Drug Pricing Value Assessment Methods in the United States: The National Pharmaceutical Council Viewpoint

August 17, 2015
Swarali Tadwalker, MPH

Swarali Tadwalkar, MPH

Written by Swarali Tadwalkar, MPH, Guest Blogger and Research Intern at HealthEconomics.Com

Drug prices are the fastest-growing part of healthcare costs, and everyone – from patients, to physicians, policy-makers, and pharmaceutical companies – are grappling with price-setting and drug value assessment.

States like Massachusetts are leading the way with several initiatives, such as a state bill demanding price transparency and separately, a non-profit group who is developing price benchmark reports evaluating nationwide cost-effectiveness of newly launched drugs.  A few days ago, it was announced that the consumer advocacy group (Health Care for All) has helped draft a bill in Massachusetts that would force biopharma companies to justify drug prices by divulging expenditures on research, production, and marketing.  In late July, this tHEORetically Speaking blog reported on the Boston-based non-profit Institute of Clinical and Economic Review (ICER) announcement of the Emerging Therapy and Assessment Program (ETAP) framework.   The ETAP program – and several other value assessment frameworks in development or use – has stirred strong interest among the pharmaceutical and related policy research fraternity involved in assessing drug cost-effectiveness.

In order to understand a different perspective on the advantages and limitations that the ETAP framework offers, the National Pharmaceutical Council (NPC) has lent its outlook. NPC provides an important and broad perspective on pharmaceutical value assessment approaches, by virtue of its mission and research agenda, as a health policy research organization dedicated to the advancement of good evidence and science, and to fostering an environment in the United States that supports medical innovation. While its member companies represent biopharmaceutical manufacturers, NPC seeks to include independent experts and it is not a lobbying organization.  As such, their point of view offers additional insight into the dialogue about drug price and value.  Dr. Robert (Bobby) Dubois, Chief Science Officer and Executive Vice President of NPC sat down with Dr. Patti Peeples to discuss Drug Value Frameworks, ETAP, and NPC’s research agenda for comparative effectiveness.

Patti PeeplesPatti Peeples, RPh, PhD

CEO and Founder, HealthEconomics.Com 

Principal Researcher at HE Institute




 Robert W. Dubois, MD, PhDRobert W. Dubois, MD, PhD

Chief Science Officer & Executive Vice President

National Pharmaceutical Council




PP: NPC has been involved for decades in quality and outcomes issue, as well more recently in comparative effectiveness and the value of pharmaceuticals.  Please describe some of NPC’s initiatives.

RD: For 60 years, NPC has been involved in various aspects of health policy and research to provide insight into key issues related to pharmaceutical use and value. We have had a particular focus on comparative effectiveness, which not only involves comparing clinical effectiveness but also the value comparisons across different therapeutic options like surgery vs. medication, surgery vs. chiropractic therapy or drug vs. drug, or any other combination. This provides a broader perspective on the types of healthcare interventions and their associated value. Additionally, we seek to take a more holistic view of healthcare, by looking at the dynamics associated with the changing reimbursement environment as well as changes happening at the provider level (such as paid bonuses for quality performance). All of these factors are important in the value assessment of healthcare interventions.

But, value goes beyond whether the payment system for service is appropriate or not.  It goes beyond whether the provider is meeting quality standards. As you mentioned, drug prices are getting significant attention. NPC is focused on helping people understand those drug prices in a broader context. One of our current projects evaluates the lifetime cost and benefits of a drug, over the branded period as well as generic period, spanning over 20-30 years.

Another aspect of value that NPC is involved in has to do with the fact that there is a disconnect between who is paying the economic bill and who is reaping the economic benefits. A lot of the drugs are being paid for by Medicaid or commercial insurance, yet Medicare is the likely recipient of the positive consequences (like in the case of Hepatitis C drugs, avoided transplant of livers or liver cancers or hospitalizations). This is another limitation of our healthcare system, and we want to improve the methods whereby we look not only at costs (and price) but also assess where and when the payoffs occur, and who is receiving them.

libraryVisit the National Pharmaceutical Council Research Library here.

PP: You served on the ICER value framework committee for developing these pricing benchmark reports.  Can you describe NPC’s involvement, and your thoughts on the process and the framework that is now being put to use?

