Biotechnology and Specialty Pharmaceuticals - Illumination Medical


1 Δεκ 2012 (πριν από 5 χρόνια και 6 μήνες)

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Biotechnology and Specialty

By David J. Gibson, MD
Medical Director Illumination Medical, Inc.

It is imperative that health plans today identify and
quantify their existing and projected future liability
for the biotechnology derived pharmaceuticals.
These agents are becoming the standard for care
in most organ system diseases. Not to understand
this looming liability could prove fatal for
unprepared health plans.
Within health care, the epicenter for new drug development is in the
biotechnology sector of the industry. The current trend for office and home
injectables, including infusions, has been inflating at a rate of almost 30%
annually. Five new biotech drugs were approved for the market by the FDA
during 2001 and 2002. In 2003 the number of approvals rose to 21. The
projected growth rate of market entrées is exponential into the future.
The above market dynamics are playing out in an accelerating era of
fundamental change in medical science. Increasing knowledge of the human
cellular system - thanks in large part to the mapping of the human genome two
years ago - promises new cures and ways to prevent diseases. Coincidentally,
the aging population in the U.S. and other industrial countries, plus the plague of
diseases such as AIDS and SARS, cry out for the introduction of new medicines.
The following data summarizes the evolving trend in the market toward higher
cost biotechnology derived pharmaceuticals:
• Spending on biotech and specialty drugs rose 40% in 2002.

• Biotech drugs are very costly, ranging from $10,000 to $1 million per year
per patient.
• Patients utilizing specialty medications typically comprise only 1 to 5
percent of a health plan's population, yet account for 25 to 50 percent of
the plan's total medical and pharmaceutical costs.

There are over 90 biotech drugs that are approved by the FDA (over 50
approved in last 3 years)

Over 350 drugs are currently in human clinical trials, hundreds more in
nonhuman trials (almost ½ are for cancer)

Medco Health Solutions, 2003.
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Over $26 billion is currently committed to biotechnology R&D
The following table illustrates just how much more expensive these new agents
are in comparison to the pharmaceutical therapies they are replacing:
The cost for newer agents
Imuran, Ridaura,
$3Cafergot (Generic)$15-$30ImitrexMigraine
$2 - $4
(Generic – high dose)
$17Intron A$38Peg- IntronHep C
Deep Vein

To further illustrate this point, the following table demonstrates the costs associate
with the “top twenty” biotechnology drugs that are in use in the market today.
Commonly used biotechnology drugs
$100,000+1 yearFactor ProductsHemophilia
$15,0001 yearGrowth HormoneGrowth Failure
$8,0001 yearLupronProstate Cancer
$7003 injectionsSynviscOsteoarthritis – knee
$20,0001 yearSandostatinAcromegaly
48 weeks
Peg Intron
With Combo Rebetol
Hep C
$16,0001 yearEnbrelRA
$6,0006 monthsSynagisRSV Prevention
$13,0001 yearAvonexMS
AWP Cost
Per Patient
Injectable DrugIndication

Biotechnology and Specialty Pharmaceuticals
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Biotech drugs are life-saving, necessary, disease-changing compounds that
produce an insatiable demand in the market. Targeted diseases for specialty
pharmacy drugs that are currently in the development pipeline include:


Breast cancer

Colon/colorectal cancer

Congestive heart failure

Crohn’s disease


Head and neck cancer

Hepatitis C





Myocardial infarction

Non-small cell lung cancer


Prostate cancer

Rheumatoid arthritis




Other cancers

Organ transplants

Other autoimmune
The issue of injectable and infusion drugs as they relates
to private health plans today
The infusion of biologically derived agents that target specific areas in the
immune/inflammatory process are now deployed throughout the health care
delivery system. The use of these agents is most advanced in the specialties of
Rheumatology, Gastroenterology and Oncology. In the very near future, all
disease processes that incorporate inflammation will soon be targeted with these
This article will describe in detail the current therapies for Rheumatoid Arthritis as
a descriptive framework for the evolving use of infusion drugs in the future. There
are three drugs on the market that have been deployed. These include:
REMICADE® (infliximab) - Centocor has exclusive marketing rights to
REMICADE in the United States. Schering-Plough Corporation (NYSE: SGP)
has rights to market REMICADE in all other countries throughout the world,
except in Japan and parts of the Far East where Tanabe Seiyaku, Ltd. will
market the product.
ENBREL® (etanercept) – Amgen-Wyeth
HUMIRA® (adalimumab) - Abbot Immunology
REMICADE® (infliximab)
Remicade (infliximab) is a chimeric monoclonal antibody that binds to tumor
necrosis factor alpha (TNF), which is believed to be a central causative factor in
the inflammatory process in humans. Remicade is biologically derived and is
approved for treating rheumatoid arthritis and Crohn’s disease (an inflammatory
Biotechnology and Specialty Pharmaceuticals
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bowel condition). It is being studied for the treatment of psoriasis and psoriatic
arthritis, and some doctors are already prescribing it for these diseases.
Remicade blocks tumor necrosis factor-alpha (TNF-alpha), a chemical
“messenger” in the immune system that signals other cells to cause inflammation.
There is too much TNF-alpha in the skin of people with psoriasis and the joints of
people with certain types of arthritis. This causes inflammation and can lead to
tissue and joint damage.
TNF-alpha can also lead to increased immune system activity through the
activation of T cells. T cells are a type of white blood cell in the body; in psoriasis,
once T cells are mistakenly activated, they can trigger inflammation and other
immune responses and fuel the development of psoriasis lesions.
Remicade helps lower the amount of TNF-alpha to more normal levels, thus
interrupting the inflammatory cycle of psoriasis and psoriatic arthritis and leading
to improvement in symptoms for many people who take it.
Rheumatoid Arthritis
The recommended dose of REMICADE is 3 mg/kg given as an intravenous
infusion followed with additional similar doses at 2 and 6 weeks after the first
infusion then every 8 weeks thereafter. REMICADE should be given in
combination with methotrexate. For patients who have an incomplete response,
consideration may be given to adjusting the dose up to 10 mg/kg or treating as
often as every 4 weeks.
Quantization the cost for anti-TNF agents within a representative health
Centecore, the pharma company distributing
in the United States,
has been providing classes for physicians and their offices in techniques for bill
third party payers for both product cost and technical fees. If the physicians are
not reimbursed for the infusion, using the techniques provided by Centecore, the
company will hold the physician harmless and provide a replacement product
unit, without cost, to the physician.
Billing information:

