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McClellan Offers Ways To Avoid ‘Adverse Selection’ in Era of Personalized Medicine

WASHINGTON, DC — As advances in genomics and health information technology push the US healthcare system toward a more personalized model, the country’s insurance system will begin to disintegrate if left unchanged, former FDA Commissioner Mark McClellan warned last week.
The current insurance system relies on the redistribution of resources from low-risk patients to high-cost patients, but in the era of personalized medicine the issue of “adverse selection” – instances when insurance companies try to avoid covering sick, high-risk patients – “is going to be a bigger, not a smaller, problem,” McClellan said at a conference here hosted by the Personalized Medicine Coalition.
McClellan, now a senior fellow at the Brookings Institution and former administrator of the Centers for Medicare & Medicaid Services, advised that the best way to advance personalized medicine and simultaneously prevent adverse selection is by encouraging patient choice, incentivizing coverage of high-risk patients through risk adjustment, and practicing evidence-based medicine.
“We are going to need to rely on the expertise and the involvement of patients in designing benefits that work best for them if we want to fulfill the promise of personalized medicine going forward,” McClellan said.
“There is not a single benefit package that is going to work well for all patients. There is no single benefit package that any expert can come up with that is going to be able to keep up to date with all the treatment options that are evolving for patients. There is a real benefit from getting patients actively involved in making decisions about their coverage and making decisions about their care, based on their coverage.”
McClellan’s former employer is also giving the issue some thought. Last week, the HHS released a 75-page report, “Personalized Health Care: Opportunities, Pathways, Resources,” which briefly discussed how personalized medicine would demand changes in the insurance game.
According to the report, “as the healthcare system focuses on disease prevention and preemption through personalized approaches based on risk assessments, these advances will drive a need for new reimbursement strategies and other incentives.”
The advice in the report, which was also a mantra throughout the PMC conference, is the need for more evidence-based approaches to treating patients and developing drugs and devices.
“Personalized healthcare disease management approaches will be evidence-based. The advancements in health information technology, improvements in standardized phenotypic characterization of disease parameters, and increased understanding of unique biological factors responsible for individual differences in health and disease will lead to more informative clinical trial data,” the report stated.
“Over the next decade, the effects of these steps will result in better information about what works for which patient, which will not only strengthen measures of quality of care, but also improve efficiency in new product development and evaluation.”
The demand for evidence-based approaches in insurance coverage is already a reality as large insurers like Aetna are demanding additional clinical trial information confirming the economic and clinical validity of certain genetic tests. For instance, even though the FDA has approved a gene-based warfarin test for commercial use and updated Coumadin’s label with genetic testing information, Aetna has refused to cover it (see story, in this issue).
However, as payors’ evidence requirements evolve in step with rapid technological advancements in health care, some diagnostic shops have felt unfairly jilted by insurers. For instance, Aetna’s policy for Roche’s AmpliChip test would require Roche to perform controlled clinical trials to prove that the product will reduce adverse drug reactions. Aetna has also requested that Roche compare the AmpliChip, which interrogates CYP2D6 and CYP2C19 polymorphisms, with standard therapeutic drug-monitoring techniques.
In Roche’s view these evidence demands are excessive. One company official previously complained to Pharmacogenomics Reporter that payors are holding Dx developers to the same evidence standards as pharmaceutical companies, which may end up hindering the development of innovative tests [see PGx Reporter 04-25-2007].
However, according to McClellan, more rigor in evidence-based approaches is the only viable path toward personalized medicine. “Personalized medicine will require personalized evidence,” he said.
More and more pharmaceutical companies are trying to get this personalized evidence by incorporating genomics and molecular diagnostics in their drug development strategies. In this way, pharma is attempting to learn more about its drug candidates earlier to avoid late-stage attrition, segment clinical trial populations with those most likely to benefit and least likely to see adverse reactions, and identify biomarkers that are applicable in multiple disease populations.
For instance, Lilly has said it is committed to spending its intellectual and economic capital on PGx studies if they yield better therapies. According to one Lilly official, PGx technologies have become an integral part of Lilly’s overall R&D strategy over the past two years [see PGx Reporter 04-18-2007].
Additionally, drug companies are embracing the “nichebuster” model, where instead of investing large sums of money in one “blockbuster” drug for a broad population, the focus is on identifying biomarkers that target subpopulations in multiple disease markets [see PGx Reporter 03-28-2007]. Bristol-Myers Squibb, Novartis, and Pfizer have recently all unveiled plans to restructure their R&D setup to incorporate PGx tools and identify safety and efficacy biomarkers to develop targeted therapies.

“One of the problems you get into in competitive insurance markets is the problem of adverse selection. If you know there’s going to be high cost, then plans can make more money by trying to avoid those patients.”

However, the more industry moves toward developing personalized medicines of this kind, the greater the chance that insurers will move toward practicing adverse selection, according to McClellan.
“One of the real core challenges in public policy related to keeping benefits up to date, in getting patients involved, to get to personalized medicine, is that we’re also at the same time getting a lot better at predicting which patients are going to have high cost and which patients are going to have low cost and which patients are going to need certain kinds of services,” McClellan explained.
“One of the problems you get into in competitive insurance markets is the problem of adverse selection. If you know there’s going to be high cost, then plans can make more money by trying to avoid those patients.”
The solution, he said, is to change the insurance model in line with transforming drug development technologies. According to McClellan, one example lies in the incentive-based risk adjustment system built into Medicare Part D, a program he helped craft as former CMS administrator.
“In Medicare Part D we pay particular attention to placing incentives in place for plans to want to seek out and compete for the highest cost and highest risk patients. One way to do that, for example, is through what is called risk adjustment in payment systems,” he said. “In Medicare, if you are a drug plan, and you have someone who is 65 and healthy, that’s great, but we’re not going to pay you very much money for that because those people don’t need very many drugs and they are not going to have very high cost in Medicare Part D. In contrast, if there is someone with HIV/AIDS, or an 85-year-old person with four or five diseases, who has a nursing home level of frailty impairment and additional care needs, Medicare is going to pay you a lot more.
“[By] putting in ‘risk adjustment’ steps — so individuals based on their health needs can get more access to the kinds of coverage they need — you really get competition focusing on how do we deliver the best benefits and best care at the lowest cost, [and] we can avoid some of those big problems with adverse selection,” he added.
According to a survey of 16,000 Medicare beneficiaries conducted last fall by researchers at the Kaiser Family Foundation, the Commonwealth Fund, and Tufts University School of Medicine, more than 40 percent of Medicare Part D beneficiaries have three or more chronic conditions. More than 27 percent of seniors take seven or more prescriptions every month.
“The point of adverse selection is that as expenditures get more predictable, as they will with more personalized care, those problems, those stresses on the insurance pools, get bigger,” McClellan concluded.
“My point is that that’s not the end of the game. You shouldn’t just conclude from that [that] people can’t have choices about their care, because we need people to have choices about their care in their personalized medicine: what’s the best benefit package for you, what’s the best treatment for you, may not be what’s best for others.”

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