May 2004 VOL. 10, SUPPL. 1 - TheBody.com · An overview of AIDS drug access in the United States Christine Lubinski S15 Examining the pharmacoeconomics of HIV treatment Patrick G

May 2004 VOL. 10, SUPPL. 1

M O N T H L Y

Examining the PHARMACOEconomics of US AIDS Drug Access

INTERNATIONAL ASSOCIATIONOF PHYSICIANS IN AIDS CARE

Headquarters OfficeChicago, Illinois, USA

PRESIDENT/CEO José M. Zuniga

VICE PRESIDENT/CFO Harry J. Snyder

VICE PRESIDENT/CMO Mulamba Diese

INTERNATIONAL ASSOCIATIONOF PHYSICIANS IN AIDS CARE

African Regional OfficeJohannesburg, South Africa

EXECUTIVE DIRECTOR Mulamba Diese

DEPUTY DIRECTOR TBA

IAPAC MONTHLY

EDITOR-IN-CHIEF José M. Zuniga

MANAGING EDITOR Lisa McKamy

POLITICAL EDITOR Scott A. Wolfe

CREATIVE/DESIGN DIRECTOR Holly J. Emanuelson

ADVERTISING DIRECTOR Cathy Supina

WRITER-AT-LARGE Mark Mascolini

CONTRIBUTING WRITER Mark D. Wagner

IAPAC Monthly (ISSN 1545-1089) is published monthly by theInternational Association of Physicians in AIDS Care. All material published,including editorials and letters, represents the opinions of the authors and doesnot necessarily reflect the official policy of the International Association ofPhysicians in AIDS Care, or the institutions with which the authors are affiliated,unless otherwise noted.

IAPAC Monthly welcomes responses to the material presented. Lettersshould be sent to Letters to the Editor, IAPAC Monthly, 33 N. LaSalle, Suite 1700,Chicago, IL 60602-2601 USA.

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IAPAC Monthly © 2004, International Association of Physicians in AIDSCare. Reproduction of any part without written permission is prohibited. Theinformation contained in IAPAC Monthly shall not, in whole or in part, beredistributed, reproduced, or entered into a computer without permission.

May 2004 Volume 10, Supplement 1

M O N T H L Y

b a t t l i n g c o m p l a c e n c y

a d v a n c i n g c o m m i t m e n t

S3From the President

José M. Zuniga

S4Public Policy

Mark D. Wagner

S8Why is IAPAC examiningAIDS drug access in the

United States?José M. Zuniga

S10An overview of AIDS drugaccess in the United States

Christine Lubinski

S15Examining the

pharmacoeconomics of HIV treatment

Patrick G. Clay

S23Untangling the economics of drug pricingJoshua P. Cohen

S29Defining the impact of AIDS drug pricing on the public sectorLanny Cross

S34Defining the impact of AIDS drug pricing on the private sector Michael Allerton

S39A physician’s call to actionBenjamin Young

Editor’s Note: This IAPAC Monthly supplement features transcripts of presentations delivered

at a one-day summit entitled, “Examining the PHARMACOEconomics of US AIDS Drug

Access.” The transcripts, which are accompanied by selected slides, were edited to conform

to IAPAC Monthly style. Visit www.iapac.org to access complete slide sets.

Vol. 10, Suppl.1—May 2004 IAPAC Monthly S3

José M. Zuniga

he International Associationof Physicians in AIDS Care(IAPAC) secured almost 40percent of our 2003 annualbudget from pharmaceuti-

cal and diagnostic companies,through unrestricted educationalgrants, to advance third-partymedical and patient educationinitiatives. Our other revenuesources include membership dues(individual and institutional),government and foundationgrants, and private donations.

I describe our diversifiedfunding sources in introducingthis IAPAC Monthly supplementbecause it is often thought bysome that accepting money fromthe pharmaceutical industry is akin to accepting towear a muzzle. Not so. For as long as I have ledIAPAC, this association has adhered to a principle ofchallenging the status quo (especially where it contributes to unnecessary suffering and hasteneddeaths), no matter the repercussion. And that principlehas guided our advocacy efforts around AIDS drugaccess in resource-limited countries of the developingworld.

The challenge in the United States today—although not equal in statistical proportion—is equalfrom the human perspective because, as of April 7,2004, more than 1,200 people living with HIV/AIDSfind themselves on AIDS Drug Assistance Program(ADAP) waiting lists nationwide. The system isbuckling under two pressure points—not enoughmoney, and high prescription drug prices. ThusIAPAC’s first summit examining the pharmacoeco-nomics of AIDS drug access in the United States—adaylong gathering the association hosted last month

in Washington, DC, to discussboth the need for increased federaland state funding for ADAPs andthe pressing need to address thecontentious issue of AIDS drugpricing.

As Mark D. Wagner’s summaryarticle and the accompanyingpresenter transcripts will attest,IAPAC brought together a diversegroup of individuals from variouswalks of life to engage in a veryserious, and long overdue, dia-logue around what may mush-room into a full-blown crisis ofeven greater proportions withinmonths. I do not wish to reiteratethe points made so eloquently bymy fellow summit presenters,except to echo the call fromIAPAC member and Colorado

physician, Benjamin Young, that this is a subject onwhich physicians and allied healthcare professionalscannot remain silent. Though they may fall outsidethe traditional clinical purview, public and fiscal pol-icy decisions become the domain of medical profes-sionals when they create barriers to fulfilling an oathto provide the best possible treatment for theirpatients. As Young put it, “physicians and otherhealthcare providers have the moral obligation tobecome involved in this issue.”

Healthcare is a human right. IAPAC foundingmember Jonathan Mann argued that when that rightis challenged, those of us who work to providehealthcare must act. I am proud to say that yourassociation continues to keep that principle at theforefront of our activities. ■

José M. Zuniga is President/CEO of the InternationalAssociation of Physicians in AIDS Care, and Editor-in-Chief of the IAPAC Monthly.

F R O M T H E P R E S I D E N T

b a t t l i n g c o m p l a c e n c y

a d v a n c i n g c o m m i t m e n t

Challenging the status quo

T

S4 IAPAC Monthly Vol. 10, Suppl.1—May 2004

Mark D. Wagner

n many respects, the frontline of thefight against HIV/AIDS left the eco-nomically wealthy countries of NorthAmerica and Europe sometime aroundthe mid- to late 1990s. Researchers had

developed effective treatment in the form ofantiretroviral therapy, and the governmentsof these wealthy nations were able toguarantee access to antiretroviral drugs as“essential medicines.” Morbidity and mor-tality decreased dramatically in countriessuch as the United States, and the mosturgent goal for HIV medicine and AIDSadvocacy became addressing the repre-hensible global treatment gap that makesantiretroviral drugs unavailable to the millions who continue to die of AIDS-related illnesses in resource-poor countries.

However, given that there is neither acure for AIDS nor a viable vaccine, andtreatment remains an expensive, life-longendeavor, sustainability is vitally importantto the world’s response. Where there hasbeen success in providing antiretroviraltherapy to patients, we must ask how wellthe commitment is being maintained.And, in the case of the United States,where HIV/AIDS was first detected andresponded to, and which has been the siteof most breakthrough research discoveries,the unfortunate answer is “poorly.”

As cited repeatedly during a day-long summit held April 6, 2004, inWashington, DC, entitled “Examining thePHARMACOEconomics of US AIDSDrug Access,” the latest estimates countapproximately 800 HIV-positive patientson waiting lists to access HIV/AIDS care,including antiretroviral therapy, throughvarious state AIDS Drug AssistancePrograms (ADAPs), designed to provide

coverage for under- or uninsured Americans.At the summit, which was hosted by theInternational Association of Physicians inAIDS Care (IAPAC), clinicians, policyexperts, patient advocates, pharmaceuticalindustry representatives, government officials, and other delegates who hadgathered to discuss contentious issuesaround AIDS drug access generallyagreed in predicting that this sobering statistic would increase. Indeed, the NationalAlliance of State and Territorial AIDSDirectors (NASTAD) announced a daylater its new estimate of the number ofHIV-positive patients on ADAP waitinglists: over 1,200.

Patients are being made to wait for theantiretroviral therapy they need for rea-sons that tend to build on each other.Pharmaceutical companies are raising theprices of old agents, and charging unprece-dented rates for new ones, even as govern-ment programs to provide treatment receivenear flat, flat, or decreased funding fromfederal and many state governments.

These programs become responsible formore and more patients because antiretroviraltherapy greatly increases life expectancy,but also because the same tight economicenvironment that makes it difficult forgovernment to increase its spendingmeans growing numbers of Americans areunable to afford private insurance thatcovers HIV treatment. Patients falling inand out of private insurance coverage, inaddition to increasing HIV incidenceamong many Americans who have neverbeen privately insured for healthcare,translates into an increased burden on analready strained government safety net.

These weaknesses are emblematic of asystem cobbled together on the fly—onethat has much to recommend it in its ability

to develop and provide antiretroviral therapyto thousands of Americans over the years,but that bespeaks, perhaps, an emphasis onquick responses over long-term planning.

There is great variation from one stateto the next, confusion about which pro-grams cover which patients, and a moun-tain of paperwork required to gainentrance to treatment programs. In oneinfamous irony, Medicaid, the system offederally funded state programs that paysfor healthcare for Americans who are disabled and, in some states, below a certain income threshold, does not coverHIV-positive patients until they have anAIDS-defining illness. The ADAP wasmeant to fill this gap, covering patientswho are living with HIV but who have notyet developed AIDS, but Medicaid often hasbetter benefits and is a federally guaranteedentitlement. Despite overwhelming evidencethat antiretroviral therapy is best startedlong before patients are symptomatic, they aresometimes asked, in essence, to get sickerbefore they are offered better coverage.

With regard to developing and sellingmedicines, a system that does not regulatedrug prices, despite granting exclusivemarketing rights to pharmaceutical com-panies, may be credited with establishinga research-friendly environment, and allsummit presenters agreed that profitincentives had been effective catalysts forpast drug development and would beneeded in future. Many expressed fears,however, that absolute freedom to setprices was leading to costs that are toomuch for public and private payers tobear. This thorny dilemma is in manyways the same that is being debated aboutpricing of all pharmaceutical products inthe United States, and that has come to ahead over the issue of re-importation of

P U B L I C P O L I C Y

IAPAC hosts HIV pharmacoeconomics summit

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drugs, at price-controlled rates, fromCanada, many European countries, andMexico. Immediate AIDS-specific pointsof concern include Abbott Laboratories’400 percent price increase of ritonavir(RTV), the high cost of Roche Laboratories’enfuvirtide (ENF), and a general patternof increasing prices for new antiretroviraldrugs entering the market.

In discussing and debating the bestways to address these growing concerns,the concept stressed by the experts gatheredat IAPAC’s summit was “balance.” Theremust be a way for society to ensure accessto drugs that mean the difference betweenlife and death, even in a time of increasedbudget constraints. There must be a way tobalance profitability, and, thus, continuedresearch and development, with drug pricingthat does not cause impossible strain onthe system. As IAPAC President/CEOJosé M. Zuniga stated in his openingremarks, economic realities and ethicalimperatives can, and must, co-exist.

Zuniga summed up the current state ofHIV/AIDS treatment in the United Statesas “the best of times, and the worst oftimes.” On the one hand, there are 19 USFood and Drug Administration (FDA)-approved antiretroviral agents, as well asthree fixed-dose combinations. Death ratesand AIDS diagnoses have fallen dramati-cally. Where 50,610 people with AIDSdied in 1995, only 16,371 died in 2002.

One good example of the much-toutedsuccess of antiretroviral therapy camefrom Michael Allerton, HIV/AIDSOperations Policy Coordinator with

Kaiser Permanente’s Permanente MedicalGroup. Among the nearly 15,000 patientsliving with HIV/AIDS who receive carefrom the giant health maintenance organi-zation (HMO), the mortality rate has beenless than 1 percent per year for the lastsix years. This figure “includes all fatalities,so some of those individuals were killedin car accidents or died of heart attacks,”explained Allerton. Successful treatmentcan truly turn HIV/AIDS into a manageablechronic illness.

But increasingly physicians and alliedhealthcare professionals have to managemore than antiretroviral therapy. Theyhave the difficult task of helping patientsmaintain healthcare coverage, and debatingwhether to begin therapy when coveragegaps might mean a break in treatment.Economic constraints are pressing into theability of healthcare professionals to makedecisions based on what they know is theideal from a purely clinical standpoint.

This other side of the “best of times,and worst of times” divide is marked notonly by the ADAP waiting lists, but bysocioeconomic and epidemiological factors that are exacerbating the holes inwhat Christine Lubinski, Executive Directorof the HIV Medicine Association (HIVMA),called “a fragmented patchwork of a health-care system that links access to healthcarewith employment, disability, age, sometimespoverty, and other factors” and whichoffers “no guarantee of continuity of care.”

The list of entities that pay for AIDSdrugs is a long one: Medicaid, privatehealth insurance plans, ADAPs, Veterans

Administration (VA), US Department ofDefense (DOD), Medicare, and a miscella-neous grouping of charities and other statefunds. And, as Lubinski made clear, thereis tremendous variability of coveragewithin most of these categories of payers.One state Medicaid plan or ADAP hasmore stringent eligibility requirements thananother; some formularies of availabledrugs are very broad, others quite narrow.Although data are sparse on drug coveragethrough private insurance, there is no doubtthat different plans offer vastly differentcoverage.

Allerton pointed out that the categoriesare not necessarily discrete in terms ofhow people living with HIV/AIDS receivehealthcare coverage. Those who have private insurance that is insufficient mayrely on ADAP for additional coverage,and that will probably be more and morethe case as private insurance plans raisepremiums, increase co-pays, and, particu-larly with regard to HIV/AIDS, imposecaps on annual spending. Lubinski reportedthat Mutual of Omaha did just that (anddefeated a lawsuit challenging the decision)in the late 1990s.

Many of the same cost-cutting measuresare being implemented in governmentprograms. Lanny Cross, who managesADAP for the New York State Departmentof Health, told summit delegates thatMedicaid and ADAPs in many states arelimiting prescription refills, cappingenrollment, and restricting the criteria formedical and financial eligibility. Lubinskireported that the new Medicare law,signed by US President George W. Bushin late 2003, means older people livingwith HIV/AIDS will be able to receivedrug coverage from the entitlement for thefirst time. However, Lubinski pointed outthat among other concerns, the coveragemay not be better than what patients cur-rently have, and rules require them to agreeto a long-term plan before learning all thecoverage details.

All of these programs are at the budgetingmercy of lawmakers. For example, ADAPhas received relatively small percentageincreases from the US Congress over thelast several years—from approximatelyUS$714 million in fiscal year 2003 toUS$749 million in fiscal year 2004.About the same percentage increase islikely in fiscal year 2005, and it will notcover the estimated need. Medicaid,which is the largest single payer for

Craig Thompson, Executive Director of AIDS Project Los Angeles, shares his perspective on the impact current financialconstraints are having on patient access to appropriate HIV/AIDS care and support services.

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HIV/AIDS treatment, has more securefederal funding, but both programs areheavily dependent upon state budgets,which are currently in notoriously badshape nationwide. Unlike the US Congress,many state legislatures are required topass a balanced budget, putting furtherconstraints on funding decisions.

The states that tend to do the worst atsupplementing federal money are oftensmall Western and Southern states. Thesereceive less federal money to begin with,by virtue of their smaller HIV popula-tions. They are often in budget crunches,either because of depressed economies or a conservative ethos that calls forkeeping taxes low. Having a smaller HIVcommunity also comes into play againbecause there is not the constituent lobbying power of states such as Californiaor New York.

Apart from an inadequate supply ofpublic money, the other strain on payers’budgets, which was a major focus of summitdiscussion, is the increasing amount thatpayers are paying for prescription drugs.As people with HIV/AIDS are living longer,and as antiretroviral therapy is becomingmore expensive, the pharmaceutical portionof most payers’ healthcare budgets isstraining. Allerton reported that althoughpeople living with HIV/AIDS make up lessthan 1 percent of Kaiser Permanente’stotal patient population, they account forthe second highest total pharmacy costs.(Patients treated for depression make upthe highest cost.)

As one presenter noted, however, thesecosts may need to be put into some per-spective. Tufts University’s Joshua P.Cohen, who is a Senior Research Fellowat the university’s Center for the Study ofDrug Development, argued that pharma-ceuticals, not just for HIV/AIDS, but ingeneral, are in many ways a bargainbecause they represent a much smallercost burden than that of hospitalizationand other healthcare services. Accordingto Cohen, although costs for prescriptiondrugs have risen as a percentage of whatprivate and public third-party payersspend, they represent only 9 percent of thetotal healthcare expenditure in the UnitedStates. Patrick G. Clay of the Universityof Missouri and the Kansas City FreeHealth Clinic presented data showing the positive cost/benefit trade-off for antiretroviral therapy, stating that one hos-pital stay for the common opportunistic

infection Pneumocystis carinii pneumoniacosts more than a year’s worth of antiretro-viral drugs.

As Cross pointed out, however, thosesavings are sometimes missed by a systemsuch as ADAP, which essentially onlycovers the cost of drugs. There are no offsethospital costs, at least not visible ones,and the appearance to lawmakers may beonly of consistently growing expenses asmore patients are entering and utilizingthe system and living longer.

There was general agreement, as well,that increasing numbers of patients coveredeach year cannot alone account for theunmanageable costs experienced by third-party payers. The high and increasingprice of antiretroviral drugs is also a factor.Even if the use of those drugs eliminatesthe theoretical cost that would have to bepaid for hospital visits if those drugs didnot exist, that does not mean that anyprice, or price increase, is reasonable. Crosspresented data showing a jump in pricingthat began with efavirenz (EFV) in 1998and continued through five of the next sixnew antiretroviral drugs. Abacavir (ABC),tenofovir (TDF), ENF, atazanavir (ATV),and fosamprenavir (FPV) are all pricednear or above the higher price point established by EFV. Other agents, such asazidothymydine (AZT), the first FDA-approved antiretroviral drug, have under-gone steady price increases that are greaterthan would be required to compensate forinflation. These price increases have realeffects on access. Even when price increasesare accompanied by industry-sponsoredcompassionate access plans for peoplereceiving government aid, Allerton said,the strain is felt throughout the systembecause private insurance plans raise theirrates to compensate, forcing more peopleinto already over-burdened public health-care plans.

