How Should Functionally Equivalent Drugs be Reimbursed?

Abstract

Statutory reimbursement agencies as well as private insurers throughout member states of the Organization for Economic Cooperation and Development (OECD) reimburse the cost of medicines on the basis of criteria that include robust clinical evidence, budget impact analysis, and incremental cost effectiveness. The Centers for Medicare and Medicaid Services (CMS) in the US are no exception to this rule and are, in principle, seeking to maximize benefit for their Medicare enrollees, whilst ensuring reasonable drug outlays for the small number of drugs that they reimburse. This paper provides a retrospective analysis of the way two functionally equivalent drugs are treated for reimbursement purposes by the CMS; the period under consideration was 2001–3. The two drugs, epoetin-α and darbepoetin-α, are used for the treatment of anemia in renal failure and in patients receiving chemotherapy. By reviewing the publicly available pharmacological and clinical data of epoetin-α and darbepoetin-α, the paper confirms the two drugs’ functional equivalence, despite their structural differences. The implications of dose conversion ratios and costs to Medicare are subsequently explored. It is argued that the issue of dose equivalence between epoetin-α and darbepoetin-α has significant implications for patients, practitioners, and payors. A payor’s perspective is adopted in this respect, whereby clinical evidence and pricing data are used simultaneously. Based on the clinical evidence, a dose conversion ratio for epoetin-α:darbepoetin-α is established, which achieves a comparable clinical effect for the two drugs and this is set to be <254IU:1μg. The incremental costs to Medicare are calculated subsequently. The Average Wholesale Price and the Outpatient Prospective Payment System rule that Medicare uses to reimburse providers are used and suggest that treatment of cancer patients with chemotherapy-related anemia with epoetin-α would save Medicare an estimated $US600 million each year. Patients would also benefit significantly in terms of lower co-payments for epoetin-α. The evidence is supportive of the decision made by the CMS to reimburse the two drugs at the rate reflecting the achievement of comparable clinical effects and therefore reducing the pass-through payments for darbepoetin-α to zero for the 2002–3 fiscal year.