Are Emerging Value Frameworks a Path to Implementing Value-Based Pricing?
HTA QUARTERLY | SUMMER 2018
Emerging Value Frameworks as a Path to Implementing Value-Based Pricing? Depends on Your Perspective
Unaffordable and Valuable
Navigating International Reference Pricing
Clinically Effective ≠ Cost-Effective
Another challenge to overcome is that clinically effective therapies are not always cost-effective. One scenario in which this can happen is when there are costs associated with providing therapy, such as clinician-administered intravenous infusions, that will outweigh the health benefits achieved from the therapy even when priced at zero. Another scenario that can preclude demonstrating the cost-effectiveness of a therapy, even when priced at zero, is when the therapeutic benefit results in additional time in a health state associated with high resource utilization and/or low quality of life during or after the treatment period. For example, a therapy that is effective in treating patients with chronic kidney disease who require dialysis, but does not reduce time on dialysis—an expensive chronic treatment—may not be cost-effective even when priced at zero. Any successful VBP approach should include a process to manage these situations and value clinically effective therapies at a price that is fair.
Therapeutic Advances Require New Solutions
ICER evidence evaluations include assessments of short-term affordability and long-term value for money. “Pricing benchmarks” are used to determine VBP or estimate the discount needed from the current net price to be cost-effective; products with budget impacts that exceed $991 million over 5 years are subject to an “alert.” The long-term value is estimated using incremental-cost effectiveness ratios with thresholds from $100,000 to $150,000 per quality-adjusted life-year (QALY). The Drug Pricing Lab tool, in contrast, provides a more singular focus on the prices of health technologies. The aim stated is to provide a “rational approach to drug pricing” and “a way of thinking about how to determine appropriate prices for drugs.” User preferences regarding various modifiable price components are used to determine a drug’s value-based price.
Outside of the US, the National Institute for Health and Care Excellence (NICE) has been helping England and Wales balance access to innovative therapies with budget limitations since 1999, though it too has been challenged to achieve VBP. Over time, NICE’s approach to HTA has evolved to broaden the cost-effectiveness threshold from a single point value to a range of acceptable values (£20,000–£50,000) based on a number of factors including burden of illness, the wider societal impact, certainty of the cost-effectiveness ratio, health-related quality of life, innovative nature of the technology, and other non-health objectives of the National Health Service (NHS). Following further consultation in 2017, NICE adopted changes to its approach to better align societal value with its approach to appraisal and reimbursement. These new changes include fast-track approval for drugs under £10,000 per QALY, automatic price negotiation if the budget impact exceeds £20 million over 3 years, delaying implementation when budget impact cannot be mitigated, and implementation of a QALY modifier for highly specialized technologies.
Opportunities and Solutions
While there are certainly barriers and challenges to the implementation of VBP and value frameworks, it is critical that health systems continue to advance strategies that better align spending with value. In this effort, there are 4 keys to successful implementation of VBP.
Keys to Successful VBP
Second, institute a learning healthcare system that connects the current value to price and reimbursement. Since the value of a healthcare technology is constantly evolving as new evidence becomes available, a learning healthcare system is necessary to capture the current value of the technology. It is much more important to understand the evolution of value over the entire life cycle of a therapy than to make a 1-time judgment of value at the time of HTA assessment.
Third, flexible value assessment tools should be implemented and be able to evolve. As discussed earlier, the NHS of England has evolved to adopt a dynamic cost-effectiveness threshold that considers additional factors. A World Health Organization report suggests that as an alternative to a single fixed cost-effectiveness threshold, flexible guidance that includes fairness in the decision-making process or multi-criteria decision analysis are worth consideration.
“The use of cost-effectiveness ratios in decision making remains an area without consensus. Our view is that a fixed cost-effectiveness threshold should never be used as a stand-alone criterion for decision-making.”
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