It is important to note that all thoseprices are averages. An additional prob-lem is the fact that no two buyers actuallypay the same price for a given drug.Instead, they each work out their own private agreements with the various phar-maceutical companies, some getting muchbetter deals than others, no one knowingwhat anybody else is paying. Imperfectinformation is known by economists tocreate market inefficiencies, and the phar-maceuticals market is no exception. Whenpricing data do become available, theyreveal some rather backward results. For

example, in a 2001 study, Medicaid —again, the largest single buyer of antiretro-viral drugs—was found to pay 33 percentmore on average for antiretroviral drugsthan other federal programs, Lubinskisaid. And there is variance within theMedicaid system, with Georgia paying thehighest prices of the 10 states with themost HIV cases, while Massachusettspays the lowest prices. In general, patientswithout any coverage at all, who have noone to bargain on their behalf, pay the high-est prices for prescription drugs.

Another arcane process is the internaldebate that pharmaceutical companieshold regarding what they should set astheir average wholesale price (AWP), the“list price” that becomes the starting pointfor negotiations with different buyers.How do companies decide what to charge?How does that price relate to researchexpenses, marketing expenses, and overallprofits? The generally touted figure ofUS$800 million that is estimated for acompany to bring a new drug to marketfrom point of conception to research anddevelopment through clinical trials,remains a matter of much controversy.Although several pharmaceutical industryrepresentatives attended the IAPAC summit,most said they could not speak to thesequestions, citing federal regulationsdesigned to prevent collusion by prohibit-ing companies from discussing their pric-ing decisions.

During discussion, a consultant whoworks closely with an antiretroviral drugmanufacturer—he asked not to be identi-fied—described the pricing process. Heportrayed it as an internal debate betweensuch factions as the marketing team,whose goal is to maximize profits, and thepublic affairs team, which often seeks toguard against the company receiving a“black eye” for raising prices to a levelthat the patient and provider communitieswill view as unfair.

In his book, “Elements of PharmaceuticalPricing,” EM Kolassa, an acknowledgedpricing expert and frequent industry consul-tant, also emphasizes that pricing negotia-tions hinge on perceptions. He essentiallyargues that prices should be set at thehighest possible level that will not instigatepublic backlash, taking into considerationthe likelihood that affected groups arewilling and able to act on their indignation.Setting prices based on costs is singledout as a very bad way to proceed.


Instead, Kolassa urges decision-makersto think about such factors as who actuallypays for a type of drug, saying that ifpatients are usually covered by public orprivate payers, so they do not see coststhemselves, the pharmaceutical companyshould charge more. He points to researchshowing that high prices for drugs treatingcertain types of indications are more likelyto incur patient ire than are others, sayingthat acute illness and highly symptomaticchronic illness leave the most room for highprices. Other considerations are companyneeds, competition, and the company’spreparedness to defend a high price againstattack or promote the benefits of a lowprice. According to Kolassa, surroundingand superceding all these considerations ispublic policy.

“In the foreseeable future, a companymust consider the responses and actions ofgovernment officials and patient advocateswhen setting a price,” he writes.

In light of all that, it would seem thatadvocacy and working with the pharma-ceutical industry to make companiesaware of problems and concerns isbecoming very important. Indeed, Zunigaand Allerton, among other presenters and delegates, specifically called for more andgreater communication and activism,making clear that higher prices have realeffects on the viability of the system and,therefore, people’s lives.

Such efforts, however, are often frus-trating. Some advocates who participatedin what might be the most ambitiousefforts to work with industry around pricing of AIDS drugs—the ADAP CrisisTask Force and the Fair PricingCoalition — attended the summit andreported mixed results. The task force hasbeen the more successful of the two,bringing together state ADAP or AIDSdirectors from 10 large states to negotiateADAP-specific discounts for all ADAPs,and saving an estimated US$60-65 mil-lion in the first round, Cross reported.

The coalition’s efforts to establishlower overall prices, however, have notbeen very effective. Comprised of treatmentadvocates and government healthcareofficials, the coalition attempts to workwith pharmaceutical industry senior managers on pricing decisions. Theyemphasize the need for lower initialprices of new drugs and price freezes forexisting drugs. Cross and Lei Chou of theAIDS Treatment Advocacy Coalition

(ATAC) reported that their efforts werelargely unsuccessful. They had multiplemeetings with decision makers and presented their data, but the companies,with some variance from one to the next,continued to bring in new drugs at or above existing price points and either refused or quickly reversed pricefreezes for older drugs. Chou said he felt“deceived.”

The industry consultant, who, on con-dition of anonymity, described the pricingdecision process, said that a companyoften does not see the multiplied effect ofprice increases. Raising the price of theirone drug by 6 percent seems insignificant,but when all companies are acting similarly,it can have a tremendous market impact.The companies simply do not recognize theoverall effect, he said, positing that antitrustlaws preventing companies from discussingpricing in each other’s presence might playa role in that myopia.

Even if companies do see the impact oftheir pricing decisions, of course, they areunder no obligation to act accordingly.They are given the ultimate power todecide how maximizing profits will bebalanced against setting prices to facilitateaccessibility. According to Kolassa, “Inhealthcare markets, we are granted theunique authority, by virtue of the productsthat are developed, to charge whatever wewish… We have the peculiar ability to sayto a patient, ‘It’s your money or yourlife.’” Even provided that industry takesthat responsibility seriously, and strivesfor pricing that does not create barriers toaccess, as Kolassa goes on to suggest,there is no official oversight .

The traditional argument is that anyattempt to tinker with industry’s ability toset its own prices will result in reducedprofitability and, thus, less of the researchand development that is a benefit to every-one. There was general agreement at thesummit that profits must be ensured as anincentive for research. Perhaps, however,it would be wrong to take for granted thatany outside pricing intervention wouldcripple the industry. According to a HenryJ. Kaiser Family Foundation study, aver-age profits for pharmaceutical companiesfrom 1994-2001 were 17.2 percent, by farthe highest of any legal industry, and considerably greater than the 4.6 percentthat was the average for all Fortune 500companies. Warnings of an end to researchand development due to past regulation

such as 1984’s Hatch-Waxman Act(which effectively created the genericsmarket) and 1990’s Omnibus BudgetReconciliation Act or “OBRA 90,” (whichattempted to reduce Medicaid expenses)proved unfounded. Data from Fortunemagazine, in fact, reveal that net profit as apercentage of sales actually increasedrather dramatically in the years immedi-ately following those regulatory changes,and they have not fallen off since.

Although time constraints for the firstof several fora IAPAC intends to convene onthis topic did not allow for many specificsuggestions for reforming the pricingprocess, there was a sense among presentersand most delegates that the time for doingsomething along those lines might beupon us. It was also generally agreed thatreforms should be broadly conceived interms of both their impact and the actorsinvolved in creating them.

Zuniga suggested a “mixed basket” ofsolutions, including industry profit concessions, but also review and amend-ment of the prescription drug system as awhole, increased federal and state ADAPfunding, and increased attention to keepingpeople living with HIV/AIDS in privateinsurance plans. Benjamin Young, aphysician with the University of ColoradoHealth Sciences Center and an IAPACmember, has been an outspoken critic of recent industry pricing decisions. Heechoed the need for inclusive decisionmaking in a “Call to Action” he deliveredto end the summit.

Access to life-saving care must be recognized as a human right, Young said.And, though access to profits might alsobe a type of universal right, it is one thatshould be balanced against the greaterhuman mandate to save lives. He calledfor an “unprecedented collaboration”between government, patients, advocates,physicians, allied healthcare workers, andindustry to re-think all current operatingprocedures and inject a greater sense ofethics and community responsibility intoevery decision. He suggested this simplelitmus test for policy decisions: “Are thestrategies that you are developing consis-tent with how you would take care of yourgrandmother?” If the answer is no, Youngsaid, those strategies should be changed. ■

Mark D. Wagner is Director ofCommunications at the InternationalAssociation of Physicians in AIDS Care.


José M. Zuniga

n behalf of the InternationalAssociation of Physiciansin AIDS Care (IAPAC), Iwould like to welcome eachof you to our association’sfirst summit on the issue ofAIDS drug access in the

United States. The summit will examinepublic and private sector provision ofHIV/AIDS care, specifically antiretroviraltherapy, as well as the issue of drug pricing.

We live in one of the best of times withregard to access to antiretroviral therapy;with 19 US Food and Drug Administration(FDA)-approved antiretroviral drugs andthree fixed-dose combinations. We knowthat highly active antiretroviral therapy(HAART) has led to dramatic declines in

AIDS-related mortality. In fact, where50,000-plus individuals died of AIDS-related causes in 1995, we witnessed asteep decrease to 16,000-plus deaths in2002—and we know that this “miracle”is a direct result of HAART.

Regrettably, this is also among theworst of times in that an expanding anti-retroviral drug armamentarium, whileproviding choices to patients and theircare providers, creates an incredible financialstrain on those systems that currently existto guarantee access to people living withHIV/AIDS, especially the medically indigent. There are serious concerns aboutthe additional expense of and about theprice points for antiretroviral drugs at various stages of development, includingBoehringer Ingelheim’s new proteaseinhibitor, tipranavir (TPV). This at a time

when a growing number of Americansliving with HIV/AIDS find themselves onwaiting lists for AIDS Drug AssistancePrograms (ADAPs) because of state andfederal budget shortfalls, or must dealwith one or more drastic restrictions inaccess to life-saving medications throughtheir state ADAPs. And this is all com-pounded by sobering statistics telling usof increased HIV prevalence among un- and under-insured Americans.

Lanny Cross, Program Manager ofNew York State’s ADAP, will speak abouthis experience in these difficult times. The50-state ADAP network currently servesapproximately 89,000 individuals who arelow income, un- or under-insured, andnon-Medicaid eligible. As of January 30,2004, nine states had ADAP waiting listswith almost 800 people on those lists. Six

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Why is IAPAC examining AIDS drug access in the United

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other states had implemented some type ofrestriction. According to recent modelingestimates, we know that a minimumincrease of US$217 million is needed infiscal year 2005 to support state ADAPsnationally; US$121.7 million of that isneeded immediately to address accumulatedfunding shortfalls over several years.

The private sector is also feeling afinancial squeeze, what with a significantper capita growth in prescription drugspending. Michael Allerton, HIV OperationsPolicy Coordinator of the PermanenteMedical Group at Kaiser Permanente willexplain the already existing and soon-to-come restrictions on private sector AIDSdrug coverage, to include formularyrestrictions, prior authorizations, andmulti-tier co-pay arrangements.

This one-day summit is meant toaddress both the economics and the ethicsof AIDS drug access. Because IAPACinfuses all of its meetings with ethics, thenecessary balance of economics and ethicsaround this public health challenge will beexamined. On the economic side, the costof prescription drugs is reflective of theneed to recapture research and develop-ment (R&D) investment, and that argu-ment will be presented by Joshua Cohen,Senior Research Fellow at the TuftsCenter for the Study of Drug Development.He will also demonstrate in cold, hardnumbers another economic reality: thatthe public and private sector actorscharged with guaranteeing AIDS drugaccess are struggling to keep pace withdemand. On the ethical side, I am certainthat our discussions will reinforce thenotion that, for example, drug pricingdecisions must be made within the contextof a moral duty to assist those in need.Our obligation is to provide more thansuccor to people living with HIV/AIDS,especially because we know beyond a reasonable doubt that early HIV treatmentsaves both lives and money. It is thus necessary to provide such treatment universally through various mechanisms,including the Early Treatment forHIV/AIDS Act (ETHA) currently beforethe US Congress.

This summit is not about blaming thepharmaceutical industry for the entirety ofthe problem. Certainly drug pricing is aconcern. But there is an additional needfor increased funding from federal andstate governments. Increased collectiveprice negotiations efforts are critical, as is

a broader systems approach to prescriptiondrug access and funding. And, obviously,thought needs to be given to regulationthrough reference pricing and theenhancement of cost relocation schemessuch as the ETHA.

A dose of reality is necessary in every-thing that we are addressing today. Thebusiness of manufacturing pharmaceuticalsis based on a free-market system, andprofitability remains a key incentive. But,we need to look at a mixed basket of solutions if we are to make any progressin an era when we are experiencing severeeconomic constraints on both the publicand private sectors. Thus, industry profitconcessions, prescription drug systemreviews and amendments, increased buttargeted federal and state ADAP funding, andincreased attention to private insurancecoverage must be on the table as we cobbletogether our strategy to maintain and expandAIDS drug access in the United States.

The key, I believe, is open and partici-patory dialogue. I am thus pleased thatcontributions from representatives of various sectors are included: we count onthe participation of people living withHIV/AIDS and their advocates, physiciansand allied health professionals, AIDS service organizations, government officials,insurance company decision-makers, andpharmaceutical company representatives.

Why the mixed basket approach toarriving at solutions? Because we need to ensure the sustainability of our effortsto guarantee AIDS drug access toAmericans living with HIV disease. Thisis an argument IAPAC is advancing onseveral different fronts as we attempt toexpand access to antiretroviral therapy in the developing world. It is no lessimportant here in the United States, espe-cially in light of the cruel reality thatthere are hundreds—and there may soonbe thousands — of people living withHIV/AIDS in this country who today do not have access to life-saving and -enhancing antiretroviral therapy.

Christine Lubinski, Executive Director ofthe HIV Medicine Association (HIVMA),provides an overview of AIDS drugaccess in the United States. My hope is thather presentation will provide a frameworkfrom which we can derive context for anexamination of the pharmacoeconomicsof HIV treatment—which is covered in apresentation by Patrick Clay, AssistantProfessor of Medicine in the Division ofPharmacy Practice at the University ofMissouri-Kansas City. And, to keep usfocused on what our advocacy is all about—the care of men, women, and childrenliving with HIV/AIDS—we are pleasedto count on the participation of BenjaminYoung, an IAPAC physician member andClinical Instructor in the Department ofMedicine at the University of ColoradoHealth Sciences Center. He will deliverIAPAC’s call to action around AIDS drugaccess.

Our ultimate objective is to developsome recommendations for advancing afar-reaching advocacy and legislativeagenda to expand AIDS drug access in theUnited States, as well as strategies forpublic and private sector influence onAIDS drug pricing; again, with an eyetoward the future. There are certainly contentious issues with which we have dealtin recent months and which merit discussion,specifically Abbott Laboratories’ decisionto implement a 400 percent price increasefor its protease inhibitor, ritonavir (RTV).Yet, I am hopeful that today’s summit willinclude a healthy dose of forward thinkingaimed at securing the future of AIDS drugaccess in the United States. ■

José M. Zuniga is President/CEO of theInternational Association of Physicians inAIDS Care.

The key, Ibelieve, is open and

participatory dialogue. Iam thus pleased that contri-

butions from representativesof various sectors are included:we count on the participationof people living with

HIV/AIDS and their advo-cates, physicians and

allied health profes-sionals, AIDS.


Christine Lubinski

couple of disclaimers: One,I know very little aboutdrug pricing. Most of mywork in AIDS has beenabout healthcare access,which means I know a littlebit about the programs that

pay for drugs. So, basically, what I amgoing to do is give you a very quickoverview of who pays for drugs in theUnited States.

These are the major providers of payment for AIDS drugs: Medicaid;private health insurance; the Ryan WhiteCARE Act, including but not limited tothe AIDS Drug Assistance Program(ADAP); the Veterans Administration (VA);the US Department of Defense (DOD);

Medicare; and uncompensated or charitycare. I am not going to talk about theDOD. They are doing very well indeedfinancially, and have fabulous coverage.But, just moving through some of theseprograms, I think the first thing to say is—and, I guess, as I was preparing this presen-tation I sort of stepped out of being anAmerican and thought—what an outra-geous situation we continue to deal withhere in the United States.

We have, in fact, growing numbers ofpeople who are uninsured, 43.6 million in2002, and still no comprehensive solutionto this problem. Looking first at the private health insurance market, whichmay cover about a third of the people inthis country:

• Premiums have risen 13.9 percent.

• Co-pays are going up. The average co-paysare US$9 for generics, US$19 for preferred drugs, and US$29 for non-preferred.Theoretically, most of the antiretroviralswould be preferred drugs because thereare no generic substitutes.

• 71 percent of workers are in plans thatuse a formulary.

• US courts have upheld coverage limitsfor the treatment of HIV/AIDS relatedto private health insurance. Several ofus worked on and supported an amicusbrief a couple of years ago whenMutual of Omaha had policies thatcapped spending for HIV care at a verylow level. The US Supreme Court didnot grant cert. So, of course, one of theconcerns is whether we are going tobegin to see more of these coveragelimits.



A

An overview of AIDS drug access in the United

States


There are also very little data. As men-tioned by José [M. Zuniga] in his openingremarks, more attention should be paid tothe private health insurance market. There arereally very little data on what is happeningwith AIDS care in that market, althoughthere are probably snapshots of what ishappening in some parts.

Medicaid is the largest payer of AIDScare and the largest payer of AIDS drugs.In 2003, Medicaid spent US$8.5 billion formore than 200,000 people. It is important tonote that eligibility requirements includebeing a member of a specific category, aswell as being poor. This is not a universalaccess program for poor people. Mostpeople with HIV/AIDS qualify on thebasis of disability or as a caretaker parentof poor children. The eligibility issueshave been huge, especially since theadvent of highly active antiretroviral therapy (HAART), and clearly there is anurgent need to get people access beforethey become completely disabled byAIDS, especially since we know that drugintervention after an AIDS diagnosis has a poorer prognosis than interventionbefore a diagnosis. But states are requiredunder federal law to cover medicallyaccepted indications of US Food andDrug Administration (FDA)-approveddrugs and off-label use.

Just as the rest of our economy, Medicaidis in a huge financial crisis. What we haveseen is a number of cost-control measureson prescription drug access, everythingfrom preferred drug lists to preauthorization,to requiring generics, to increasing co-pays, to locking individuals in to get their drugs only at one pharmacy, and generallytighter controls on high-cost drugs.Probably the most worrisome of all thecost-control measures is the increasingnumber of states that are actually limitingthe number of prescriptions that peoplecan get filled per month.

One of the other cost containmentstrategies is reduction in acquisition costs.The states are trying to get greater discounts on average wholesale prices(AWPs) for drugs in their formularies,limits on the number of medications, limitson the number of refills, etc. There arecertainly states, including the states ofCalifornia and Florida, both of which areamong the top three states in terms ofnumbers of people with HIV/AIDS, thatare looking to dramatically increase co-pays for certain populations of people on

Medicaid, and obviously with the numberof prescriptions people with HIV/AIDSneed to fill, this could really be a barrier togetting everything they need.