RD: ICER has engaged a diverse group to help think through the framework and provide guidance. In addition to participating on an advisory committee, my staff and I have had a substantial number of conversations with ICER and its principals (Dr. Steve Pearson and others), which I believe have been influential in framing the evolution of the group and ETAP. In terms of these contributions, I want to divide my thoughts into some broad areas with series of subpoints.

First, I’d like to say a few words about the positive work of Steve Pearson and his team from ICER.  He has been working on this and related areas for a significant amount of time, and he wants to get input from many key groups. Although his matrix is primarily focused on payers and how payers might value drugs, he also -in the long run-wants to initiate a dialogue around the characteristics of value, especially between payers and the biopharmaceutical industry. This would help everyone understand the possible perspectives on value and the evidence required to support that value. The broad stakeholder input he has received, welcomed, and encouraged is really important.

Second, the ICER/ETAP framework is transparent, and is not very subjective (thus, it is more objective) and it has comprehensive criteria and Likert scale elements that make it very clear how an individual is viewing things. This is very important.

Third, unlike some of the other existing frameworks, the ETAP framework is a multi-attribute one. There are several other frameworks or methodologies that are receiving a great deal of attention, including the ASCO Value Framework,  The American College of Cardiology/American Heart Association Cost/Value Methodology, Memorial Sloan Kettering DrugAbacus, Premera Blue Cross value-based drug formulary, Blue Cross/Blue Shield multi-tiered formulary, National Comprehensive Care Network (NCCN) Value Pathways, among others.  I think the ETAP framework considers the most elements in its analysis, and cost-effectiveness is calculated over a 2-year and lifetime horizon, which is good.  The clinical care value consideration is very well defined and has gone through a lot of vetting. Other value frameworks (like ACC/AHA) are very simplified, single metric cost-effectiveness calculators over a one-year time horizon, and I believe this has notable limitations.

However, in terms of areas of potential improvement for the ETAP framework, there are a few. The health system value assessment for the ETAP analysis is built around affordability.  Although this assessment has evolved immensely, I don’t think it has been vetted enough. It moved from originally being an arbitrary metric to one that is now based on GDP (gross domestic product), GDP growth, and how much growth should be consumed by drugs. It is modelled around the WHO (World Health Organization) framework and this aspect could certainly be beneficial. But, we need further assessment.

Another area of concern specifically is that I believe the ETAP framework conflates the term “value” with “affordability”, and while some think this may be semantics, I think it’s important.  The “clinical care value” part of ETAP assesses this metric this through cost-effectiveness and I believe it is appropriate in how it is configured. However, when the framework looks at affordability or budget impact, it terms this “value.” So, I believe that it really isn’t value but it is affordability and this happens to be confusing or misleading for people.

Why is use of the term value vs. affordability relevant? For example, Harvoni® is used to treat Hepatitis C; it has been shown to be cost-effective and has a high clinical care value in the ICER framework. However, due to the significant number of people who could benefit, it has a considerable budget impact in the short-term. Just because it has a considerable budget impact doesn’t mean it has low value. Therefore, most health economists would say it is a very valuable drug, but it is expensive for the society, collectively. We would prefer if the terms were changed and it was called budget impact. When you say a treatment has a low value, people tend to focus on price. However, when you say it has a high value but the budget impact is substantial, you open all sorts of possibilities and opportunities and change the dialogue.

Next is the quantitative issue. When the ICER framework looks at affordability, budget-impact and health system value, they are looking only at one- to two-year horizons. They are saying this is the expenditure, but the benefits may be five years later. If they say it is too much of a budget impact, it broadens the window to look at cost and benefits over 5 or 10 years.  It’s important to have an appropriate time horizon for all assessments.

PP: Do you think that the ETAP assessments of short- and long-term cost-effectiveness, affordability, and budget impact will affect the pharmaceutical industry’s use of discounts, rebates and copay coupons because it won’t be considered in this ETAP benchmark analysis?  In other words, will they price drugs more consistently across customer groups and curtail the use of these customer-centric strategies?

RD: Although the ETAP framework is gaining traction, it is not in widespread use yet. The ETAP framework will have an influence here, and possibly outside of the US, but it won’t be an immediate, direct all-encompassing impact because it’s one of many frameworks. If the ETAP framework says that an oncologic agent has high or low value but the ASCO Value assessment finds the opposite, neither of them is necessarily likely to win the debate.

PP: What do you think is going to be the biggest and the most near term impact of the ETAP framework?