The usual dosage is 3mg/Kg so that for a 70 Kg male patient, the dosage
is (70mg times 3mg/kg or 210 mg.

It is common to have “dosage creep” for patients taking REMICADE®
(infliximab). Thus, the maintenance dosage can increase to double or
even triple the above starting infusion level.

The product is billed by 10 mg units so that 10 units are within a 100 mg vile
of product.
Biotechnology and Specialty Pharmaceuticals
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The rate for billing by unit is now $102 per unit. This generates a billing rate
of $1,020 per vile ($102 x 10 units). Thus the markup for a $490 acquisition
cost for the physician by a factor of 2.08 ($1,020 / $490).
o The per session product charge for a 70 kg patient at the starting
dose of 3 mg/kg is therefore $2,142 while the acquisition cost is

While the above billing factors are attention grabbing, it should be kept in
mind that the same product and service cost in the hospital ER is billed at
a rate in excess of $23,000 per event.
Case study:
The following table summarizes the methodology whereby a physician’s office
will calculate the bill for infusing REMICADE in the office setting:
Calculating the fee for a 70 kg patient with “dosage creep” at a dose of 6
# OF
IV Infusion up to 1 hour 90780 1 $153.00 $153.00
IV Infusion each additional hour 90781 2 $68.00 $136.00
Intracatheter 36000 1 $70.00 $70.00
Venoset 8922C 1 $3.00 $3.00

Saline per 250cc (_250_ / 250) J7050 1 $15.00 $15.00
(total cc's pat receiving)

D5 1/2 NS per 500cc (____ / 500) J7042 $17.00
(total cc's pat receiving)

Aredia, per 30 mg (_____ / 30) J2430 $412.00
(total mg's pat receiving)

Remicade, per 10 mg (420_ / 10) J1745 42 $102.00 $4,284.00
(total mg's pat receiving)

Benadryl up to 50 mg J1200 1 $16.00 $16.00



Biotechnology and Specialty Pharmaceuticals
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Physician income from infusion therapy per year:

Assume that a busy Rheumatologist has, on average, 100 patients
receiving REMICADE® (infliximab) throughout the year. For the sake of this
exercise, I will reduce this assumption by 3/4 so that the number of
patients on therapy will be 25.

Furthermore, assume that the average dose per patient will be 6 mg / kg
given the reality that it is not uncommon for the dosage creep to increase
to 9 mg/kg.

And assume that the facility fees are fully loaded (i.e. there is no profit
after all expenses are paid).
The following represents his net from the in-office business unit per year:
REMICADE® (infliximab) acquisition cost $490.00

Product cost per infusion (42 units) $2,058.00

Facility and disposable costs $242.00

Actual Cost


Charge per episode of service


Net profit per episode of service


Number of treatment events per year (52 weeks / 2) 26
Number of patients receiving REMICADE® 25
Number of treatment events per year 650

Net profit per year per Rheumatologist


Effect of all of the above on the beneficiary
Patients are now facing increasing co-payment and co-insurance costs for these
agents. Many patients, even in affluent markets, can not pay a co-payment
cost of $24,320 per year or a co-insurance cost of $60,801. See below:
Cost per episode of infusion $4,677.00
Number of infusions per year 26
Net cost per year $121,602.00
Co-pay of 20% $24,320.40
Co-insurance of 50% $60,801.00