Many of us have been working for someyears on the Early Treatment for HIV Act(ETHA), which is about addressing theneed for early intervention in healthcare.It gives states the option to amend theirMedicaid eligibility, basically to extendMedicaid to low-income people with HIVbefore they become disabled. It also givesstates an enhanced federal match to do so,modeled on the Breast and Cervical CancerAct. We have spent a lot of the last twoyears defending the Medicaid program, butalso feel it is important to have a proactivestrategy, and to acknowledge the ways inwhich Medicaid does not work for ourpopulation.

I want to give you a little bit of data onMedicaid prescription drug prices. Thelatest estimate is from fiscal year 1999,which is obviously a long time ago, butMedicaid spent US$617 million on anti-retroviral drugs, and what has been discov-ered is that, notwithstanding the languageabout Medicaid getting the best price onprescriptions, in fact, that program cate-gorically does not get the best price. Astudy specifically on AIDS drugs foundthat Medicaid pays 33 percent more thanother federal drug discount programs for HIV drugs, including a number of

ADAPs. There is also wide variation inthe prices paid for the same drugs amongstate Medicaid agencies in that particularstudy, which looked at the 10 states with thehighest number of cases. Massachusetts paidfar less than any other state, and Georgiapaid far more. In all the discussions wehave been having over the last couple ofyears about the South and the southernepidemic and the number of people onrural Georgia’s ADAP waiting lists, it issort of interesting to find out that Georgia isactually getting a pretty bad deal onMedicaid prices.

All 50 states and the US territorieshave ADAPs. The goal of the program isto provide HIV/AIDS-related drugs touninsured and underinsured persons.Funding is based on formula, and is largelyfederal. There is some state funding, butthe amount of state funding varies quitedramatically. The overwhelming majorityof the money, and this has consistentlybeen the case since 1997 or 1998, is spenton antiretroviral drugs. The majority ofrecipients are people who would qualify aslow-income. Ten states account for more thanthree quarters of all the expenditures fordrugs. It is a discretionary program; how wellwe know that. Funding depends on annualcongressional appropriations. Such decisionslately have not been in our favor, and thereis little indication that that situation isgoing to change. I cannot remember the

Slide 1.


last time we had a successful supplementalfunding approach for ADAP—the payerof last resort, intended to fill in the gaps inMedicaid and private coverage, becausethe private health insurance market hasbeen pretty successful in avoiding paying forour population of people, by and large.

The ADAP is critical. It is certainly amajor focus of our community. A lot ofADAPs have been imposing cost-contain-ment strategies, enrollment caps, waitinglists, restricted access to drugs, and percapita expenditure caps. They are onlygoing to pay for X thousand dollars peryear per beneficiary, by implementinglimited formularies and reducing financialeligibility criteria—though, by and large,that does not save a lot of money becausethere are not very many people on the higherend of eligibility. This is a map indicatingwhere ADAP restrictions are the mostserious (Slide 1). According to theNational Alliance of State and TerritorialAIDS Directors (NASTAD), there are 791people currently on ADAP waiting lists.

We are clearly having challenges interms of providing access to drugs. I thinkthis is also a time when most people in theworld, with the attention garnered by theglobal epidemic in the last few years,assume that there is universal access tolife-saving drugs in the United States. Asyou all probably know, there is a lot ofvariability in ADAP eligibility. What drugsare on the formulary? How much dostates contribute? That is determined byindividual states, it varies pretty dramaticallyin terms of financial eligibility. There areno minimum formularies or requirementsby the federal government, and there is alot of discussion every time we talk aboutRyan White CARE Act reauthorizationabout whether there should be. I think themost common view is that the only waythis can happen is if there is some type offederal responsibility for helping toimplement that formulary state by state.There are dramatic differences: 18 drugsversus 463 drugs.

I represent HIV physicians now, and Ihave been trying to get some responseabout the Ryan White CARE Act reautho-rization. One physician from NewHampshire e-mailed me and said, “I thinkit would be a good idea if we changed thelaw so the ADAP formulary could includedrugs other than antiretrovirals.” Has hebeen to New York lately? Their idea of acut in the formulary is to reduce the amount

of Ambien® people can get per month.People tend to think the ADAP that existsin their state is the same as programs inevery other state.

Not all ADAPs receive state contributions,and although 36 states contributed in2002, that was two fewer states than contributed in 2001. There is a tremendousvariability in negotiated prices among stateADAPs. There have been some precedentsin recent years of negotiations betweenADAPs and individual pharmaceuticalmanufacturers; they have led to some

agreements, although some people tell methat several of the companies havereneged on those agreements already.About half the states get 340B drug discountprices that are available to some publichealth entities. In order to do so, you have toacquire drugs through a central purchaser.The other half have a rebate option thatallows them to access Medicaid rebateson a quarterly basis.

I think we often forget about one of thebiggest providers of HIV care: the VA. Infiscal year 2003, the VA provided anti-retroviral drugs to almost 15,000 people andhad over 19,000 people with HIV/AIDSunder its care. The VA exists in a rarifiedenvironment where drugs are purchasedthrough one of the only statutorily discounted price programs enacted by thefederal government. The prices are called“Federal Ceiling Prices” and they are partof the Federal Supply Schedule, which is

also how federal contractors get a gooddeal on buying commodities such asoffice equipment. These prices, which aredramatically lower than what Medicaidand most ADAPs get, are available only tothe VA, DOD, US Coast Guard, and someelements of the US Public Health Service(PHS).

In 1997, some of the national AIDSgroups joined forces with the NationalAssociation of Public Hospitals and triedto enact legislation that would allowADAPs to access the Federal SupplySchedule, because public hospitals werehemorrhaging financially from the highcost of AIDS drugs. I never saw such aquick reaction from the pharmaceuticalindustry in my life. Within days the wordwas out that the AIDS community wastrying to undermine medical care for veterans, which I thought was a sort ofinteresting take on all of this.

Moving on to Medicare, which beforelast year would have been a very shortconversation, since Medicare currentlypays pretty much exclusively for inpatientdrugs and for some outpatient cancermedications. We have a new Medicareprescription drug law, which is a verycomplicated piece of legislation in its ownright; but briefly, starting this spring andnext year beneficiaries will have access toMedicare-endorsed discount drug cards,and US$600 in an annual drug subsidywill be available for low-income seniorsand persons with disabilities, which willindeed include some people with HIV/AIDS. In 2006, beneficiaries will have achoice of staying in fee-for-service Medicarewith access to private drug-only plans,(emphasis on “private”) or MedicareAdvantage (MA) integrated plans that areessentially Medicare-managed care plansthat also include drugs, but there will bepreferred provider organizations (PPOs)as well as health maintenance organizations(HMOs) in that option.

There will be reasonably generous subsidies to help low-income beneficiariespay premiums, and cost sharing. Ourcommunity was a very small part of avery large debate, but we did try to dosome advocacy around issues that would becritical. We do not really know the numberof people with AIDS on Medicare, butspeculation is that there are as many as60,000 to 80,000 of them, and many ofthem are duly eligible for Medicaid butsome are not, and in some states they are

I have been trying to get some

response about the RyanWhite CARE Act reauthoriza-

tion. One physician from New Hampshire e-mailed me and said, “I think it would be a good idea if we

changed the law so the ADAPformulary could include

drugs other than antiretrovirals.”


a rather significant part of the ADAP rolls.I remember several years ago hearing apresentation by the ADAP Director for theState of Washington in which he statedthat 15 percent to 17 percent of his state’sADAP rolls were people on Medicare only.So certainly this benefit has the promise ofalleviating some of the burden on ADAP.

One of the very interesting parts of theMedicare prescription drug law is that wehave a completely decentralized private-sector model, in which individual plansnegotiate with pharmaceutical companiesfor prices. There is an explicit statutoryprohibition against the federal governmentnegotiating drug prices on behalf of 40million Medicare beneficiaries. You wouldthink that might get us a good deal. Thepharmaceutical industry, which actuallyhad historically opposed a prescriptiondrug benefit from Medicare because theythought it would inevitably lead to pricecontrols, in fact was incredibly successful—the big winners. They gained a largemarket with no threat of price controls,with all due respect to my friends fromindustry.

What about the Medicare law and peo-ple with AIDS? We have a number ofconcerns about this law… with which weare working administratively and perhapssomeday legislatively to remedy. There islittle hope that this law will be opened up legislatively this year. We are worriedabout comprehensive coverage of antiretroviral drugs on plan formularies.Not only can US Secretary of Health andHuman Services (HHS) Tommy Thompsonnot negotiate prices, but his departmentcannot be proscriptive in terms of a formulary — it cannot say, “You mustcover all antiretroviral drugs in all threeclasses,” for example. As we know, giventhe history of many people with this disease, all the options need to be on thetable because there is no one-size-fits-allantiretroviral combination.

We would really like to change the lawto allow Medicaid to supplementMedicare coverage with federal matchingfunds. Currently, people who are eligiblefor both Medicare and Medicaid must jointhis drug plan and if the drug plan doesnot have all the drugs they need, Medicaidwill not be able to supplement their coverage.Their best hope will be to turn to thealready-strapped ADAP in their communityand ask for help, and it remains to be seenwhether that help will be available. There

are some consumer protection issues thatwe are concerned about, which we actuallyshare with many other constituencies.Right now Medicare does not have to pro-vide even appeals information on enroll-ment, and they also require a beneficiaryto file his or her own grievance, thoughunder current Medicare law, for instancefor the Medicare-managed care plans, aphysician can file on behalf of a beneficiary,a friend, or a family member. We havebeneficiaries who frankly are not equippedto negotiate a grievance process alone, soit would appear that in fact the statute hasa way of discouraging people from filinggrievances.

It is unclear whether ADAP can wraparound this benefit, and that is also one ofthe issues we are working on now. Virtuallythe only programs that can do so are theso-called “State Pharmacy AssistancePrograms.” Our patients are not includedunder that rubric, but we are trying to arguethat in fact, ADAPs are State PharmacyAssistance Programs.

It is really important that all medicallynecessary drugs count toward the cata-strophic limit. If you know anything aboutthis law, you know that there is a phenome-non called a “donut.” It is about US$2,000that you are stuck carrying by yourself,unless you are categorized as low-income.But there is also a catastrophic limit overwhich you pay nothing, and one of ourquestions is: “If you have to buy drugsyourself that are not on the plan formulary,do those count toward the catastrophiclimit or not?” Obviously, we know thatdrug costs to people with AIDS are goingto facilitate them reaching that limit, andthe sooner they do that and have federalsupport, the better off people will be.

Finally, there is the bizarre situationwhere the burden of health plans to provideinformation to the public does not beginuntil people actually enroll. If you are livingin a community that has a fairly robustprovider system with several plans, youcannot go to Plan A and ask, “What drugsdo you cover?” They are not required totell you. But as soon as you join a plan,you are locked in for a year. We think thisis a little troubling, and this is actually oneof the issues we hope to talk to HHSabout, and hope there might be some wiggleroom in regard to regulation. So, not onlydid the pharmaceutical industry win, butalso the health plans won big with thenew Medicare law.

There are many issues and challenges…A lot of people think the Medicare benefitsstart immediately. When deciding whetherto enroll, a large number of Medicare beneficiaries have access to some privatesupplemental insurance that they hope tokeep. There is a lot of concern that someof the companies that provide insurancefor retirees and people with disabilitieswill in fact no longer do so. I am worriedabout my mother in this regard.

There are financial penalties for delayedenrollments. You have got to be informedabout what to do, and if it is the bestbet—for instance, making sure you get inthe low-income subsidy program if youare eligible, which is pretty critical. Howdo you sign up? These are all things that Ithink people on the ground, Ryan WhiteCARE Act-funded case managers andothers, are going to have to help people do— for example, comparing plans anddeciding which to join, because they areall going to be different. First of all, weare fighting for the right to make informeddecisions about comparing plans, whichwe do not have; again, with the risk ofconsequences of bad decisions or a lock-into a sub-optimal plan. It appears that theburden may be on the beneficiaries totrack out-of-pocket cost. If you manageyour finances the way I do, you would bein lot of trouble that way. Obviously peoplewith AIDS have a lot more challenges intheir lives than I do.

Just some summary comments: Wehave, in case it is not incredibly obvious,a fragmented patchwork of a healthcaresystem that links access to healthcarewith employment, disability, age, some-times poverty, and other factors. Becauseof the categorical nature of access, thereare no guarantees of continuity of carefrom childhood to old age in this country.There is no human right to healthcare.There is no legal right to healthcare, andobviously that has tremendous implica-tions for access to drugs. Drug costs vary considerably across public and pri-vate programs by kind of system and bygeography, like everything else related tothe AIDS epidemic. The high costs ofprescription drugs affect individual decisionsto adhere to drug protocols, and alsoaffect the capacity of public programs to offer a medication safety net. If drugsdid not cost so much, ADAPs could offer more of them to more people, forexample.


Most information about drug pricing isproprietary, even among state Medicaidprograms and ADAPs, so they are notallowed to share information about that.So only the individual pharmaceuticalcompanies have the big picture about whatthe pricing structure looks like across payers,and they only have that picture for theirdrugs. It is not a transparent process. It isvery difficult to change. Patient-assistanceprograms sponsored by pharmaceuticalcompanies serve a critical role as safety

nets for individuals, as eligibility for programsfluctuates or as benefits fluctuate, but theycreate tremendous burdens for providersand patients alike. I talked to one of ourproviders at a recent conference, a private-practice doctor in Indiana. She had about20 patients who lost their eligibility becauseof a change in the Medicaid program, andshe was a sole practitioner and did nothave the time or the personnel to do thepaperwork to get each of her clients onthe drugs they need since she was getting

out of AIDS care. It sounds like a goodjob for Ryan White CARE Act-fundedcase managers; but what do I know?

Continuing access to life-saving medica-tions for people with AIDS remains anelusive goal. Without more clarity, unifor-mity, better pricing, and an increased levelof purchasing power, I am not sure howwe get there. ■

Christine Lubinski is Executive Directorof the HIV Medicine Association.

7th International Conference on

Healthcare Resource Allocation for HIV/AIDS

HIV/AIDS and the United Nations Millennium Development Goals: Are We on Target?

November 3 - 4, 2004 - Washington, DC

Call for Abstracts

At the UN Millennium Summit in September2000, world leaders placed sustainabledevelopment at the heart of the globalagenda by adopting eight MillenniumDevelopment Goals (MDGs) that set cleartargets for reducing poverty, hunger, disease,illiteracy, conflict, environmental degrada-tion, and discrimination against women by2015.

Goal 6 commits nations to specifically “combatHIV/AIDS, malaria, and other diseases.” TheUN Millennium Project—spearheaded byJeffrey Sachs (Columbia University)—hasidentified 10 priority areas through which toachieve Goal 6. Four years after the UNMillennium Summit, the 7th InternationalConference on Healthcare Resource Allocationfor HIV/AIDS (7th ICHRA) aims to assessglobal responses to Goal 6 as well as ourrelative success in addressing the related 10priority areas.

The International Association of Physiciansin AIDS Care (IAPAC) thus welcomes abstractsubmissions for the 7th ICHRA along the following 10 tracks (representing the 10priority areas):

Track 1 Access to Treatment

Track 2 Health System Investment toSupport HIV/AIDS Services

Track 3 Prevention of HIV Transmission

Track 4 HIV/AIDS and VulnerablePopulations

Track 5 Integration of HIV Prevention,Care, and Treatment Efforts

Track 6 Empowerment of Women toCombat HIV/AIDS

Track 7 Strategies to Address HIV/AIDS in Orphans and VulnerablePopulations

Track 8 Enhancing the United NationsResponse

Track 9 Expanding and ImprovingImplementation of Domestic and International Funding for HIV/AIDS

Track 10 Empowerment of Governmentsand Measures for Accountability

The deadline for electronic abstract submissionis August 4, 2004.

Visit www.iapac.org to submit your abstract(s).


Patrick G. Clay

am quite honored to comeand deliver a quick presen-tation for you on the phar-macoeconomics of HIVtreatment. First, a little bitabout my background: Inaddition to teaching at the

University of Missouri-Kansas City, Ipractice at the Kansas City Free HealthClinic, which is a completely free-of-charge clinic with lab and medical services.Everything is provided free-of-charge toanyone who walks in the door. We requireneither proof of insurance nor of anyfinancial source.

The guidelines for the administration ofantiretroviral drugs in adults and adolescentswere recently updated March 24, 2004.

Many of you are familiar with the USDepartment of Health and Human Services’“Guidelines for the Use of AntiretroviralAgents in HIV-Infected Adults andAdolescents” (DHHS Guidelines), but Itook no chances in the event that some ofyou were not familiar. Because I do teachmost of the time, I have two reasons touse these guidelines: 1) to define ourgoals of therapy; and 2) to illustrate the tools we use to achieve the goals oftherapy.

I am going to address several issuesthrough economic analysis. First, how toobtain maximal and durable suppressionof viral load, below the limit of detection,whatever that definition may be at thetime; also, how to restore and preserve theimmune function. We may not be able tofully restore or bring patients back to

where they once were, but we can preventfurther decline of their immune function. Iwill discuss improving or at least notcompletely losing quality of life. Finally, Iwill analyze the incredible reduction inmorbidity and mortality that has beenshown with these antiretroviral agents.

In order to get there, we need to maximizeadherence to an antiretroviral regimen. I will discuss the different componentsand the thought processes that go intoconstructing one of these regimens. I amgoing to try to give you some insight intothat based upon something that happenedabout 24 hours ago. Preserving futuretreatment options may be an answer to thequestion that was raised earlier: “Is aneconomic perspective going to be used indeveloping treatment guidelines in thefuture?” I think that as I go through my



I

Examining the pharmacoeconomics of HIV treatment


presentation you are going to find theanswer to that question is absolutely “yes,it will be.” One thing I am also going totouch on at the very end of my presenta-tion is the use of drug resistance testing inclinical practice.

Slide 1 shows the four classes of currently available antiretroviral agents.This is fantastic. Ten years ago that wasnot the case; two years ago that was notthe case. We now have the nonnucleosidereverse transcriptase inhibitors (NNRTIs),the protease inhibitors (PIs), the nucleo-side reverse transcriptase inhibitors (NRTIs),and just coming on board are the fusioninhibitors. Below this, as you will see, aretwo excerpts from Table 12A of theDHHS Guidelines, which recommend the “preferred regimens” to start in persons who are HIV infected and meetcriteria to start therapy. If you pay closeattention to some of the previous presen-ter’s slides, she talked about pricing basedupon preferred and non-preferred agents.If you look closely at the DHHSGuidelines, you find exactly the samewording. There is a preferred regimen andan “alternative regimen.” If you are a beancounter by trade, you can very quicklytake that wording and apply it to howmuch you are going to charge yourpatients if they are on a preferred regimenversus an alternative regimen.