RD: I think that with or without ETAP framework we are moving into an era where value is the centerpiece of discussion. It’s not price, but value. The ETAP framework addresses the price along with all the other elements. If we can move from a very narrow, short-sighted view of drug cost, to something which is broader, multi-dimensional, and has a multi-year time horizon, it would be a good shift of dialogue. I do believe that we will see more of these value frameworks taking hold in decision-making. Now, whether it takes the Premera approach of determining primary tiers, whether it is embedded in clinical pathways developed by NCCN or whether it is a specific cost-effectiveness metric, or maybe all of the above, this means value will embedded in our reimbursement system at an increasing rate.

PP: I am intrigued by your earlier statement about the conflation of value with affordability. Is that something you are spending little bit time on from NPC’s perspective?

RD:  If you look at all the other frameworks, confusion doesn’t occur. The ETAP framework is the only one that formally raises the issue of affordability. All the other ones look at an individual drug, or an individual patient, and they don’t multiply the impact across a population.  The ETAP framework does, and this has raised this very important issue on a larger scale. Although it doesn’t take away the issue, it frames it slightly differently. Affordability is very important but it doesn’t immediately mean prices need to change.

PP:  What are some potential solutions to the affordability issue for drugs? 

RD: There are many solutions to the problem. One is long-term financing. If you say that Hepatitis C treatment is quite costly in the near term, but has benefits in the long term, the problem has a life-long impact. The fact that it’s front-loaded raises attention. Aggregate spending is different from paying it over a time. This is going to be critically important as gene therapy hits the market because one injection is potentially going to cure certain inherited blindness or inherited anemia and therefore, it will have a different price tag and very likely, it will be cost-effective but the costs will be front-loaded. There will be policy exploration to level out costs so they don’t blow the budget.

Another solution is really to say that they are all one-time costs, but we—as a society—want to handle these near-term costs if we are willing to have a cure for many of these diseases. This means we will potentially pay for many treatments/cures in a short period of time, but we all want this because we are avoiding long-term care that wouldn’t occur. This may require a one-time additional expenditure by the federal government, by employers or by individuals.

Another way could be by employing performance-based payments. In this case, payment will be based on the benefit received by the patient.

Another way focuses on low-value services.  These low-value services are rampant within our environment. Sometimes we end up with extraneous medication from  a doctor or a surgery that is not really necessary or beneficial. We need to consider all of these elements and package them up to use appropriately. We possibly would be able to save all the money we need for these other, efficacious valuable treatments.

PP: How are your member groups in the biopharmaceutical industry reacting to the various Value Frameworks and Benchmarking approaches?

RD: Well, we have an active exploration under way of the various frameworks that are out there and as I mentioned, there are some frameworks which are too narrow and some that are much broader; they all have some limitations. The ETAP framework, I think is the broadest and has the most strengths but it needs maybe about 20-25% refinement. I think this refinement will be very important to do to make it the best available.

Innovative drugs need to demonstrate value and our members want to make sure that value assessment is broad enough. As a simple example, let’s look at the ASCO value assessment: they will come up with a measure of incremental efficacy or benefits and it would be a single assessment based upon a single study and they are only going to look at median survival. If two drugs have the same median survival time but one has a much greater chance of long-term survival, the assessment won’t show that difference.  Some patients would prefer the potential for long-term survival, but they won’t have the information to make that choice.  That is a problem.  We, as a professional discipline, need to ensure this is understood, the limitation addressed, and make sure that, at the end of day, everything patients care about will be adequately recognized, evaluated and included in the value assessment. That is one of the areas that this young field of US value assessment needs to address. PP: To your point above, it seems that we are having these discussions of value at the provider and policy level.  To what extent are patients currently part of any of these groups involved in developing value frameworks, or is the patient perspective included in any of the resulting outputs?

RD: It is good news that ASCO’s value framework is targeted to the patient.  The ETAP metric is much more targeted towards the payer but they have the limitation I just mentioned. This is a very young field. Health outcomes research is a young field, value assessment is a young field, yet cost-effectiveness has been around for a while.  But broadening it to thinking about value is brand new. I can only hope that the field and all of us will push hard to keep improving the methods that are used. I think we can get there but we just aren’t there yet.

For more information on National Pharmaceutical Council, visit here.  For more on the ETAP Framework, visit ICER.


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