The Right Price by Peter J. Neumann

Author:Peter J. Neumann
Language: eng
Format: epub, pdf
Publisher: Oxford University Press
Published: 2021-01-15T00:00:00+00:00

Indeed, ICER’s budget impact criterion played a key role in its 2015 PCSK9 inhibitor assessment. On the basis of cost-effectiveness, ICER had recommended that the prices of two new PCSK9 inhibitors should be reduced by 46% to 62% (roughly from $14,000 per year to $5,000–$7,500). However, on the basis of budget impact, ICER instead recommended a reduction of nearly 85% off the $14,000 annual price to roughly $2,200 per year. After several years of often-contentious negotiations with payers, manufacturers of the PCSK9 inhibitors agreed to lower their prices to about $5,900 annually, roughly mirroring ICER’s pricing guidance based on cost-effectiveness.29 To be sure, other factors (e.g., the ability of payers to restrict patient access to these drugs, lackluster sales, and questions about the impact of these drugs on long-term clinical outcomes) apart from ICER’s assessment played a role in drug company actions. Still, concessions by companies signaled ICER’s growing influence.

The idea of including budget impact as a component of a drug’s value-based price remained compelling to many audiences. After all, an expensive purchase, no matter how “great a deal” (i.e., no matter how cost-effective), forces difficult trade-offs and can perhaps make the buyer worse off. For example, acquiring a pair of Manolo Blahnik shoes for $500 is a marvelous bargain (or so this book’s authors have been told), but purchasing half a dozen pairs at that price is problematic because it would leave the daughter of one of the authors unable to pay her rent, and housing is even more important than footwear. (Her father, sensing her disappointment and feeling guilty about spending too much time at the office during her childhood, could “subsidize” the shoe purchase, although this happens only in an alternate universe. But we digress.)

Economists love to remind us that “value” is what you receive in exchange for what you give up. A cost-effectiveness ratio represents value because it compares spending (the incremental dollars in its numerator) to the acquired benefit (the incremental QALYs in its denominator). Because a budget impact calculation refers to dollars expended but ignores benefits received (excepting any cost savings from reduced use of health services such as hospital or emergency room admissions), it does not, strictly speaking, represent value.

But shouldn’t budget impact figure someplace in value considerations? If total spending cannot increase beyond a “cap,” any spending above this level means that some other spending must be foregone. The budget serves as a tool to force consideration of the tradeoffs involved in purchasing decisions. A new drug might seem cost-effective, but if it replaces other essential spending, it could decrease overall welfare. Put another way, a sufficiently expensive purchase of a valuable commodity can seem “cost-effective but unaffordable.”

New hepatitis C drugs presented a real-world example. Individuals with the condition often depend on government programs like Medicaid or the Veterans Administration for their medications. Because these programs cannot always easily increase their budgets, it follows that a large, new expense like Sovaldi and other antiviral drugs can lead to cuts elsewhere. As one

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