I want to point out that regimens arebroken down by class of antiretroviralagent. There are NNRTI- and PI-basedregimens, each regimen consisting of atleast three agents. What does this mean

for pill burden for the purposes of costing?There are now co-formulations availableas one drug—such as Kaletra®, which isthe co-formulation of lopinavir (LPV) andritonavir (RTV). Taking into account apreferred PI-based regimen—LPV/RTV+ lamivudine (3TC) + stavudine (d4T)—

we are talking about three total drugs inan actual combination. If we look at analternative PI-based regimen, for example,indinavir (IDV)/RTV + 3TC + d4T, weare talking about four total drugs in anactual combination — because none of

these antiretroviral agents is co-formulated.A previous presenter mentioned that caps are being imposed on the number ofprescription medicines that can be filledper month. We need to have at least three drugs on board to construct an effec-tive regimen. So, if you are limiting pre-scriptions, and you are counting co-formulated drugs as one prescription,the co-formulated drug would automati-cally move higher up on the preferred list.

I saw a fellow by the name of Bill yesterday. He was diagnosed in October2003. His CD4 count was 368 cells/mm3.His initial viral load was 113,000copies/ml. We did not start Bill on therapy initially, and the student who waswith me yesterday was very puzzled... Shesaid, “You have a person here who obvi-ously needs to be on therapy. Why haven’tyou started him on therapy before now?”What I asked her was to go back and lookat the other medications that he is on.There was this thing about Bill’s acuteschizophrenia that we had to get resolvedbefore we could start him on medicine.While it is fantastic to put patients onantiretrovirals and get their viral loadundetectable and their CD4 count up, ifthey are schizophrenic or psychotic, wedo not really want to have them out there.So we prioritize what we are going totreat first. Bill, however, was at great riskfor the development of AIDS. His viralload was 113,000 copies/ml at baseline.When he showed up yesterday, by theway, his viral load was 450,000 copies/mland his CD4 count had dropped to

Slide 1. Slide 2.

There is a preferredregimen and an “alterna-

tive regimen.” If you are abean counter by trade, you

can very quickly take thatwording and apply it to howmuch you are going to charge

your patients if they are ona preferred regimen

versus an alterna-tive regimen.


178 cells/mm3, but he was stable on hisanti-psychotic meds so we were veryhappy about that.

Slide 2 shows the proportion of indi-viduals who have a CD4 count of lessthan 200 cells/mm3 and viral loads in dif-ferent ranges who are going to go on todevelop an AIDS-defining illness or diedue to an AIDS-related illness over thecourse of three, six, and nine years. Weuse this table to decide who should starttherapy at any given time. In this particu-lar instance, without question, it would betime to start therapy, but although ourpatient met these criteria, we decided notbegin therapy because patients are individual

human beings. I have a number of col-leagues in pharmaceutical sciences andpharmacology, and I give them a difficulttime whenever they tell me they do notunderstand why, when I show up in thelab, my experiment is not ready to go. Itell them, “Well I do not deal with ratsand I do not keep them in cages in the lab,so if I show up it does not necessarilymean they are going to show up that day.”It is one of the things I try and emphasizeto my students, as well as audiences, thatthese are humans with whom we are dealing.

There are guidelines and there are variances within the guidelines. In Slide 3,we can see where Bill falls in terms of

risk for developing an AIDS-defining illness in three, six, or nine years. Slide 4is a graphical representation of these data.This figure is modified from the graph inthe back of the DHHS Guidelines, and itshows the four strata based on HIV RNAviral load: greater than 55,000; 20,000 to55,000; 7,000 to 20,000; and 1,500 to7,000 copies/ml. CD4 count range is alsoshown. As you can tell, as the CD4 countcontinues to decline, the likelihood fordeveloping AIDS within three years sig-nificantly increases, and this has a majorinfluence on what we decide to do andhow aggressive we are in doing so. A sidenote, when we saw Bill yesterday, he was

Slide 3. Slide 4.

Slide 5. Slide 6.


there for two and a half hours to get startedon his antiretrovirals. Not only did he see me, he also saw the physician, andthen went on to see his case manager, his substance abuse case manager, and his peer counselor. If Bill had a job heprobably got fired because of how long he was at his doctor’s appointment yesterday.

When we start someone on therapy,one of the things that health maintenanceorganizations (HMOs) and other health-care payers look at is lifetime cost to treatthese individuals. Along the X-axis inSlide 5 are CD4 counts. If we look at this as a one-dimensional approach only,the greater a person’s CD4 count at initiation of therapy, the higher the overalllifetime cost to treat, using just anti-retrovirals, without any other factors.Costs of starting therapy at CD4 countsgreater than 500 cells/mm3 are signifi-cantly higher compared to waiting untilthe count drops to 400, 300, and 200-299cells/mm3. Costs for starting therapy atless than 200 cells/mm3 are elevatedmostly because patients are more likely tobe hospitalized. If we take this figurealone and you want to decide to developguidelines of when you are going to start someone on therapy, then it lookslike 200 to 299 cells/mm3 is the optimaltime to start therapy. However, the perspective I prefer is that once we start therapy, what is the cost to treat permonth lived?

In this instance what we find is that thegraph gets reversed (Slide 6). Those patients

who were started on therapy with CD4counts of greater than 500 cells/mm3 overthe course of their treatment lifetime werecheaper to treat per month. If we take acost per month approach to treating theseindividuals, we can see that it is better to treat them earlier on, expandingmore access to antiretroviral agents.

So if they present initially with CD4counts under 200 cells/mm3, since we see the cost to treat per month lived isconsiderably higher than any of the others, should we just go ahead and notoffer them therapy? Most of us would

absolutely not agree to this. Even if theirCD4 count was less than 50 cells/mm3, ifthey already had an AIDS-defining illness, we know that individuals on antiretroviral therapy cost the system sub-stantially less than those individuals whohad not been started on therapy.

Similar data were broken down andpublished in the New England Journal ofMedicine about three years ago (Slide 7).They looked at the initial CD4 count ofthe presenting individuals, the lifetimecost to treat these individuals, the lifeexpectancy, and the incremental cost perlife-year gained, broken down by CD4counts of 50, 200, and 500 cells/mm3.They also looked at those individuals whowere on no antiretroviral therapy versus athree-drug regimen, not specifying theregimens. Total lifetime costs, were higherfor those individuals with higher CD4counts, again, reinforcing the data that Ipreviously showed you, and as CD4counts decrease, the lifetime costs alsodecrease. Overall, lifetime costs aregreater for people who are on medicationsif you look at the cost alone.

But when we adjust for quality of life,we can see the incremental cost per yearof life gained is less as we treat these individuals earlier on. As we get them stabilized, we decrease viral load, weimprove CD4 counts, and we improveimmune function. The earlier we are ableto do this, the more of a benefit we areable to give our patients. That was ageneric three-drug regimen approach, butmuch of the data that I use are based on

Slide 7. Slide 8.

Whenwe adjust for

quality of life, we cansee the incremental cost

per year of life gained isless as we treat these

individuals earlier on. As weget them stabilized, wedecrease viral load, weimprove CD4 counts, and weimprove immune function.

The earlier we are able to do this, the more

of a benefit we areable to give our

patients.


PI-based combinations, because thoseagents have been out for a longer periodof time, more researchers have conductedthese types of cost comparisons with theseparticular agents and there are more datacurrently available.

What we can see in Slide 8 is that if weare able to achieve an undetectable viralload for three years, the cost benefit of PI-based therapy is over US$5,000 per life-year gained. And if we can delay AIDS for20 years in these individuals, as many ofus are trying to do, and make HIV achronic disease, that is a worthwhile goalto have. We can also show substantial costsavings to an institution.

Slide 9 reflects data from four recenttrials — ACTG 320, the Johns HopkinsHIV Clinic cohort study, the INCASstudy, and the Dupont 006 trial — inwhich we see that those people takingpotent antiretroviral drugs are costing thesystem more if you take that unique directional approach of just looking at one aspect of this. But we can see life expectancy is greater, even whenadjusted for quality of life, and the costoverall was much lower in the individualswho received triple-drug therapy. One of the things noted is that overall, PI-based regimens were more expensivethan NNRTI-based regimens. That is a

generalization, but it is also somethingthat is actually still holding true at thistime.

The cost benefit for PI-containing regimens, if we look not just at outpatientbut also inpatient expenses, and if we lookat the average length of stay for individualswho are receiving a PI-based regimen, wecan see a decrease in the number of daysin hospital for people on therapy versusthose individuals who are not on therapy(Slide 10). Hospital costs decrease substan-tially for those individuals who are ontherapy versus those that are not. This isto reinforce the data I previously presentedabout how these drugs, when started, can

Slide 9. Slide 10.

Slide 11. Slide 12.


not only impact a person’s life, but canalso impact the savings to the institution nomatter what stage of the disease treatmentis started.

If you look at the change in per patientper month costs as we increase use of PIs,we will see outpatient oral medicationcosts go up, but that is more than offset bya decrease in hospital costs, professionalcosts, lab costs, and home healthcare costs(Slide 11). For every 10 percent increasein PI use, there is an average increase ofabout US$135 when starting individualson these therapies.

I have been discussing PIs andNNRTIs, and I have tried to stress that it

really does not make a cost difference—Slide 12 illustrates my case. A PI-basedregimen — IDV + AZT + 3TC — wascompared with an NNRTI-based regimen — efavirenz (EFV) + AZT +3TC. What researchers found was that theaverage cost between the two regimenswas not significantly different for eitherexperienced or naive patients. Despitedifferences in viral load, CD4 count, andadverse events, whether a person wasdiagnosed with HIV or AIDS, researchersreally were not able to tease out a difference between these two regimens.Both regimens were shown to be verycost effective.

It is not just getting people started ontherapy that we must strive for to reducecosts to our system, it is getting them andkeeping them engaged in primary care. AsI mentioned earlier, Bill was meeting witha number of individuals for two and a halfhours yesterday. The reason is that if weare able to start and keep patients engagedin care in our clinic, we are much morelikely to achieve success. Some in-houseanalyses that we have done have shownthat patients are more likely to get to anundetectable status if they are able tocome back for at least two follow-upappointments after starting their antiretro-viral therapy. That does not sound like a

Slide 13. Slide 14.

Slide 15. Slide 16.


lofty goal but that is where we start andwe are trying to improve from there.

In Slide 13 when we look at the lengthof stay, the cost in millions of US dollars,the number of emergency room visits,and the number of hospitalizations seenon an annual basis, individuals remainingin clinical care have much lower numbersthan those individuals who started ontherapy but dropped out of clinical care.Engagement and continuation of engage-ment in primary care is paramount to thesuccess of antiretroviral therapy. These drugscan be as potent as anything else in theworld, but if the patients do not take themyou can rest assured they will not work.

One of the other expenses for primarycare, however, and it is not an insignifi-cant one, is the cost for laboratory proce-dures. Slide 14 shows just a very smallsampling of the types of labs that we doand the percentage of abnormal resultsthat we see in our patient population.Each of the drugs has criteria that need to be monitored. Liver enzymes, renalfunction, anemia, hematocrit, and whiteblood cell count must all be watchedclosely and followed up as necessary.This does not include resistance testing; itdoes not include a number of other teststhat are now being used but is simply toshow you that we do check a number of

laboratory parameters in our patients. Wedo a number of procedures in them andmany times we find that the results areabnormal. In our clinic population, abnor-mal results are quite different than whatyou might find in others.

Though we do all of the labs everythree months, or even more frequently if,for instance, they were not fasting whenthey were supposed to be fasting, the labis not a significant component of the overall cost when providing primary carefor an individual. This is true whether thepatient has failed an antiretroviral regimenmore than one time, has only failed oneregimen, or has never failed a regimen.

Slide 17. Slide 18.

Slide 19. Slide 20.


I say that tongue-in-cheek because it isnot the patient who fails the drugs, it isthe regimen that does not work.

What we see is that as individuals failtherapy, the cost for providing primarycare continues to increase (Slide 15). So do we decide that, since they are failing therapy, and these are the patientswho are costing us the most money, we will not provide antiretrovirals to these individuals? We do not make thatdecision, because, again, it is more than a one-step approach. It is more than a unilateral approach to looking at the cost.If we look at the mortality of individualswho have low CD4 counts but who couldnot achieve undetectable viral loads, there is a substantial difference betweenthose who have been receiving antiretro-viral therapy and those who are notreceiving antiretrovirals. If you look atthe incidence of opportunistic infectionsin these different groups, keeping patientson a “failing regimen” was proven to provide a substantial improvement inthose individuals from a cost standpoint.The cost of one admission, actually thecost for an emergency room evaluation totreat pneumocystic pneumonia, will payfor an antiretroviral regimen for an entireyear for one individual. It has been shownnumerous times that preventing theseopportunistic infections is paramount inoverall cost savings.

I did say I would talk briefly aboutresistance testing. Slide 16 offers an analysisby Kit Simpson [Medical University ofSouth Carolina] of the cost of resistancetesting using three different models todetermine whether resistance tests wouldultimately prove cost-effective. The reasonI cite this work, even though this grouphas gone on to show different resultsbased upon different trials, is that depend-ing on which methodology was used, theycame up with either a benefit, a cost, or break-even. Unlike many of the colleagues with whom I converse on aroutine basis, I am not a great believer inresistance testing, and it probably has todo with the limited amount of resourceswe have at our disposal. I guess I am justjealous of those sites that actually are ableto do resistance tests, since I just have todo without them.

There was a question earlier about theactual cost for antiretrovirals, and I donot necessarily believe in using the red book, which most people use as the

standard in determining the annual average wholesale price of a medicationin the United States. This is because Ifound it to be much more competitive if you do like the rest of the world and you get on E-bay and you ask: “How much does this cost?” So these are E-bay costs. This is how I can get my medications through E-bay. I do not know if it is legal or not. I have not actually tried to buy them… because I am sure I would be in trouble in threedifferent states.

Slide 17 shows the annual cost for the PIs. For those of you who areengaged in doing this on a routine basis, if we had those 60 individuals who were able to take ritonavir (RTV) in theoriginal RTV trial, and they were on 600 mg of RTV twice a day, the cost for their PI alone would be aboutUS$46,000 a year. Now most of us have used RTV to boost, or pharmacoki-netically enhance, other agents to improve the activity of the other agents.We can see that the cost is still sub-stantially higher, and this is not evenusing the drug at its full dose. This is 200 mg a day. Again, as was mentionedearlier, in some states there is a cap onthe number of drugs, so you can see whya state such as Texas would want to capRTV at 200 mg a day because the cost of

RTV 200 mg a day is over US$30,000 a year.

Slide 18 shows the cost for one NRTI.For example, the price of emtricitabine(FTC), a recently approved once-a-daydrug, is running just over US$3,000.Combivir® is prorated as though it weretwo agents, so Combivir® is actually twicethis price because it is actually two drugsin one. So we can see that the averageprice for one NRTI is a little overUS$4,000 per year.

Slide 19 shows two NNRTIs —EFV and nevirapine (NVP). Efavirenzcosts a little over US$5,051 a year and NVP costs about US$500 less permonth; you multiply that times 40 millionindividuals who may be on antiretroviraltherapy and that is a substantial cost savings.

Slide 20 shows the annual cost for an antiretroviral regimen, this is just the antiretroviral. It is not the labs. It is not providing case management, substance abuse case management, or anyof the other ancillary services that Italked about. It is not hospitalizations.This is roughly about US$20,000 toUS$25,000, and takes into considerationthe average price of a PI, the two NRTIs, and an NNRTI. The reason I added all of those up is because that is actually the regimen that we started Bill on yesterday—all four of those agents fromall three classes of available antiretrovi-rals. We have the temporary benefit inMissouri of covering all approved anti-retrovirals. I believe the number of drugsavailable through Missouri’s AIDS DrugAssistance Program (ADAP) is secondonly to New York State. Because of that, we were able to stabilize Bill on hisanti-psychotic medicines through ADAP,and we now have him on antiretroviraltherapy.

What I have tried to present today issome brief background—some of whichis published, much of which has been pre-sented elsewhere. Finally, I think AbbottLaboratories has brought to the forefrontwith their RTV pricing increase last yearexactly what is going to be coming alongin a few short months to years with anti-retrovirals. ■

Patrick G. Clay is Assistant Professor ofMedicine in the Division of PharmacyPractice at the University of Missouri inKansas City.

If we look at the mortality of

individuals who have low CD4 counts but who

could not achieve unde-tectable viral loads, there is a substantial differencebetween those who have been

receiving antiretroviraltherapy and those who

are not receivingantiretrovirals.


Joshua P. Cohen

am honored to be here, butI need to issue a disclaimer: Iam a health economist, butmy main focus is on reim-bursement issues—that is,pharmacy benefits manage-ment. I have also done

some work on prescription to over-the-counter switches but I have not donemuch work on AIDS drugs, at least not inspecific detail, nor am I an expert on drugpricing, per se. However, that being said,reimbursement and drug pricing are certainly related, as we will see shortly.

The theme throughout my talk will bethat patient access to prescription drugs isa function of three items, the first being“availability” of the drug. That is, it needs

to be approved or go through the regulatoryapproval process, and implemented by theUS Food and Drug Administration(FDA), and FDA counterparts abroad.Second, and very important, is “cover-age.” Christine [Lubinski] touched on thattopic. In fact, she gave a detailed talk oncoverage, and I will supplement some ofwhat she said. Finally, although this ismore self-explanatory than the others, thethird item will be “personal income,”because some fortunate people may noteven need to be covered, may not needinsurance. They may simply have incomesufficient to pay for their prescriptiondrugs. Most people, of course, are not thisfortunate.

I will cover the main FDA regulatoryinitiatives to speed up and improve theapproval process, and then I will turn my

attention to coverage issues. I am going togive a brief historical overview, goingback about 15 years. Finally, I will give abrief, quick, and dirty case study that Idesigned last week, examining the place-ment of AIDS drugs on several US formu-laries, as well as the Dutch NationalFormulary. Of course, many of you maywonder why I chose Holland. Well, I havespent half my life in Holland, I haveadvanced research there, and I have studiedthere, so it was a natural reference pointfor me.

So again, access is a function of avail-ability, coverage, and personal income.

