to reward certain behaviors and limit others.

Clearly much of the care delivered in the country is appropriate and high quality. That said, tremendous variations exist within the United States, which can depend on where one resides, on socioeconomic status, or what hospital or doctor’s office one arrives at. Furthermore, it is estimated that as much as 30% of healthcare dollars are wasted for a variety of reasons. If health plans can monitor and incorporate emerging evidence, monitor variation, drive the right actions through their clinical policies and incorporate personalized medicine as new information is introduced, they can do much to drive the appropriate usage of these therapeutics and diagnostics.

About Michael Sherman, MD

Dr. Michael Sherman serves as Chief Medical Officer and Senior Vice President for Harvard Pilgrim Health Care. Dr. Sherman has been a leader in driving adoption of outcomes-based provider and pharmaceutical contracts, and is responsible for Harvard Pilgrim’s medical trend management, provider engagement strategy, medical informatics, wellness and health promotion initiatives, care and disease management services, pharmacy services, NCQA accreditation and quality and utilization management programs. He serves on the faculty of Harvard Medical School’s Department of Population Medicine, as chair of the board of managers of the Harvard Pilgrim Health Care Institute, on the advisory board of the Institute for Clinical and Economic Review (ICER), and on the board of directors for the Personalized Medicine Coalition. Dr. Sherman also is the current chair for AHIP’s CMO Leadership Council, comprising chief medical officers from health plans throughout the United States.

Prior to joining Harvard Pilgrim, Dr. Sherman held leadership roles at Humana, UnitedHealth Group, and Thomson Medstat (now IBM Truven). He holds a B.A. and an M.S. in biomedical anthropology from the University of Pennsylvania and received his M.D. from Yale and M.B.A. from the Harvard Business School.

Read our exclusive interview with Dr. Barbara Weber, CEO of Tango Therapeutics and Venture Partner at Third Rock Ventures.

 

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