CVS Caremark’s foray into cost-effectiveness analysis raises questions about the future of prescription medicines in America

Americans spend more on prescription drugs than anyone else in the world. In a move to address this, CVS Caremark announced in August that it would allow self-funded insurers to exclude from their plan any drug launched at a price greater than $100,000 per QALY (quality adjusted life year).¹

A bold move in the shift to value-based reimbursement

CVS advertises its program as incentivizing pharmaceutical companies to lower launch prices, pointing to QALYs approaching the $300,000 to $500,000 range, a stark contrast to thresholds on medicine pricing in Europe ranging from $10,000 to $50,000/QALY. The policy will use analyses from the non-profit Institute for Clinical and Economic Review (ICER) but excludes FDA-defined “breakthrough” therapies.¹

A controversial announcement

Robert Dubois, MD, PhD, Chief Science Officer of the National Pharmaceutical Council (NPC), criticized the move as being “too much too soon” with the potential to “hamper patients’ access to needed medications”. He points to the many limitations of the QALY and endorses a wider value assessment framework that considers factors like the importance of high cost medicines for inadequately treated illnesses as well as secondary values like increased economic productivity of patients. Some of these are in line with considerations by European organisations like the National Institute for Health and Care Excellence (NICE). He goes further to criticize the threshold of $100,000 per QALY as arbitrary, preferring the approach of tying formulary tiers and co-payments to cost-effectiveness to make a broader set of medicines available.²

CVS executives hit back, pointing out that the steady increase in launch prices has contributed to the rise in cost per QALY.³ By emphasizing their policy’s potential to push pharmaceutical companies to lower prices, they shift the focus from problems with the cost per QALY approach to the pharmaceutical industry’s role in rising prices.

In Bloomberg, Biopharma Opinion Columnist Max Nisen writes that CVS’s plan lets pharmaceutical companies off too easy, citing the fact that the FDA’s breakthrough designation has been applied to over 50 drugs over the past few years, commonly some of the highest priced on the market.⁴

Even patient groups have gotten involved, with over 90 advocacy groups writing an opposition letter to CVS stating that the new policy “…discriminates against the chronically ill, the elderly and people with disabilities, using algorithms that calculate their lives as ‘worth less’ “.⁵ QALY’s are often deemed less valuable as a cost-effectiveness tool for the elderly because of their insensitivity to health status improvements and shorter life expectancy compared with non-elderly.

CVS’s policy raises questions about the fundamental meaning of value

In the context of the move towards value-based care in America, perhaps this was a logical next step. But what does it mean for healthcare going forward?

The use of the QALY and ICER’s involvement in the US healthcare system is not going away. ICER’s drug assessments have already been used by the New York Medicaid Program and Veterans Affairs in drug coverage decisions.^{6 7} Moves such as this have started to formalize ICER’s role in coverage decisions and may have the potential to shift the balance of power from pharma to a pricing arbiter. A key question is whether other pharmacy benefit managers will follow CVS’s lead, putting more pressure on pharmaceutical companies.

From a practical standpoint, are QALYs useful in real-world decision-making to payers in the United States? As healthcare consultancy Milliman points out, an analysis conducted using a list price and the “average” patient may not be applicable for payers that serve specific subpopulations and utilize discounts and rebates.⁸ However, a 2018 ICON plc survey of over 20 U.S. payers seems to show that payers do consider them useful with more than 75% of respondents saying they would use an ICER threshold as a basis to negotiate a rebate contract. ⁹

Are QALYs being used to look at the most valuable treatment in a given context or simply as a tool for reducing cost? Do cost-effectiveness thresholds capture what individual patients and providers value or are they a step too far into a one size fits all process, especially in an age of individualised medicine?

If we do accept limitations to the cost per QALY approach and move to a broader framework as suggested by NPC’s Dr. Robert Dubois, how will we calculate and weight aspects of value like societal benefits and inadequately treated illnesses?

These are some of the questions that we now need to ask as cost-effectiveness becomes a staple in conversations around medicine cost. There is no doubt that these issues will be at the forefront of policy and economic conversations about medicines in the coming months.

Let us know what you think by commenting on the blog. To stay up on news related to cost-effectiveness around the globe, subscribe to the HealthEconomics.Com weekly newsletters.

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References

1. CVS. Current and New Approaches to Making Drugs More Affordable. (2018). Available at: https://cvshealth.com/sites/default/files/cvs-health-current-and-new-approaches-to-making-drugs-more-affordable.pdf.
2. Dubois, R. CVS To Restrict Patient Access Using Cost-Effectiveness: Too Much, Too Soon. Health Affairs (2018). Available at: https://www.healthaffairs.org/do/10.1377/hblog20180913.889578/full/.
3. Brenna, T. & Surya, S. Why CVS Is Giving Plans A New Tool To Target High Launch Prices. Health Affairs (2018). Available at: https://www.healthaffairs.org/do/10.1377/hblog20180913.862850/full/.
4. Nisen, M. CVS’s Drug-Price Plan Lets Pharma Off Too Easy. Bloomberg Opinion (2018). Available at: https://www.bloomberg.com/view/articles/2018-08-17/cvs-drug-price-plan-lets-pharma-off-too-easy.
5. PIPC. Over 90 Advocacy Groups to CVS: Don’t Discriminate on Care. (2018). Available at: http://www.pipcpatients.org/resources/cvs-letter.
6. Thomas, K. A Drug Costs $272,000 a Year. Not So Fast, Says New York State. New York Times (2018). Available at: https://www.nytimes.com/2018/06/24/health/drug-prices-orkambi-new-york.html.
7. ICER. The Institute for Clinical and Economic Review to Collaborate With the Department of Veterans Affairs’ Pharmacy Benefits Management Services Office. (2017). Available at: https://icer-review.org/announcements/va-release/.
8. PhRMA. New whitepaper identifies reasons why ICER’s cost-effectiveness analyses are not useful for payers. (2018). Available at: https://www.phrma.org/index.cfm?objectid=A08C8CE0-BAB6-11E8-AFE70050569A4B6C.
9. White, N. What ICER Pricing Would Mean for US Drug Spend: A Preliminary Analysis. LinkedIn (2018). Available at: https://www.linkedin.com/pulse/what-icer-pricing-would-mean-us-drug-spend-analysis-nathan-white-cpc/.