Availability depends on regulatorymechanisms and the research and develop-ment (R&D) environment. Before I lookat availability and coverage separately, letme briefly touch upon a controversial



I

Untangling the economics of drug pricing

topic, the relationship between the R&Denvironment and pricing. Suffice it to say,without a functional and profitable R&Denvironment, drugs would not be developedand made available to the general publicin a timely and efficient manner. TheR&D environment depends to a degree onpricing. Some say, controversially, that afree market for pharmaceuticals, with noprice controls, is essential for long-termgrowth and innovation; others contendthat this is not the case. As we will see, acompletely free market for pharmaceuticalsdoes not exist even in this country.

Let me briefly state my take on thepricing debate. We need to recognize theimportance of patent protection and apharmaceutical company’s ability to marketa drug at a price that matches supply and demand. This being said, I think wemust all acknowledge that when makingdecisions pertaining to drug pricing, weenter the realm of ethics and the need tobalance economics with our moral duty topeople in need, especially when we aredealing with life-saving treatments, suchas AIDS drugs. Needless to say, drug discovery and development take time,money, and they are labor intensive. Basicresearch can take decades, discovery canbe like finding a needle in a haystack, anddevelopment requires numerous, lengthyclinical trials. Only one in five investiga-tional drugs actually makes it to the phar-macy shelves.

Availability, of course, depends onmany things, not least of which is R&Dfor new drug development. It also depends

on the FDA approval process, and issuesrelated to the marketing of drugs, such aspatents. Let me give you a brief historicaloverview of regulatory initiatives that wereintended to improve this process, startingwith the Hatch-Waxman Act of 1984.Hatch-Waxman attempted to balance competing objectives—innovation, pricecompetition and prescription drug afford-ability. Not an easy balancing act. Hatch-Waxman sought to shorten the time it takesfor generics to reach the market by creatingthe Abbreviated New Drug Application(ANDA) process, which eliminated lengthyand expensive clinical trials for genericproducts.

Since Hatch-Waxman, there has beencontinued public concern about the lengthof time for FDA review, limited access todrugs during clinical trial testing, and thelack of existing therapies for certain disease states, including HIV and AIDS. Asa result, there have been more regulatoryinitiatives, including the expeditedapproval programs starting in 1987; thePrescription Drug User Fee Act (PDUFA)in 1992, which charged pharmaceuticalcompanies user fees for review of NewDrug Applications (NDAs); and the Foodand Drug Administration ModernizationAct (FDAMA) of 1997, which formallyintroduced the Fast Track Initiative.

From 1987 through 1992, the FDAdeveloped and implemented several programs designed to expedite patients’access to emerging therapies, either byallowing patients access to unapprovedtherapies, or by accelerating the drug

development and approval process. WithTreatment Investigational New Drugs(treatment INDs), desperately ill patientsgain access to a drug while the clinicaldevelopment and FDA review continue.For treatment INDs, drug sponsors maynot commercialize an investigational drugby charging a price higher than that neces-sary to recover costs of manufacture,research, and development. Thirty-nine ofthese have been granted, among whicheleven were for AIDS drugs. Then thereare the New Drug Submissions (NDSs)approved under the Center for DrugEvaluation and Research (CDER)Accelerated Approval Programs, Sub-PartH. Thirteen out of 38 of drugs approvedthrough CDER have been AIDS drugs.

The FDA fast-tracked azidothymidine(AZT) in 1987. This first of now 19 AIDS drugs passed through the FDAapproval process in four months. Anotherexample is the fast-track approval ofsaquinavir (SQV), which was approvedjust three months after the filing of itsNDA; and, in 1996, indinavir (IDV) wasapproved in a little over one month. In all,the FDA’s expedited development andapproval programs have particularlyfocused their attention on AIDS drugs, aswell as cancer drugs (Slide 1). That is thegood part. However, the share of AIDSfast-track designations, for a variety ofreasons, have fallen to less than 20 percentin 2001 and less than 10 percent in 2003(Slide 2). If we summarize the ups anddowns of AIDS drug R&D, many drugshave been approved. There is no question


Slide 1. Slide 2.


about that. And many of these drugs areclearly life-saving drugs, and are veryimportant to the patients and their careproviders. There has been improved efficacy,improved compliance, and improved dosing,but it certainly has not met the growingworldwide need. We need to focus ourattention not just on the United States, butworldwide, where millions need the med-ications and do not have access to them.

Now, we will move to the second accessfactor: coverage. Let’s talk about coverage.In this country, and I stress, in this country,a person’s degree of drug coverage dependson insurance status, and insurance statusis co-determined by socioeconomic status,factors such as income, employer, age, where one lives; and last (and unfor-tunately unique to the United States) butcertainly not least, preexisting conditions.This is certainly a unique American phe-nomenon.

In Slide 3, for the sake of convenience,I make the ideal assumption that the neededdrugs are “available.” If all the drugs areout there, the flowchart on this slideshows the relationship between degrees ofaccess and coverage. We can defineaccess in terms of coverage and earnedincome. The first question is: “Does a person have coverage?” If the person hascoverage, we have to look at restrictionsin the formulary, possible co-pays, and a highpremium burden as ways of unfortunatelylimiting their degree of access to drugsthat are available. Having coverage is notthe whole story. This is fairly obvious tomost of us, but what I have done here is

try to summarize the main points of therelationship between coverage and access.Now if you do not have coverage, it is notnecessarily a bad thing if you are reallywell off. Of course US$50,000 may notsound like a lot to some in the UnitedStates, but suppose it is US$100,000 orUS$200,000 or at whatever level weestablish the cut-off. For those of us who are well off, perhaps coverage is not an important issue, but for most of us coverage is important and insurance statusis important.

Then there is the fact that in this country,coverage is a voluntary choice on the partof the patient, the enrollee and his or heremployer, for instance. Again, while thismay be the case in the United States it isnot the same in some other countries.Coverage in the United States is completelyvoluntary. There is no mandatory mechanismmandating employers to provide coverage.Many do, many do not. The same thingapplies to the individual patient. There isno one saying that you have to have coverage, such as the case in Europe, whereit is a mandatory mechanism, providing away of spreading and pooling risks acrossthe population. In the United States we donot have that mechanism, even for thosein Medicaid or who are Medicaid-eligible.The earlier talk included the fact thatmany HIV-positive patients, up to 50 per-cent, are indeed in Medicaid, but up to 50percent who are Medicaid-eligible maynot even be enrolled in the program at anygiven time. So many of those people alsodo not have coverage, despite the fact that

Medicaid, compared to private plans, is afairly generous program across the 50 USstates. Of course there are differences,there are nominal co-pays, for example, butmany of those who are Medicaid-eligibleare not enrolled in the program.

Now contrary to conventional wisdom— and here is where I deviate slightlyfrom the previous talk — coverage ofpharmaceuticals has actually increaseddramatically throughout the 1990s, andironically, I think that is what has beenpart of the problem of perception. We seethat we have perhaps reached a turningpoint in 2000, where our own out-of-pocket costs are now going up again. But,certainly throughout the 1990s, as part ofthe “managed care” revolution, and Iknow we have been prone to bash man-aged care, but as part of the managed carerevolution, prescription drug coverageactually increased dramatically. Now ithas become an expensive proposition.Providing prescription drug coveragebecame something of a burden to the man-aged care companies, to government andto Medicaid. Why? Because spending wasincreasing at rates of up to 19.5 percent backin 1999. It has come a bit more down toearth recently. As shown in Slide 4, themost recent Milliman USA Health CostIndex Survey estimate was that it increased8.5 percent last year at this time. I do notknow if that is a one-off blip, but clearlyprescription drug spending has beenincreasing at a much higher rate than theother components in healthcare (Slide 5):inpatient, outpatient, and physician services.

Slide 3. Slide 4.

While our out-of-pocket costs havegone down—and I am not speaking nowto HIV-positive patients, but speakinggenerally — prescription drug spendingoverall has increased. This makes sense,because if you provide coverage, as theRand experiment 20 or 30 years agoproved, and basically subsidize pharma-ceutical care, there will be more utiliza-tion, thus more spending. I think what allof us fail to see, though occasionally wedo see well thought-out pieces in the NewYork Times or Wall Street Journal whichpoint out the fact that prescription drugsare still only 9 or 10 percent of the overall healthcare spending pie, is thatmaybe there is some short-sightedness on the part of certain insurers andMedicaid and the government. We justheard Patrick [Clay] talk about cost-benefit and cost-effectiveness analyses;perhaps prescription drugs actually are asomewhat cost-effective component. It is a rising component, but it is not really a big part of the healthcare spend-ing pie and it is perhaps reducing thegrowth rate in inpatient and outpatient,and maybe even physician services.There is no proof of this, but we can certainly see that while prescription drugspending was outstripping all the othercomponents by a margin of 3 percent,inpatient costs were growing at 2, 3, 4,and 5 percent per year instead of 15 per-cent per year. Maybe there is a trade-offin growth rates.

What has been the response to theincrease in drug spending? In Western

Europe, Japan, Canada, and other coun-tries as well, where healthcare is largelygovernment-run, insurers have respondedby cutting drug budgets, raising co-pays,and a few have imposed cost-effectiveness

thresholds prior to admitting new drugs tothe formulary. Australia is the best exampleof a country that has introduced thesethresholds. It is quite controversial, andthey especially apply to breakthroughmedications. In the United States, mostpeople who have insurance have privateinsurance, and private insurers have

responded to increased drug costs by capson drug spending and formulary restrictions.They have also, of course, introduced themulti-tiered co-pay arrangement in a bigway because five or 10 years ago, you didnot have this three-tiered approach, andnow I think from 60 to 70 percent ofinsurers have a tiered approach to co-pays.

Let me briefly explain other ways toreduce drug spending, which have includedprice controls. Many countries haveimposed direct price controls. The UnitedStates generally does not have direct pricecontrols other than the federal ceilingprice, which is a Veterans Administration(VA) price. Still other countries have gonedown a different path. It is called “refer-ence pricing,” based on a web, a nexus ofcash information and also drug flowsbetween the government intermediaries,patients, and providers (Slide 6).

Let’s start out looking at price controlswith the patient who gets his prescriptionand goes to the local CVS/pharmacy orRite Aid pharmacy to get a prescriptionfilled. The pharmacy has ordered the drugfrom a distributor and the distributor got itfrom a manufacturer. When insurers enterthe game, particularly when pharmacybenefit managers (PBMs) enter the game, itgets far more complicated, with payments,rebates, and reimbursements. The pharmacycollects payments from patients (the co-pay)and health plans, and pays distributors forproducts. Retailers and distributors each takea percentage from what is called averagewholesale price (AWP), which is a listprice. It is like the price on a car. It is not


In the United States,most people who have

insurance have privateinsurance, and private insur-

ers have responded toincreased drug costs by caps ondrug spending and formularyrestrictions. They have

a lso , of course , in t ro-duced the multi-tiered

co-pay arrangementin a big way...

Slide 5. Slide 6.


the actual price paid. It is the sticker price. On the insurers’ end, pharmaceutical

companies also provide rebates to PBMsfor moving market share and credit distributors. Pharmacy benefit managersnegotiate on behalf of insurers; they taketheir cut of rebates but do pass on a portionto the health plan. Pharmacy benefit man-agers can thus exert some downward pres-sure on drug prices; estimates are between10 and 30 percent. Unfortunately, PBMsare relatively secretive about their rebatedeals, and they do not reveal to researchersor others the exact percentages that they aregetting off of AWP. We have to estimatethese percentages, and when you say 10 to30 percent, it is clearly a broad range.Again, a common feature of formularydesign is the three-tiered co-pay approachthrough which enrollees pay lower co-paysfor generics than for brand names, higherprices for brand names off the formularythan on the formulary. The pharmacy’sincentive to participate in this nexus isbased on its virtual guarantee of access toan enrollee base of health plans. Again,you are talking about basically 200 millionpeople, or it may be more because almosteveryone now is in managed care of somesort. Pharmacy benefit managers havebetween 200 and 220 million coveredlives, and in exchange for this access, thepharmacies agree to a reimbursement for-mula established by the PBMs, which isexpressed as a discount off of AWP. Theydo get a dispensing fee per prescription.

Clearly there is controversy and confu-sion surrounding the complex web of cash

information to drug flows between thepharmaceutical companies, wholesalers,government, PBMs, and end users, especiallyconcerning drug prices. If the retail priceat the pharmacy for a particular dosageand quantity of a brand-name pharmaceuticalwas US$100, then on average an uninsuredindividual is paying the highest amount.Christine [Lubinski] in her presentationand José [M. Zuniga] in his introduction,both touched upon the fact that we havesomething like 40 or 45 million uninsuredindividuals in the United States; they arepaying the highest price, the full retailprice for that drug. Health maintenanceorganizations (HMOs) and insurancecompanies would pay between US$65and US$80, Medicaid pays around US$70(though it could be between US$60 andUS$80), and the VA pays between US$50and US$60. We have a confusing array ofdrug prices. We have the retail price, thehighest in the chain of distribution, andreally none of us probably know what theretail price is, because when we go to thepharmacy, at least those of us of who areinsured, we are paying a co-pay. We donot really know what the price is and forthe most part, physicians and providers donot know either. That is part of the moralhazard.

The fact is, once there is coverage,since no one really knows what the priceis, sometimes you can have what is called“physician-induced demand” for certainproducts. People will just say, “Oh look, youare covered. You can take this or that pill.”It does not apply as much to AIDS drugs

because these are still life-saving treatments,but it certainly applies to other drugs thatwe know about from direct-to-consumeradvertising. We have then the AWP,which is a list price. It is referred to as asticker price. Most estimates are that discounts for HMOs and large purchasersare more than 20 percent off AWP. Andthen there is the average manufacturer’sprice (AMP), which is the price paid to apharmaceutical manufacturer by whole-salers for drugs distributed to retail phar-macies. Finally, there is the only directprice control in the United States, which isthe federal ceiling price, or maximumprice manufacturers can charge for theFederal Supply Schedule.

Now to get back to what I briefly mentioned before, reference pricing. Inan effort to contain drug spending,Germany, Australia, New Zealand, andThe Netherlands allow reference pricing.Let me take the Dutch as an example.The Dutch formulary reimburses at the level of the cheapest product in a therapeutic “cluster.” The governmentalso imposes price ceilings at the sametime, and these are based on the averageretail price of drugs in four surroundingcountries. In Holland, it is important tonote that non-clusterable products, whichare about 15 percent of the products, andwhich tend to be life-saving drugs for diseases such as HIV, are put on a sepa-rate list and are always reimbursed in full. In 2005, however, all new non-clus-terable products will have to pass a cost-effectiveness threshold, a test prior to

Slide 7. Slide 8.

being reimbursed in full. It will be similarto the situation that currently exists inAustralia.

Reference pricing is an approach toreimbursement for pharmaceuticals youwill be hearing more about in the comingmonths in the United States as well. Somehealth plans are experimenting with a version of reference pricing, and reim-bursement based on functional equiva-lence is closely akin to reference pricing.In reference pricing schemes, products areclustered into groups, as I said, which arebased on therapeutic effects. In contrast togeneric referencing, therapeutic referenc-ing treats compounds with different activeingredients as equivalent, despite possibledifferences in efficacy and/or side effects.They cluster on-patent with off-patentcompounds. This is often considered quitecontroversial, even in The Netherlands.The payer—the insurer—sets a referenceprice for each cluster based on a relativelylow-priced product in the cluster. Say youare looking at second-generation antihist-amines. Suppose that Allegra® was thecheapest. That would be the product thatwould be given the reference price. Thereference price is the maximum reim-bursement for all products in the group.Suppose you are a patient in Holland andyou want Claritin®. Fine, you can getClaritin®, but you pay the surcharge,whatever the difference is between thereference price and the price for Claritin®.

Now the AIDS drugs and other life-saving treatments are put on the non-cluster-able list, what is called 1B in The

Netherlands, and I believe it is the same in Australia, Germany, and New Zealandas well. Though I am not sure about this, I am assuming that it is the case, so 15 percent of drugs are considered“life-saving,” and therefore they are fullyreimbursed.

In Slides 7-10 you can see that KaiserPermanente and the Blue Cross/BlueShield plans, for instance, include AIDSdrugs on their formularies. The dollarsigns simply refer to the tiering of thatproduct. If it has few dollar signs, it is alow-priced product; if it has many dollarsigns, it is a high-priced product. We do not know exactly how much people are paying in co-pays, but clearly Kaiser Permanente and the Blue Cross/Blue Shield plans are putting these prod-ucts on their formularies. Aetna andHarvard Pilgrim coverage may havechanged slightly since I created theseslides, but I believe that coverage is for themost part the same. Kaiser Permanentehas numerous formularies, not just one.We picked a representative formulary.Some of the products are not on certainformularies; other products are on all formularies.

If we compare it to The Netherlands’national formulary, we can see that thesedrugs have been put on a non-clusterablelist and they have been given full coverage,other than the products that are labeled as“N/A,” which are not approved by thelocal FDA counterpart. You have to lookat this very carefully. I mentioned avail-ability as being an important component

of access. Certain drugs, Baycol® is perhaps the best example, never made itthrough the approval process in The Netherlands, in fact never made itthrough the approval process in severalEuropean countries. They made it in the United States and approval later had to be withdrawn. That does not mean that The Netherlands or European FDAcounterparts are more or less cautiousthan we are, but it certainly tells us a story about globalization. We are not yet there in terms of harmony of our drug approval processes and I do not think we ever will be, because there is a culture that is different at the FDAfrom its FDA counterparts such as theEuropean Agency for the Evaluation of Medicinal Products (EMEA). So, certain drugs are just not available. But,the ones that are available are given fullcoverage.

To recap, availability depends on theregulatory initiatives that are in place to increase availability, but they dorequire fine-tuning to meet patientdemand for newer medications. Forinstance with AIDS drugs, only one new, novel drug has been approved overthe past few years, and certainly some-thing needs to be done about that.Moreover, we have seen that third-partypayers are increasingly restricting coverage.Thank you. ■

Joshua P. Cohen is a Senior ResearchFellow at Tufts Center for the Study ofDrug Development.


Slide 9. Slide 10.


Lanny Cross

wish to thank the InternationalAssociation of Physicians inAIDS Care (IAPAC) for invit-ing me to join you all heretoday to discuss the impact ofAIDS drug pricing on thepublic sector.

My estimate of expenditures for anti-retroviral drugs in the year 2003 in NewYork State, by payer, is shown here (Slide1). There is some guesswork involved inthis, however. The one thing I am fairlycertain of is that the ratio of Medicaid toAIDS Drug Assistance Program (ADAP)is just a little over three people onMedicaid getting antiretroviral drugs forevery one person on ADAP. Based onrecent corrections to some previous esti-

mates that we had, and more recent datathat we picked up from the VeteransAdministration (VA), we are pretty confi-dent that these numbers are pretty close,although there are still some estimates fig-ured in. The biggest guess is with the“Private/Other” category. We lumped anumber of smaller things in there so itsaccuracy is least certain, although I thinkit is still quite close.