Biotechnology and Specialty Pharmaceuticals
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Problem: The data base is not capturing the “J Codes”
Armed with the above information, Illumination Medical examined the paid
claims data base for the actual cost of infusion products paid for by the Health
Plan during the study period. We identified the patients who carried the
diagnosis of Rheumatoid Arthritis by ICD-9 classification within the health plan’s
medical paid claims data base. We further identified that they were on an
unspecified anti-TNF agent. In addition, we determined that these patients had
no record of having first and/or second line disease-modifying anti-rheumatic
drugs DMAR therapy (plaquinil, gold, or MTX), as per protocol, before being
placed on an anti-TNF agent.
The problem of data capture appears to be an anomaly associated with J
Codes. These are not billing codes that are used for medical professional or
technical fees. These fees are identified by ICD-9 codes and billed with modifies
as CPT codes. Nor are they part of the pharmacy billing code system - NDC
(National Drug Code) Numbers.
R•J Health Systems has developed its own "NDC/AWP database file" with
information supplied by First Data Bank, Facts and Comparisons (Medi-Span) and
Red Book. This information is validated and supplemented with information
supplied by wholesalers and drug manufacturers.
These "J-codes" were originally established by CMS to identify certain drugs and
other items (e.g. disposables used in injections). These codes aren't unique for
product size, packaging or dose, so it's impossible to tell from the claim how
much of the medication was administered. Secondly, there are many injectable
products for which no J-code exists, so claims are submitted using a
miscellaneous J-code instead.
Thus J codes provide an environment whereby it is difficult to quantitate the
utilization or the cost for goods and services billed with these numbers. These
codes will frequently produce duplicate claims through both the medical and
the pharmacy benefits. Because of the lack of detail in J-codes, health plans
are placed at the mercy of the provider to get a fair price for a given drug.
Centicor is teaching physicians to bill using these codes thus providing an
opportunity to maximize coverage for pharmacy services by leveraging whether
claims were processed through the pharmacy or medical benefit.
Thus the protocol for billing, detailed above, includes CPT codes for the facility
fee but J-codes for product fees. This billing format is now widely used not only in
Rheumatology, but in the practice of Oncology, Gastroenterology and
Endocrinology as well.
The implications for the Health Plan are significant. The actual cost for a years
worth of infusion therapy can easily total over $100,000 without having the
system ascribe the cost to either medical or pharmacy categories. In addition,
Biotechnology and Specialty Pharmaceuticals
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the ability to track cost by patient and provider are not within the systems
Quality indicator targeted members within a sample health plan
The following table indicates the criteria evaluated within the beneficiary
population during the study period:
# of Members
# of
# of

% of

Issue #
With the Issue
Members with
arthritis, on TNF Rx,
with H/O
treatment with first
and/or second line
medication (eg
6 0 0%
The following table indicates the beneficiaries not meeting the above criteria for
management of Rheumatoid Arthritis with stepped therapy before using anti-TNF
Indv_ID Not Met

Total Cost

33.6 53.8 Y S $11,791.34 $4,318.06 $16,109.40

45.6 68.4 Y E $4,019.25 $6,607.90 $10,627.15

24.2 29 Y S $2,772.44 $7,699.75 $10,472.19

10 16 Y S $3,663.69 $1,764.44 $5,428.13
12.8 25.6 Y E $2,510.21 $2,023.66 $4,533.87
4.2 5 Y S $182.18 $1,275.08 $1,457.26
Source: Illumination Medical Analysis
The relevance for all of the above for the typical privately funded health plan is
multifaceted. Most health plans today are paying far above their typical
contracted discount rates for pharmaceutical products within their pharmacy
benefit. These discounts generally are negotiated in the range of average
wholesale price (AWP) minus 12 to 15 percent. In addition, the health plans are
Biotechnology and Specialty Pharmaceuticals
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not receiving rebate reimbursement in most instances from these expensive
pharmaceutical agents.
By teaching physicians to bill using J codes, pharmaceutical manufacturers are
generating an end run around the health plan’s pharmaceutical benefit
manager and having the claim adjudicated and paid for by the plan’s third
party administrator (TPA).
TPAs have none of the infrastructure to handle pharmaceutical claims. They do
not have the data base to receive and interpret pharmaceutical manufacturers
National Drug Code NDC data and therefore typically do not require this
information when the claim is submitted. TPAs do not typically have discount
contract with health care providers (hospitals, physicians, infusion centers, etc.)
to enforce industry accepted discounts that key off these NDC codes. In
addition, there is no TPA in-place on-line adjudication process established to
review and set payment discounts in advance and check for drug protocol and
interactions. This entire infrastructure exists within the pharmaceutical benefit
management (PBM) market but is unavailable within the TPA market.
The above explains the rational for using J Codes and sending the claim through
the TPA adjudication process. In many instances, the TPA, lacking the ability to
capture NDC codes, will pay the bill fees and file the payment under an
“unknown” file. The result can be catastrophic for the health plan. Rather than
accurately tracking the cost for the pharmacy benefit, the health plan carries
the most rapidly inflating component of its pharmaceutical benefit under non-
specific general health care costs.
It is imperative that health plans today identify and quantify their existing and
projected future liability for the newer biologic derived pharmaceuticals. As
discussed above, these agents are becoming the standard for care in most
organ system diseases. Not to understand this looming liability could prove fatal
for unprepared health plans.