So, New York State spent somewhereover US$800 million in 2003 on just antiretroviral drugs. This cost, spread acrossvarious programs such as Medicaid,ADAP, and the VA, is not the same mixthat you are going to find in every state.Medicaid in New York is a very inclusiveprogram that covers a high number ofpeople in need of antiretroviral drugs.Christine [Lubinski] has said, “Medicaid

is not universal healthcare for the poor.”In New York, it is. You do not have to bedisabled to get it; you just have to be poor.In some states, the ratio of Medicaid toADAP will actually reverse, becauseMedicaid is such a closed system and sodifficult to get into that ADAP will haveto pick up that much more of the burden.

Here is where we get into the detail.Just for perspective, I think that the anti-retroviral drug market in the United Statesis about US$4 billion per year, and ADAPand Medicaid are probably good for atleast US$250 million and US$1 billion of that, respectively. There are a mix ofgovernment prices and purchasing systems.The purchasing system used in a distributionsystem to some extent dictates how youare going to get your pricing. There is theFederal Ceiling Price, there is a Federal



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Defining the impact of AIDS drug pricing on the public

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Supply Schedule, and there is a PublicHealth Service 340B price, for whichADAPs are eligible. All of these meanyou take possession of the drugs, you getthe drugs, and then you distribute them.

The other primary type of system is thepharmacy network system, where youreimburse a broad network of pharmaciesat average wholesale price (AWP), typicallyminus some percentage, plus a dispensingfee. That is the system that Medicaid uses.Medicaid also receives rebates underOmnibus Budget Reconciliation Act(OBRA) legislation, and ADAP receivesrebates under the 340B Rebate option. Iwill not go into the 340B Rebate option ingreat detail.

The way a Medicaid or ADAP rebateworks is that for a brand-name drug youget a minimum of 15.1 percent off theaverage manufacturer’s price (AMP),which is a secret price. Though you cannotknow what that price is, you get 15.1 percentoff the AMP, or the difference between AMPand the best price that the pharmaceuticalcompany is giving to a private sector payer,if it is larger. Plus, you get a supplementalrebate if the AMP price increases exceed theinflation rate as stated by the ConsumerPrice Index (CPI). Inflation is calculatedback to the initial introduction of the drug,which is a little complicated, but it meanstypically when you are in a low-inflationperiod, such as we have been, the rebatesget larger if the drug prices have increasedmore quickly than the rate of inflation. Ifyou get a 5 percent price increase, what anADAP or Medicaid is really going to see

is a net cost creep of about 0.50 percent or soper quarter, and it keeps getting recalculatedeach quarter, keeping track with the CPI.

The rebate for generic drugs, of whichthere are no antiretroviral drugs in thiscase, is 11 percent of AMP; the 340B

discount price is simply AMP minus thatrebate amount.

Slide 2 is an attempt to make things alittle simpler to comprehend. When youare direct purchasing, that price is goingto be the bottom block of the figure. This

is a hypothetical drug that costs US$100at AWP. I say it is very hypothetical in theantiretroviral drug business because wewould love to see a US$100 drug, andthere is nothing anywhere close to that.The AWP is the retail, or list, price. Thefigure shows a discount. The pharmacydoes not get the full amount as discounted.In this case, the example was discounted10 percent. The next amount goes to thepharmacy and the wholesaler; it is theircost of doing business, for taking possessionof the drug and moving it to the pharmacy;and to the pharmacy for handing it to theindividual, and all of the counseling andhandling costs involved in that. The nextpiece comes back as a rebate. But the amountof money going to the pharmaceuticalcompany is really US$68 in this hypotheticalsituation. That is important, because wetalk a lot about drug pricing but it is veryconvoluted, and the price that you see orthat we are even able to talk about is notnecessarily the price that anyone is paying.Joshua Cohen alluded to this issue in his presentation (see “Untangling theEconomics of Drug Pricing,” pages S23-S28).

New York State’s ADAP pays AWPminus 12 percent to the pharmacy. This isthe same rate that Medicaid pays. If anADAP were to purchase drugs directly,we could take out the cost of the rebate,the discount to the pharmacy, the pharmacywholesaler amount, which is their cost ofdistribution, and their profit margin, plusthe potential for additional price concessions.There is a difference between this price,

Slide 1. Slide 2.

If an ADAP were topurchase drugs directly,

we could take out the costof the rebate, the discount to

the pharmacy, the pharmacywholesaler amount, which istheir cost of distribution, and

their profit margin, plus the potential for addi-

tional price concessions.


which is closer to the net cost, and anAWP minus 12 percent price, which iswhat you would see in government data.

There are variations in price increasesfor individual drugs. You have got theslow steady creep of zidovudine (ZDV). Itis the turtle in the race. The company thatmanufactures this drug takes regular priceincreases, lets inflation grow, and takesadvantage of that CPI penalty or makessure that there is always headroom so itcan grow. When efavirenz (EFV) enteredthe market in 1998, we had a problem. Itwas priced substantially higher than otherdrugs. It set a new pricing point. The onlydrug that has broken from that trend isemtricitabine (FTC), for which we areseeing cost parity because it has essentiallythe same effectiveness as lamivudine(3TC).

Whenever we have a new drug breakingnew pricing points, it has a negativeimpact for payers for the next round ofdrugs coming through the pipeline.Besides some of my other problems withritonavir (RTV), it really affected thescale. Again, in a similar scenario, we hadconsistency on pricing for quite a while.Then enfuvirtide (ENF), admittedly a newclass of drug, was introduced, but followingthat there was a new price point; and theprice points are coming up further. Forfosamprenavir (FPV), in fairness, a boosteddosage is about half the amount of anunboosted dosage, but we are still tryingto see what the mix is going to bebetween boosted or unboosted dosages.The big issue is probably the substantial

difference in many cases between theactual cost and the public price. There is asubstantial difference between what itlooks like we pay and what we actually dopay.

Slide 3 shows the average total month-ly cost of antiretroviral drugs per user, andhere we have a very clear trend. It is gen-erally a result of more drugs being used incombination. Plus, there are newer drugscoming in, and those new drugs tend to behigher priced, despite the efforts we maketo keep prices down. It is also due to regu-lar price increases on the part of mostpharmaceutical companies. It is gettingmore expensive to keep a person on anti-retroviral therapy.

There is an ancillary cost as well withantiretroviral drugs, which is treating thetoxicities and side effects. For example, inSlide 4 we took a basket of drugs that weassumed would be primarily used to treatthe side effects and toxicity of antiretrovi-ral therapy. You have a big jump in 2000because we added new categories that wehad not added in the past. By 2000, werealized that we were absent some classesof drugs that are needed to adequatelycare for someone with HIV in the longerterm. Relative to the actual cost of anti-retroviral drugs per month, it is not a largeamount, but it is a cost that is growing andit is part of the cost of treating HIV/AIDS.

Looking at New York State’s ADAPcosts by quarter from 1996 through 2004(Slide 5), the nucleoside reverse transcrip-tase inhibitors (NRTIs) are still the majorcost component. The protease inhibitors

(PIs) are still the second largest. Non-nucleoside reverse transcriptase inhibitors(NNRTIs) and the new category of fusioninhibitors are third and fourth, respectively,in terms of overall spending on antiretroviraldrugs. All of the other drugs, and NewYork is lucky to have about 450 drugsother than the antiretroviral drugs on itsformulary, make up a relatively small part,about 14 percent of total cost. Again, Iblame RTV for messing up my charts onaverage price increases here. We went intocost containment mode the first quarter of2003 while we tried to get some moremoney, and we were fortunate that we did,largely from the New York State government.But it really did not have much impactsince we could not have any control overthe antiretroviral drug end of things, so wehad to take the money out of the other drugs.

Clearly we have a growth trend here thatis somewhat overwhelming in a relativelyclosed system such as ADAP. New YorkState’s ADAP, unlike most other ADAPs,also has several other components.ADAP-Plus pays for ambulatory care,medical visits, and lab tests. We have ahome care component, and we haveADAP-Plus Insurance Continuation(APIC). We do try and keep people in theprivate sector by helping them pay fortheir insurance premiums whenever possible.We did get some savings on home carefrom 1996 onward when antiretroviraldrugs came into play, and we saw a dramaticdecrease in home care, but there was littledecrease in costs because home care was asmall fraction of overall cost. Ambulatory

Slide 3. Slide 4.


care has more than doubled—it is abouttwo and a half times what it was, but thebulk of that cost is drugs, and the bulk ofdrug cost is the antiretroviral drugs. So, ina system where we are looking at primarilyoutpatient care, all we see are increasingcosts year after year, month after month.

In New York State, Medicaid pays forthe inpatient cost for their patients, andgenerally for the ADAP patients as well,because by the time they go into inpatientstatus Medicaid will kick in for them. Wecan see some of that cost effectivenessthat was discussed earlier. In Slide 6 wecan see that total Medicaid cost for AIDSdropped from 1994 to 1997 and then startedto level off until 2001 when it started toincrease again; this is the last year forwhich I was able to get data. The onething that I have to point out is that costsdropped from 1994 to 2001 by aboutUS$200,000 a year. Medicaid’s antiretroviraldrug bill went up by about by aboutUS$500 million in that same time period.Even though they were saving US$200million in one place, they were still accruingabout US$300 million more in HIV costsat this point, so it is not a net savings, it isa net loss that we are dealing with forgovernment.

It is becoming a harder sell to keepHIV-specific and -related drugs exemptfrom cost containment measures.Fortunately, our trump card is thedecrease in AIDS deaths in New YorkState from 1990 to 2002. That dramaticdecrease in deaths that had started occurringin 1996 and 1997 has somewhat leveled

out now. The result of that decrease, ofcourse, is more people living with HIV—they are living longer, better lives. Whatyou are seeing is that because there aremore people now living with HIV andrequiring ongoing care and treatment, weare accumulating more and more costs.

So, what is the impact on governmentand patients? Increasing ADAP andMedicaid costs came at a particularly badtime over the last few years. Both the fis-cal situation in this country, and the econ-omy, have not been good. States are suf-fering a great deal, and it is being reflect-ed in how states are dealing with theirADAPs and Medicaid programs. There isan indirect cost on government throughrising health insurance premiums. Michael[Allerton] will deal with that in more detail, Iam sure. But from a government perspec-tive, we are seeing individuals losing theirprivate insurance. They can no longerafford to pay those rising premiums, sothey are turning to the state programs.There is also a rising cost to governmentfor our own employee health costs, andthe impact ultimately on the patientscomes by way of the cost containmentmeasures that are being imposed.

Medicaid is focused on generic substitu-tion, preferred drug lists, prior authorization,and reduced pharmacy reimbursement rates.They are trying to squeeze the pharmaciesand, ultimately, they are also trying tosqueeze pharmaceutical companies withsome supplemental rebates by using preferred drug lists. We are very fortunatein New York State; we have probably the

most stable ADAP in the country. Whenwe went into cost-containment mode in2003, it was around mandatory generics, alimit on the number of refills before theperson has to be seen again and issued anew script, prior authorization on selecteddrugs, and replacement of high-cost drugswith lower-cost alternatives. We reducedthe amount of Ambien® people could get,and they screamed more about that thananything else. We were very fortunate thatours was more of a tightening rather thanelimination. Other ADAPs are muchworse off, with capped enrollments andwaiting lists.

We are probably going to find that theJanuary 2004 number of 791 people onADAP waiting lists that José [M. Zuniga]referred to earlier is going to be the lowestnumber we will see for a long time. Statesare moving to reduce financial eligibility,imposing restrictive medical criteria, andreducing formularies. I think the mostdramatic example of that is New Jersey,which had a full formulary in March2004. On April 1, 2004, that state’sADAP formulary was downsized to onlyantiretroviral drugs… So they went fromabundance down to a very minimal formulary for treating HIV. We are seeingmonthly limits on the number of prescrip-tions allowed, or the cost per participant.That cost per participant is a particularproblem when the drug prices go up,because the cost per person has to be cal-culated at the front end of what is beingpaid at the pharmacy, not at the back endof what is the net cost for the pharmacies.

Slide 5. Slide 6.


When you use cost containment like that, itis not really fair to the individual patient.

There are some major problems withcurrent government pricing systems. Wehave a fragmented system with discretepricing schedules for the various governmententities. It is secretive pricing, and it isprotected by law. State officials cannotgive you the exact price that we are paying.We cannot even know sometimes whetherthe price that we are paying is the correctprice. There are loopholes in the governmentpricing protections. The CPI penalty thatcomes into effect if drug prices increasefaster than the rate of inflation goes awayif there is a new formulation of an existingdrug. If the new formulation gets a newcode, it starts from scratch and we areonly guaranteed that 15 percent rebate. Sonew formulations, while a really goodthing from a clinical perspective, are notnecessarily such a great deal for us from a payer perspective, and we find the phar-maceutical industry blocking any legisla-tive attempts to reform pricing.

I am very glad to be here with you, andwith IAPAC today, to discuss what I hopewill be some ideas. There have been someefforts on the part of government and thecommunity to partner around drug pricing.The Fair Pricing Coalition is a coalition oftreatment advocates and government payers,which engages senior management ofpharmaceutical companies in pricing discussions. The primary focus has beenon initial pricing of new drugs and onrequesting price freezes from industry.The ADAP Crisis Task Force, which wasformed last year, represents 10 ADAPs orAIDS Center Directors, reflecting 70 percentof the buying power of ADAPs. We nego-tiated pricing concessions with all of theantiretroviral drug manufacturers. We cal-culated US$60 million to US$65 millionnationally in savings for ADAPs in thatfirst round of discussions. All ADAPsbenefited equally, even though there wereonly 10 ADAP representatives in theroom; one of our major points was that allADAPs will get a share of the savings. We

Honoring Our Heroes 2004

November 1, 2004 Washington, DC

coordinate efforts with the Fair PricingCoalition and other advocacy groups, and weintend to continue to expand our efforts tosecure the best possible prices for ADAPs.

You have seen a lot of concise, scientificinformation about cost effectiveness andquality years of life. Unfortunately, when youare working in government, sometimesthe people who are making decisions areonly seeing my charts with the big growthlines and the increasing bottom line forgovernment agencies, and that is a problem.It is really dependent upon physicians andtreatment advocates to make sure decision-makers get the full picture, but you mustrealize that often they are looking from avery limited perspective, bottom line taxdollars. How much can we raise taxes andget away with it? How much do we haveto cut in order to maintain government asit is? We must play a role in helping themto see the bigger picture. ■

Lanny Cross is Program Manager of NewYork State’s AIDS Drug Assistance Program.


Michael Allerton

hank you for inviting me tojoin you today.

This presentation willtake an operational approachto care provision. What Imean by an operationalapproach is that I want to

talk about what I refer to as “being caughtbetween a rock and a hard place” in the clinic on a daily basis. This is not apolicy talk in strictly those terms. It is anoutcomes-focused talk based on what Iam hearing from our providers and my colleagues in the field. Then in closing Iwould also like to highlight two ethicaldiscussions we now are undertaking thatwe never had to undertake before. Theyare very disturbing, and one of them really

relates to the discussion so far today. Theother one is sort of “out there.” When Ifirst talk about it you are probably goingto wonder, “how in the world does thatrelate,” but bear with me and I will bringit back to how it relates to this discussion.

I am not a bean counter. I am anadministrator, however, the second wordin my job description, approved by ourhuman resources department, is “ethical,”the first being “provide”—“provide ethical…” in other words. So, I am notcompensated by how much money I savemy company. I am responsible for develop-ing appropriate outcomes- and evidence-based procedures for providing optimalcare to our HIV-infected population. Ireally do see myself as an HIV patientadvocate that is in the private sector. Thatis often misunderstood.

I want to give you just a little exampleof the frustrations that those of us atKaiser Permanente sometimes have interms of misperception of who we are andwhat we do. I am going to go throughsome demographics and backgroundabout the program, but I just wanted torelate to you a story that helps illustratesome of the perceptions about our group. Ido not relate this story with any intent todepict any specific organization. I onlysay, “relate this story,” to demonstrate theperception of the individual who was sayingthese things to me—not necessarily theviews of whom she represented, but herpersonal opinion and perceptions.

The story is this: I was very lucky inJanuary 2001 to be a civil society delegateto the United Nations (UN) for the UNGlobal AIDS Response to HIV and AIDS.



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Defining the impact of AIDS drug pricing on the private

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As a civil society delegate, I was a consultantrepresenting Kaiser Permanente, and Ioffered services to the UN on the part ofKaiser Permanente, but there was somethingvery interesting that was different aboutthe United States’ representation at theUN versus all other countries. All othercountries except the United Statesenrolled their civil society members intotheir UN delegations. The United Statesdid not do that, and we only had onemeeting with the US delegation, whichwas held here in Washington, DC, at theUS Department of State. It was actuallypretty far into the discussions, and becauseit is the US Department of State, we hadto offer our Social Security numbers andour addresses, so I am sure there wassome sort of security check and someknowledge base of who we were. I walkedinto the US Department of State and intothis meeting to understand what the col-laboration between the US Mission andthe civil society delegates was going tobe, and a public affairs representativefrom the US Department of State came upto me, shook my hand and said, “Mr.Allerton, you are from Kaiser Permanente.We are so glad to see industry representedat this.” I said, “Well, what do you mean?”She said, “Well, were you one of the delegates that was recruited by…” andthen she named a major pharmaceuticalcompany. My first reaction was, “No, I am surprised. I did not realize that company was negotiating to have civilsociety representation at the UN.” Shesaid, “Well, I am very concerned that the

delegations will be overtaken by advocates, and that the importance ofbusiness will not be understood.” I said,“Well, you have to understand that I comefrom Kaiser Permanente. We are a not-for-profit prepaid health plan.” Herresponse to me was, “Oh, come on, yousell insurance.” Well, we do not sell insur-ance. I do not sell insurance. I am part ofthe Permanente Medical Group, and Ithink that is a good example of the misunderstanding of the not-for-profit private sector.

I have spoken to colleagues who are inBlue Shield, which in California is also anot-for-profit, and we have some of thesame difficulties. I cannot speak for thefor-profit industry, and it would be interestingto see what their perspectives would be,because I am sure theirs might be a littledifferent from mine. This example wasjust my way of qualifying what KaiserPermanente is from a personal level, andexplaining the frustrations regarding someof the common misunderstandings. I hopethat helps to provide some perspective as Icontinue.

Kaiser Permanente is a national medicalcare program. We are in nine regionsacross the country. Most of my statisticsare going to be combined for northern andsouthern California. The set-ups areslightly different in some of the otherregions, but overall we provide care forover 8 million members and 14,581 ofthose are HIV positive… The averagelength of time those individuals have beenin the health plan is eight years prior to

diagnosis. So, we have a very stable popu-lation and they tend to stay with KaiserPermanente. They tend to be very satisfiedwith Kaiser Permanente and the quality ofcare that they get, so we have very goodlongitudinal data for outcome measuresand research purposes.

I am from California, and I am goingto talk about California and some of theunique things that have happened there inthe last few months. It is important tounderstand that the total HIV patient population is just under 10,000, but if youlook at the total California membership,we have a seroprevalence rate of 0.16 percent; that 0.16 percent of our total patientpopulation accounts for our second highestpharmacy cost, second only to depression.With costs like that, we are going to beconcerned.

I do not have to preach to this groupabout the benefits of therapy, but I thoughtit would be interesting to look at just ourspecific population. Slides 1 and 2 showjust the northern California populationdatabase registry results. As you can see,we have certainly had the same markedbenefit of antiretroviral therapy that hasbeen seen everywhere else, both in termsof viral load suppression and immunereconstitution. Viral suppression is probablyone of the most amazing pieces. You seehere measures for viral load suppression.The viral load under 500 copies/ml iswhat was used as a measure until 1998,because that was what the levels ofdetectability were for the first few years ofthis evaluation. The reason why the dark

Slide 1. Slide 2.


diamond bar goes much farther below 500copies/ml at a certain point is that in 1998we changed assays and were able to gobelow 500 copies/ml as a detectable level.

Another amazing statistic from KaiserPermanente is that the mortality rate ofthe HIV/AIDS cohort has been less than 1percent per year for the last six years, andthat mortality statistic includes all fatalities,so some of those individuals were killedin car accidents or died of heart attacks,etc. Another statistic that I think is alsoextremely important is that in northernCalifornia, viral load is below levels ofquantification for 72 percent of all of ourmembers who are on therapy. I think thatit is very clear that highly active antiretro-viral therapy (HAART) is high-cost butextremely high-benefit for our members.But given that it is high-cost and high-benefit, we have three major concerns.First, how are quality and efficacyassured? Second, how do we maintainnumbers like that? And, third, ultimatelywho pays?

I am going to answer the third questionfirst. Obviously, private purchasers, entitlements, and AIDS Drug AssistancePrograms (ADAPs) pay, but I want to talkabout some unique aspects of each ofthese. Increasing numbers of private purchasers over the years have institutedcaps and limited pharmacy benefits. It is really important that people understandthat this is purchaser driven. KaiserPermanente does not decide how much weare going to pay, it is the purchaser whobuys Kaiser Permanente as insurance thatdictates to us more and more that therewill be high caps and high co-pays. Whatwe are seeing is that there is an increasedneed and demand for new product lines.Those new product lines mean we need toreach and provide coverage for the young,healthy individuals, and they do not wantto subsidize everybody else. I firmlybelieve that this is going to backfire in afew years.

For now, anyway, we have plans thatare being paid for by purchasers such asBank of America, Wells Fargo, and GeneralMotors. They buy health insurance or pre-miums through us with, for instance, max-imum drug coverage of US$1,200 toUS$2,000 a year, or US$50 co-pays to theemergency room, or US$200 a day co-pays for hospitalization. These plansare very attractive to that young, 20-some-thing family. But I think the first time that

family, which may now believe that theirhealth is benefited more by their member-ship in a gym than their membership in aninsurance program, is going to be sorelywoken up is when they have an infantwho is born with a heart defect and needsopen-heart surgery, and they are going togo bankrupt because they will not haveinsurance. The headlines are going to say,“Kaiser Permanente refuses to do openheart surgery.” But the reality is that theyor their employer have not purchased aplan that is going to cover that possiblemedical crisis. The demand for these newproduct lines is very disconcerting to me.

Out-of-pocket expense caps are alsohappening. There is a sort of middleground. You only have US$2,000 worthof medication coverage, but if you spendUS$5,000 out of your own pocket, thenyou go back to having drug coverage. Sothere is a maximum out-of-pocketexpense for some of these plans that, ifmet, leads back into the insurance coverage.Where that is a real problem is within theADAP. I firmly believe that in the publicsector an ADAP patient tends to stay anADAP patient, and in the private sectorpeople rotate through ADAP. They are init, they are out, they are in, they are out…I will speak about the problems with that scenario soon.

Issues with Medicare, Medicaid, andmedical Supplemental Security Income(SSI) were significant for us this year.

Many of you know that Medicare does notreimburse for name-brand drugs. Theyhave carved out life-saving drugs such aschemotherapy, but they have not carvedout AIDS drugs from that exclusion, andthis is very important. It is very ironic thatour oncologists, when they hear this, arevery supportive of the HIV providers.They say, “Antiretrovirals have a bettertrack record than chemotherapy agents.”But we continued, even though there wasno reimbursement for name-brand drugs,to reimburse them until January 1, 2004.Just from a competitive standpoint, we could not continue to do what nobodyelse was doing, so as of January 1, 2004, allof our Medicare and SSI patients lost anykind of name-brand drug coverage for HIV.

To cope with this, we did some proactive planning. We knew that at anygiven time, we have a number of patientswho are enrolled in ADAP. We knew that there was going to be a suddenincrease in those patients who are eligible for and require ADAP assistance,and so we hired some temporary casemanagers. Through pharmacy records,they identified those individuals, about500 in the State of California, to makesure that their paperwork and everythingwas completed in time to enroll in ADAPstarting January 1, 2004. At exactly thesame time, the new Governor of California,Arnold Schwarzenegger, announced theproposal to freeze all new ADAP enrollmentsstarting January 1, 2004. So we were caughtagain between a rock and a hard place.

The main ADAP stability issue, ofcourse, is whether it is going to be there,and whether it is going to become capped.In California, we had slightly under 2,000people living with HIV/AIDS, or 20 percent of our members, enrolled inADAP in the fourth quarter of 2003.Approximately 500 new enrollees wereeligible January 1, 2004, because of thegeneric versus non-generic exclusion.Now 791 patients nationwide (or at least wekeep hearing the number 791) are on waitinglists. Had Governor Schwarzenegger’sproposal gone through, we would haveadded 500 to that number just throughKaiser Permanente’s health plan member-ship in California alone.

I think the stability of ADAP is veryimportant. It is also extremely importantfor the private sector to remember that itis not always the same 20 percent. Thatrotational issue has a profound impact on

Now 791patients nationwide

(or at least we keep hear-ing the number 791) are on

waiting lists. Had GovernorSchwarzenegger’s proposal gonethrough, we would have added500 to that number just

through Kaiser Permanente’shealth plan membership

in California alone.


day-to-day operations. Our case managersare telling me that they used to spend timewith our clients and our members talkingabout adherence strategies, developingpill-taking methodologies, and loadingtrays. They now spend the majority oftheir time just trying to find out wherepatients are going to get their drugs. It is adifferent role for them than what theywere originally hired to fulfill. Also, theissue of whether there should be a freezeon new enrollees in ADAP is going tomean that a lot of patients are going todrop out of, forgo, or abandon other coveragejust so that they will not lose their slot inADAP, which ultimately will cause thecost of ADAP to go up.

Now, I would like to tell you a little bitabout our model of care, and how qualityand efficacy are assured. We do not talkabout the best bang for the buck, we talkabout the best bang for the pill, and howwe can assure the most appropriate utilization of the drugs that we prescribe.The knowledge and abilities of careproviders for HIV is a critical component. InCalifornia, we defined an “HIV specialist”for our organization long before theAmerican Academy of HIV Medicine(AAHIVM) came up with their definitionfor the United States, and ours was actuallymuch more stringent. The AAHIVM’sdefinition is actually quite thin, so oncethe AAHIVM came up with a definition,all of our HIV providers immediatelyqualified.

We defined HIV specialists, and wemoved our care of HIV patients to specialists. One of the ways we did that isa gate-keeping mechanism around the initiation of therapy rather than arounddrugs. A pharmacy will not fill an initiationof antiretroviral therapy unless it is writtenby one of our HIV specialists. The concernhere, of course, is that a general internistwho may be working out in The Valley,and may have had one or two HIV patients,could be reading that the most effective newdrug is enfuvirtide (ENF). We certainlywould not want them to initiate therapy ona new patient with ENF. Although thatwould likely not happen, we certainlywant to make sure that something similarto that does not happen, thus the heavyreliance on HIV specialists as we definethem. Kaiser Permanente in California isreally the HIV specialist model. We nowhave 88 certified HIV specialists in northernCalifornia by our criteria…

We also do heavy monitoring. One ofour quality control measures is CD4counts and viral loads on an ongoingbasis, basing the frequency of those tests onclinical guidelines. We also do resistancetesting for initiation and for any change intherapy. Again, part of the reason we relyon the HIV specialist is to interpret thosetests.

What are the implications for physiciansand members? I would like to give you ananecdote. In an earlier presentation todayyou met an HIV patient named Bill. Iwould like to introduce you to Sarah.Sarah is a 63-year-old female. She wasinfected by her husband, who was infectedby a blood transfusion given to him during atotal hip replacement. She is an ADAPpatient. She is a Medicare patient. She isnot Medicaid eligible because she has anIndividual Retirement Account (IRA) andthe amount of that is too great for her toqualify for Medi-Cal, which is what wecall Medicaid in California. She has beenin our Medical Financial Assistance(MFA) program for six months—this is aprivate charity that is within our organization.The social workers and case managershave access to MFA funds to help patientswho get caught in situations where theycannot afford their care. In the past, it wasused for things such as durable medicalequipment, but now it is being used moreand more for pharmacy. Sarah exceededthe limit because MFA is only eligible toa member for six months, and she was onit for a full six months. Her AIDS drugsare covered completely by California’sADAP, but she and Bill are good examplesof people with co-morbidities. She alsohas significant cardiac problems and noneof her cardiac medications are covered atthis time. These medications were beingpicked up by MFA, but now they arebeing paid for by her church. It was thesocial worker who went through the gymnastics of finding a charity like herchurch to get those drugs covered. Again,it has a real operational impact becausethose people are best employed workingwith our members around other issues,rather than trying to make phone calls tofind dollars.

Another impact is that although thecost of drugs is not a factor integrated intothe clinical guidelines, adherence and theability to adhere is part of the clinicalguidelines. I am hearing more and moreconcern from providers about initiating

therapy that will then have to be stoppedbecause of cost factors that are beingborne by the member. An example thatwas given to me by one of our physicianswas of a hypertensive diabetic patientwho, every December, stops taking hishypertension medication and his diabetesoral hypoglycemics because his propertytaxes are due. He knows that once he paysthe property taxes in January or February,he can start picking up his medicationagain, or otherwise he will try to spread itout during that period of time and make a30-day pill supply last 60 days by taking hismedication every other day. If a physicianhas the idea that an HIV patient might be thinking of this strategy with his/herantiretroviral therapy when Decemberrolls around, I can guarantee you that, iftruly qualified, that physician will not beprescribing antiretroviral therapy, becausethe consequences of interrupted therapynot only for the individual but for the public health are significant.

One of the reasons I stress the fact that72 percent of our patients on antiretroviraltherapy have undetectable viral loads isthat it has an impact on transmission. Sowe are not only talking about the qualityof life of the individual, we are also talkingabout arresting the epidemic throughmedication. I have already mentioned thatthe case managers and other allied healthprofessionals are spending more and moretime dealing with these issues, but I thinkit is only going to get worse. I have a coupleof ideas for solutions; they are perhaps notsolutions, but they are things that we havedone with success.

One is certainly clinical trials. Clinicaltrials have been a boon to our pharmacycosts. We do a significant amount of clinicaltrials in California. We were five of theENF clinical trial sites in northernCalifornia. What that meant was that ourfive medical centers that were ENF clinicaltrial sites were disbursed geographicallyenough that every health plan member in northern California had access to the then-investigational ENF. That benefited us because we got that drugfree, and the patients who needed it andmet the criteria got that drug free, andthey got it earlier than they would haveotherwise. Their cost savings continuedbecause even after it was US Food andDrug Administration (FDA)-approved, wewere getting free drugs for a period oftime. That was a short-term cost offset


that was very beneficial. The downside,however, is that we have never recoveredour cost of clinical trials, outside of pharmacy costs. There are costs for justthe FDA regulation and management ofthe records and the clinical trial nurses.Some of you who do not live or practicein California might be surprised to knowthat a Clinical Trials Registered Nurse(RN) in the San Francisco Bay area —because of skill, demand, and union contracts — makes more than a generalinternist in many other parts of the country.When pharmaceutical companies come tous with an operating budget that is basedon a national average of cost per full-timeequivalent (FTE) for an RN, we neverrecover those costs, not in California anyway.

The other piece is treatmentInvestigational New Drugs (INDs), whichare certainly a boon to us, but again, the time commitment of providers ontreatment INDs is significant. The cost togo through the Internal Review Board(IRB) is not insignificant, and is not usually thought of as a direct cost. I sit onthe IRB, so I know what we have toreview, and the cost for us to do thosereviews is not insignificant.

The last thing that I want to mention asan idea for a solution, is something that Ihave already seen right here through thistreatment coalition that is gathered. I amreally glad to see you folks, but I must saythat I am definitely not a person whoopenly advocates civil disobedience, especially having once been handcuffedby ACT UP. I definitely do not advocatecivil disobedience. However, I have to tellyou that there is a significant role in advocacy today, and in conveying strongmessages. In 1996, when viral load testswere not yet FDA-approved, our NewTechnologies Committee was absolutelyadamant that they would not cover viralload testing when it was becoming thestandard of care on the West Coast. It wasnot an issue on the East Coast, ironicallyenough. It was, however, a major issue onthe West Coast. Our New TechnologiesCommittee changed their minds the dayafter ACT UP delivered coffins to theKaiser Permanente Board of Directors. Ithink that is quite an interesting little com-ment on the juxtaposition of an activityand then a change of heart, so my biggestconcern is the visibility of the advocacyeffort and where it is these days.

I mentioned two ethical questions thatare being posed for us on the horizon. Thefirst one is: “Adverse selection, and is thatan issue?” The second one is: “What isthe moral imperative for post-exposureprophylaxis (PREP)?”

I was asked this question just the otherday by one of the providers: “Have wereached a point where it is no longersocially acceptable or economically viableto do the right thing?” What did he meanby that? I have already told you that wecovered the name-brand drugs for a yearlonger than they were reimbursed, that wehave MFA so that patients can get theirneeds met. We also have case managerswho break their necks on a day-to-daybasis to find out how patients are going toget their coverage. We feel that we have amoral obligation to those health planmembers who have HIV, to make sure thatall their needs are met, but since we dothat and nobody else does, when the playingfield is not level we may not be able tosustain economic viability if we continueto do many of these things. Where doesthe social acceptability come in? InCalifornia, we had a multiple month strikeof one of our major purchasers, the groceryclerks in southern California, who wantedcheap, affordable healthcare. They do notwant to accept carrying the costs of asicker population. They want the ratingbased on their own utilizations. We aregetting pressure from both directions, andI think this is probably the most disturbingquestion I have heard in my lifetime atKaiser Permanente, that someone wouldactually think that we may have reached a point where it is no longer sociallyacceptable or economically viable to dothe right thing for our patients.

Now, let me discuss the ethical issuearound PREP. We know that one of themost important advances in curbing theAIDS epidemic would be an efficaciousvaccine. But in the absence of an efficaciousvaccine, other strategies are being examined,one of those strategies being microbicides.This is especially important when youthink about the disenfranchised femalepopulation on a global level that is at continued risk for HIV infection with no social ability to practice any kind ofsafety mechanism. So, in the absence of avaccine and/or a microbicide, the Bill &Melinda Gates Foundation and othershave said, “What if one of these antiretro-viral medications, taken on an ongoing

basis in low doses, would prevent infection?”It sounds wonderful, but I have to tell you there is a lot of skepticism, and thereis going to be a lot of fallout on an international level.

At the 12th World AIDS Conference inGeneva, a representative from the SanFrancisco Public Health Department presented a proposed study on PREP fornon-occupational risk categories, andthere was a flurry of negative, adversarial,downright confrontational questions thatcame from other parts of the world. Thequestions were along the line of: “We aretalking about a non-occupational exposureand providing drugs to individuals in awealthy environment who do not have thisinfection, when the vast majority of theworld which does have this infection cannot get medications?” Now the argumentmay be made that if we sell more of thesedrugs in the United States, pharmaceuticalcompanies may have more resources togive lower prices elsewhere. There is not anygiven answer to this, but the whole issueof providing pills, at least in this country, toan uninfected population whose memberscan prevent infection by other means,when this medication is not available toHIV-infected people in other parts of theworld, could have tremendous fallout.

These are the sorts of conversationsthat are being undertaken today and willbecome even more important in thefuture. There are a lot of skeptics. Thefirst thing one of the physicians at theGeneva conference that I referred to saidwhen he heard about PREP was, “My,what a way to sell more drugs. This mustbe sponsored by a drug company.” Ofcourse, he is much more cynical than I.But, again, I think that is one of the issuesthat we have to deal with, and we wouldnot be having these conversations if thesepills cost the same as aspirin. Those aresome of the discussions that are happeningin the private sector, some of the dilemmasthat we are facing, and I really believethat it is only going to get worse.

Thank you very much for the opportunityto let me get that off my chest, and I reallyappreciate the honor to be able to be heretoday to with you and with the InternationalAssociation of Physicians in AIDS Care(IAPAC).

Michael Allerton is HIV OperationsPolicy Coordinator at the PermanenteMedical Group at Kaiser Permanente.


Benjamin Young

s a doctor and a member ofthe HIV treater community,I am truly privileged to behere; I am really quite hon-ored to be invited by theInternational Associationof Physicians in AIDS Care

(IAPAC) to speak on behalf of both mycolleagues and, more importantly, onbehalf of my patients. I want to point out,because we have some representatives ofthe pharmaceutical industry here, that mybeliefs on this topic have been labeled as“lunatic,” have been labeled as “fringe,” as“minority.” I would challenge you to con-sider whether these ideas represent the ravings of a lunatic, or if they shouldrepresent the mainstream opinion, or do

represent the mainstream opinion, of real-world HIV doctors. So on behalf of mypatients, again, I thank you for this platform.

I am going to frame our discussionstoday in a historical view, which is necessaryin order to issue a “call to action.” This isa discussion that is focused on the domesticproblem — a problem which, frankly,receives very little attention. We talk a lotabout global AIDS. We talk a lot aboutthe South African problem, the Botswanaproblem, the problem in South Asia, andthose are undeniably big problems. In allof the challenges of dealing with the globalAIDS problem, and, simultaneously, withall these successes that we have seen incare in the developed world, we haveallowed ourselves to think that the problemhas been licked. The pictures of peopleclimbing mountains, the pictures of Magic

Johnson, who looks terrific, who is terrific,mask or hide the magnitude of the problem.The problem is the nearly 1 million peopleliving with HIV/AIDS in North America,that in a sense I represent, at least half ofwhom do not have publicly insured mech-anisms for AIDS drug access.

Before this looks like some sort oftirade against the pharmaceutical industry,I would like to say I am also a member ofthe research collaborative called the HIVOut-Patient Study (HOPS) cohort. I amproud to share data that reflect how far wehave come in such a short period of time.This is from Frank Palella’s now very wellquoted research, which was published inthe New England Journal of Medicine(Slide 1). The research looks at the mortalityof patients with HIV in the United States.This is looking at patients with AIDS,



A

A physician’s call to action


actually a cohort of patients who had CD4counts less than 100 cells/mm3 at anygiven time. Back in the pre-HAART era,the pre-protease inhibitor (PI) era, or thepre-azidothymidine (AZT) era, the deathrate in this population was about 30 per100 person-years, and a crude statisticalversion of that statement says that about athird of the cohort was dying every year.

Something magical happened, ofcourse, to end that era. In those days, ofcourse, an HIV diagnosis was equivalentto having AIDS; you were inevitablygoing to progress to AIDS and weretherefore going to die. As everybody said,the expected survival was about threeyears. So antiretroviral medications in thatera in fact had very limited value. Therewas some debate, of course, over whetherthey were useful or not, and in that era in the United States, 30 percent of babies born to infected mothers acquiredHIV. Young fellows like me, at the time, became experts not in the treatmentof HIV per se, but the treatment of multi-drug resistant Mycobacterium aviumcomplex (MAC), multi-drug resistantcytomegalovirus (CMV), and multi-drugresistant candida.

Again, because of the investment ofmillions and billions of dollars, and theinvestment of hundreds of thousands ofpatient lives and hundreds of thousands ofinvestigator hours, the death rate changeddramatically, as shown in Slide 2. Thisfigure shows Frank Palella’s most recentfigures from the HOPS cohort. The numbershave changed somewhat because we are

not looking at just the AIDS patients; weare looking at the entire cohort. This figure shows all patients with HIV in theHOPS cohort. This represents about 7,000patients in eight cities, in 10 clinicsaround the country — an ethnically, demographically, and socioeconomicallydiverse cross section of the US population.This shows that the death rate hasdeclined. It has plummeted, and it remainsdown even up to the last quarter of 2003,and the use of highly active antiretroviraltherapy (HAART)—defined as a multi-drug, multi-class regimen—has increasedto a significant proportion of that patientpopulation. Deaths are down.

Slide 3 shows us that the rates of com-plication also remain down, despite thefact that preventive measures really havenot changed dramatically in this era. Medications and the investment ofpharmaceutical companies, the investmentof patients who volunteer for clinicalstudies, the investment of advocates whohave pushed us all for access to care andcheap medications, have accomplishedthis for us, and this is a tremendous evolution in the care and the prognosis ofthis particular treatment population.Another challenge is to realize that theseadvances have important implications forthe entire issue of drug discovery; whatwe can do if we simply apply force, if weapply will, and if we apply money. It is anincredible revolution. So, medicationssave lives. Investment in medications saveslives. Investment in drug discovery, invest-ments from advocates have saved lives.

The current armamentarium includes22 antiretroviral drugs; 19 distinct drugsand three fixed-dose combinations. It is anincredible tour de force, and complimentsto everybody who helped us get this far.The lives of my patients and the lives ofyour patients, the lives of your clients,your communities, and your customers allbenefit from this achievement. Thesenumbers just include drugs that have beenapproved since 1996, the dawn of theHAART era. In the future we will likelysee new co-formulated pills, new classesof medications, perhaps CCR5 entryinhibitors, perhaps a GP120 entryinhibitor, perhaps an integrase inhibitor.The point is that drug discovery will continue if we find ways to continue toprovide incentive for that.

We are also in an era where we aretalking about the potential for novelstrategies, and novel strategies are drivenin part by toxicity issues, but also in partby cost issues. I think it is important tobear in mind that those will also impacthow we approach treatment strategies inthe years to come. I would like to bringthis back to my hometown (Slide 4). InDenver, we currently have 8,000 patientswith HIV, according to data from theDenver Department of Public Health.Data show that we have saved over anestimated 2,000 lives out of the 8,000patients who are running around in ourstate right now. In our little town we havealso done a pretty good job of preventingmother-to-child transmission of HIV.There have been four babies born with

Slide 2.Slide 1.


HIV since the beginning of the HAARTera, and three of those babies were born tomothers who were diagnosed post-partum.In the case of the one baby who was born toa known patient, that mother was diagnosedin 1996, in the early AZT era.

What we can do if we get this right?We can save lives. We can improve qualityof life. We can prevent HIV infections.The stakes are not just profits. The stakesare not whether or not I get reimbursed.The stakes are lives, and that is somethingthat I think we should not forget. Whenwe talk about policy, when we talk aboutpayer mix, when we talk about fractionalshares of market, or new prescriptiondrugs; what we are really talking about iswhether people live or they die. In theHAART era, HIV does not mean AIDSand it does not mean death. The averagesurvival of a newly diagnosed HIV patientis probably calculated in decades, notyears. In fact, when I counsel newpatients, I tell them that they are going tolive for decades, live to be old men orwomen, live to see their children graduatefrom college, talk about retirement plans.Antiretroviral drugs, of course, in this erahave significant value, because we canprevent HIV and AIDS not just in theUnited States, but elsewhere.

Now we are experts not just in treatingcomplications of AIDS. Actually, I havenot seen a case of CMV in five years. So now we have become experts in managing antiretroviral therapy. Mortalityis down and, in fact, as was presented atthe 11th Conference on Retroviruses and

Opportunistic Infections (CROI), thecauses of death in our HIV populationhave also shifted from traditional AIDSdeaths to non-AIDS causes of mortality—cardiovascular disease, non-AIDS malignancies, liver disease. In my practice, the leading cause of death now issuicide because of my patients who havehad ongoing psychiatric issues, but notPneumocystis carinii pneumonia, notMAC, not wasting.

The problem, however, is that the newincident cases continue. On this issue, wehave not done a very good job at all. Infact, we have done a terrible job as providers,as educators, as industry, in preventingnew cases, because the message has beenforgotten. We have dropped our guard.We have become complacent with regardto HIV. We have become complacent withregard to prevention, and that means nowthat more women, more heterosexuals,more people of color, more people whodo not speak English are acquiring HIV,and that provides further challenges to usas a treatment community in providing careand access to care. As this demographicchanges, it becomes not just an interestingepidemiological point but, in fact, an ethicalimperative to address the concerns of thechanging demographics of our population.The consequence of this success in therapy,as Patrick [Clay] alluded, is that patientslive longer. That is a good thing, becausethat means we allow people to live lifewithout having HIV as the veneer throughwhich everything else appears. It alsocomes with some costs. The costs are

long-term treatment, long-term engagementwith medical care, long-term issues withlong-term toxicities, and the long-termfinancial and physiological costs of havingHIV and its therapies.

What we have seen in the last decade,which is about the period I have been providing HIV care, is an unprecedentedevolution, and arguably revolution, in thecare in the medical industry around HIV.Again, in Colorado we have, roughlyspeaking, 8,000 infected individuals.About 4,000 of these individuals are onantiretroviral therapy. Our AIDS DrugAssistance Program (ADAP) is bankrupt,with ever-increasing demands, with abouta 5 percent growth in ADAP requests peryear and flat funding over the last threeyears. A year ago we had zero patients onour waiting list; we now have 220 patients.Twenty-five percent of the people on thenational ADAP waiting list reside in mylittle state.

There are also challenges ahead. Thesechallenges present ethical, moral, andmedical issues for us, such as the ever-increasing prevalence of primary transmitteddrug resistance, an increasing prevalence ofpre-existing drug resistance, the increasingprevalence of resistance in patients who arealready under care. In my state, a decreasingamount of physician reimbursement hasled to the closing of three of our largefamily practices that provide specialtyHIV care.

So, what does the future hold? This isthe “call to action” part. My view of thefuture is that HIV and AIDS will ravage

Slide 3. Slide 4.


the developing world. If you want to visitSouth Africa and you want to go on safari,do it soon, because the face of southernAfrica, the face of East Africa, and theface of Asia will change irreversibly inthe decade to come unless we get off ourbutts. In fact, the differences between thehaves and the have-nots will only increasein the decade to come. In the developedworld, there will be more patients livingwith HIV, and the increasing frequency ofeither transmitted or existing drug resistance,and, therefore, there will be increasingand significant need for medical and medication support. Unless we get off ourbutts, these problems will not improve.

There are a couple of potential viewson the future of medications. I think medications will become less expensive,certainly AZT is going off patent, whichwill help in that regard. We are alreadyseeing a dramatic trend toward easier-to-take medications. I think new medicationshave made a significant change in mypatients’ ability to adhere to their regimens,and thus increased their quality of life,and I think that investment was worth thetime and effort, though maybe I am biased.However—this is the big “however”—Ithink recent price changes really challengeour resources and challenge the way thatwe must think about how we deliver carenot only to this population, but also toother patient populations. I do think wehave a dramatic problem with our publicpolicy at times, and sometimes that publicpolicy is downright irrational. Because ofthese issues, I think it becomes an ethicalimperative for us as physicians, whetherwe work in industry or the public sector,to consider the ethical principles involvedin these kinds of issues. I have been called alunatic because I think that there are ethicalprinciples that should guide opinion aroundthese points.

I do believe that we will see some ofthese new drug classes actually make it tothe market, and these will offer unprece-dented hope for patients who right now donot have hope. I think back to the 1997-1998 era, to patients who had multi-drugresistant virus and are now dead; onlywishing that they could have seen a glimmerof hope for some of these new medications.Once again, I value and welcome the supportfrom the pharmaceutical industry inbringing these new drugs forward.

I have alluded to this before, but I think that there will be new strategies to

administer therapy that will decrease total drug exposure and decrease totaldrug cost. Again, this poses some difficultquestions for the pharmaceutical industryin terms of creating an incentive for profit,but it also provides us a way of providingcare and access to care to people whomight not otherwise be able to afford it.Unfortunately, there will be no cure in mylifetime, and my fatalistic prediction isthat there will be neither a therapeutic nor apreventive vaccine in the next two decades.

We have to stop hoping for these kinds ofhandouts and start making some choices,or at least have a voice around thesechoices.

This “call to action” is based on theprinciple of an ethical imperative to savepeoples’ lives. Prevention strategies haveto improve. This means that the BushAdministration has to forget about theidea that condoms increase abortions, andthink about the ethical imperative that has been demonstrated in country aftercountry — that condoms and latex savelives. Latex prevents HIV, and this runscounter to the Bush Administration’shealthcare policy. This runs counter to theVatican’s policy. That must change, anddoctors have to stop being quiet andacquiescent on that point. This has been adiscussion that might otherwise seem tohave an anti-pharmaceutical industry slant,but continued investment and continued

profit for the pharmaceutical sector is thekey to further drug discovery, and that mustbe fostered in a way that is productive.

As physicians, we must begin to considerthe mechanisms for overcoming barriersto access to care. This is the key issue. Infact, access to care does not just meanmedications, it does not just mean condoms,it does not just mean latex, but it alsomeans appreciating the very complicatedissues of the political, cultural, and economicclimate in which all of this is delivered.Our failure to appreciate that during the13th International AIDS Conference inDurban, South Africa, contributed to thecontinued intransigence of the SouthAfrican government, preventing access tocare. If we get it right, we can do some-thing that is really unprecedented, whichis that we can save lives around the world.We might be able to change the way thatgovernments and cultures around theworld interact with one another. But doingthat is going to require unprecedented col-laboration between all sectors—betweengovernment and nongovernmental organi-zations, between community and industry,and between patients and doctors.

I think we are standing at the precipicewhere we might be able to do that. Ironicallyenough, this possibility may have beentriggered by Abbott Laboratories’ decisionto increase the price of ritonavir (RTV). Ina sense, we owe Abbott Laboratories a lit-tle scintilla of gratitude for catalyzing thatdiscussion.

It is an ethical principle based on ethicalimperative. I was very fortunate a weekago to get my 10 minutes of audiencewith Archbishop Desmond Tutu when hewas coming through Colorado lecturingon AIDS, drug pricing, and access to care.He articulated something that I would liketo use as a framework for thinking abouthow to move forward, and I am afraid Iwill completely destroy his words. But he talks about taking care of family.Family is not just your genetic family oryour first-degree relatives. Family is theentire planet. It is the entire community. I used to do a lot of volunteer relief work in Guatemala, and we talked aboutcomunidad, which does not just meancommunity, it encompasses a very largesense of caring both for people you knowand people you do not know. I would liketo pause at the idea that we must considerthe possibility of comunidad and family inour communities. HIV communities are

I happen to thinkthat the 220 or 250

patients in my state whoare on waiting lists to receive

life-saving medications do not think that the status quo is fine. I would encourage all of us to consider those eth-

ical principles. This is an eth-ical imperative and silence

is not acceptable.


defined broadly as industry, the government,the research community, the medical com-munity, the patient community, and theactivist community. The question reallyis, “If you view the other members of that community as your family, are thestrategies that you are developing consis-tent with how you would take care of yourgrandmother?” If the answer is yes, thenyou are proceeding on an ethically soundprinciple. If the answer is no, the nextquestion is whether you should reconsiderthat policy.

HIV patients are not patients who haveallergic rhinitis, and while the pharma-coeconomic principles that guide drugdiscovery often are used to explain pricingstrategies and discovery principles andother treatment niches, I do not thinkthose principles necessarily apply. HIV isa life-threatening disease. HIV therapiesin a diverse formulary for HIV medicationsave lives and clearly improve quality oflife. So the models have to be re-thought.We need to challenge the way that wethink about this, and I challenge the phar-maceutical industry to rethink, considerwhat we are doing here. Can we do some-thing which is proactive and creative, andwhich can actually change the entirehealthcare industry for the better?

I believe very strongly, although it isdebated, that access to life-saving care isnot just a good idea, not just somethingthat makes money, it is actually a humanright. That may seem a radical idea, but in fact it is not. Unless the idea isestablished in our principles that accessto care is a human right, guys such as meget labeled lunatics. I happen to think thatit is not a lunatic idea that access to careis a human right, and I would like tothink that physicians who believe so arenot lunatics and are not representative of the fringe minority. That said, accessto profit is probably also a right. If

you subscribe to capitalism as the engine by which we get new medications, theengine that stimulates discovery, then thatis an important right. But that right has tobe balanced against the other right, andthose are the difficult waters that we haveto traverse in order to come up with thepolicy that actually makes good commonsense, that will actually save lives andprevent patients in ever-increasing numbers from being on waiting lists forlife-saving medications in my state and,indeed, in this country.

In an incredible statement, a Senatorfrom my state who happens to be on theAppropriations Committee says that HIVpatients in the State of Colorado arealready getting more assistance than theydeserve. It is an amazing fact that peoplewho argue for access to care as a humanright get labeled lunatics, get labeled asbeing too personally involved in the care oftheir communities. This is not acceptable,nor is complacency. Complacency onlyleads to further prolongation of this problem,and the complacency of physicians willonly lead to further problems with accessto care, and to increases in the cost of care.It will jeopardize the possibility for futuredrug discovery, and most importantly, willjeopardize lives. We have already seenpatients on waiting lists in two states diewhile waiting for access to life-savingcare, a situation that is frankly unbelievablein this country.

Doctors have to be more involved andcannot just sit on their butts looking for ahandout. We are operating in the thresholdof the period where we must begin to consider the ethical imperatives and theethical principles by which we look at thisdisease and the communities we serve. Ibelieve this very strongly, and I think it isa very positive step for IAPAC and for theother care provider organizations to discuss the fact that physicians and other

healthcare providers have the moral obligation to become involved in thisissue. Silence is complacency. Silence isan acquiescence to the status quo, and ifyou like the status quo then silence is fine.

I happen to think that the 220 or 250patients in my state who are on waitinglists to receive life-saving medications donot think that the status quo is fine. Iwould encourage all of us to considerthose ethical principles. This is an ethicalimperative and silence is not acceptable.

Finally, I would like to tell you aboutmy dear and longest-living patient, Donny.I met Donny in 1995; if you remember thetimeline, this was right at the dawn of thePI era. He had progressive multifocalleukoencephalopathy when I first methim. He had a CD4 count of 30 cells/mm3.He had a son who was my daughter’s age.In fact, we are the same age. Donny nowhas a CD4 count of 700 cells/mm3. He ison a drug holiday. He is a success, by theway, of full-dose RTV therapy. He wasone of the first patients in the AIDSClinical Trials Group (ACTG) 315 study,and he is one of the many faces of HIVrepresenting both the successes of therapyand the challenges for all of us, becausehe has been homeless for most of thistime. I used to meet him under a bridge todo his pill counts, to make sure that hewas taking his medications. Once again,we talk about public policy, we talk aboutinvolvement, we talk about ethical principles,but ultimately it all boils right down to thefact that we are talking about peoples’lives; Donny’s life and many otherpatients’ lives, and their families and thecommunities that are affected by what wedo or fail to do. ■

Benjamin Young is a Clinical Instructor inthe Department of Medicine at theUniversity of Colorado Health SciencesCenter.

Jenny’s HIV diagnosis was confirmed shortly after shepresented in his clinic a month ago. He prescribed anantiretroviral regimen based on his firm belief that shewould derive both clinical and quality of life benefits.But within days Jenny was one of hundreds of patientson a waiting list to obtain her antiretroviral drugs throughAlabama’s AIDS Drug Assistance Program (ADAP)—one ofmore than 1,200 patients on ADAP waiting lists nationwide.

Visit www.iapac.org, to learn about how you may jointhe International Association of Physicians in AIDS Care(IAPAC) in advocating Jenny’s right — indeed, allpatients’ right—to quality HIV/AIDS care and support.

Silence = complacency

Documents

May 2004 VOL. 10, SUPPL. 1 - TheBody.com · An overview of AIDS drug access in the United States Christine Lubinski S15 Examining the pharmacoeconomics of HIV treatment Patrick G