SE: Every review has a component that looks at the cost effectiveness as well as the budget impact. What sometimes ends up happening in conditions that have a lot of patients or a lot of drugs is that we talk more about budget impact than cost effectiveness.
The GLP-1s for obesity are probably the perfect example of this tension. These drugs are wildly cost-effective. Zepbound might even be cost-saving at the prices announced through the Most Favored Nation agreement for expansion into the Medicare and Medicaid population, which we very rarely see.
But the impact is straining budgets just because of the huge number of eligible patients. We have looked at disease classes before—psoriasis, rheumatoid arthritis, multiple sclerosis, ulcerative colitis, asthma, atopic dermatitis—because there are special dynamics around big rebates being offered in order to get formulary placements in some of the crowded classes. That’s driven more economically than clinically, which is not exactly the system we want.
One way we could see de-escalation in those crowded classes is to have a formulary that pays for everything in that class. No step therapy, no utilization management: Each price the purchaser pays is tied to how good the drug is based on the data from the company. So it wouldn’t be that every RA (rheumatoid arthritis ) drug has the same price; they’d all have different prices because on average they all work differently.
That would get some administrative burden out of the system because the doctors’ offices would seek a lot less prior authorization, and in that case you wouldn’t need cost sharing to incentivize behavior: Maybe there’s no cost sharing or there’s a $10 copay and then the doctor is able to pick the drug that works best for the patient in front of them.
We think a lot about how our work, whether it’s a drug-class review or an individual drug review, is contributing to taking some of the administrative and other tensions out of the system in furtherance of the goal of patients having access.
WG: Cost sharing has grown tremendously in the US, whether it’s fixed-dollar copays, percent copays, or deductibles at the start of each year. Historically, there have been some classes of drugs—such as for asthma, hypertension, diabetes management—where that cost sharing has been relaxed so that the patient can fulfill that prescription, get the care they need, and worry less about abandonment. Does the ICER calculus look at any sort of elasticity or abandonment and how that might impact patient behavior? Because without adherence, without filling these prescriptions, we’re not going to get that desirable outcome—that effectiveness we want.
SE: We look at this in a couple of ways. We look at this in our public meetings, where we center on patients in patient groups sharing their experience with the condition, and we talk about health equity considerations and ways to address health disparities; cost sharing comes up a lot in that context. More specifically, these questions come up a lot in our reviews of gene therapies.
But through work we’ve done through our fair access criteria, our launch price and access report, we also acknowledge that cost sharing, high deductibles, coinsurance, and even high copays are a symptom of a problem. Health insurance rates are going up at an unsustainable rate: 10%, 20%, 30% year over year. If you’re a self-insured business with 1000 covered lives and your carrier says, “Here’s your 30% insurance premium increase,” you have a couple of choices.
You can take it. That money comes from somewhere. Maybe you’re not going to open that new warehouse, or maybe you’re not giving anyone a raise that year.
Or you can ask your carrier if there’s a way to keep the premium increase to 20%. Sure, if you switch everyone to a high-deductible plan with a $5,000-$10,000 deductible and do away with copays. Then everything’s coinsurance. Some of them agree because they think it’s the only way they can afford to offer health insurance.
If we get away from acknowledging that the unsustainable rate of increase of health insurance premiums is a symptom of a problem, then it’s really easy to just demonize and say: We should just do away with cost sharing. We should just do away with high deductibles.
I agree. BUT if you do that, you’ve got to have a grown-up conversation about how much we’re overpaying for value throughout our healthcare system. They go hand in hand. You have to be able to have a conversation about what our premium increases pay for, how cost sharing has become a symptom of a problem, and that you can’t fix just one side of that equation without the other side going up.
If we eliminated cost sharing and high-deductible plans tomorrow, health insurance premiums would go up. That’s just math—math that is likely to lead to people becoming underinsured and uninsured and experiencing real harm from that.
If we think about bringing prices down so they match the value that the manufacturer has been able to prove with their data, and then waive cost sharing, you’re able to do that in a way that’s not raising premiums. Our math has shown that manufacturers overreach on price, by not aligning the price with how well the treatment works, about 70% of the time, so there’s a lot of room to improve affordability in the healthcare system.
WG: In that spirit of wanting patients to have access to the right therapies, I think about your example of Zepbound. There were lots of discussions around GLP-1s versus bariatric surgeries, which have become more popular, and there are other examples of different types of cardiac procedures versus medical management. If ICER goes beyond the pharmacy and biotech realm to those types of comparisons, that impacts a different group of payers and other stakeholders. What does that look like?
SE: We’d love to get there with more funding and an expansion of our research footprint, but I’ll tell you why we spend most of our time focused on the drug space: Because that’s where we have found the government-granted monopoly has the biggest impact on cost.
There’s no government-granted monopoly on the ability to do an appendectomy. There’s a barrier to entry: You’ve got to go to medical school, you’ve got to do your surgical residency, that’s all real, but there are market forces working so that the hospital down the street is not charging a million dollars for an appendectomy.
Yet the solutions there are different than paying for value, because there’s some semblance of a functioning market—or there could be and should be because it’s not a government-granted monopoly. (Asterisk: We can have a whole other conversation about what’s happening with hospital prices and physician prices, because the consolidation, the market dynamics, and the power there are going in only one direction, too.)
The government-granted monopoly means a lot to a health system that asks: How much should I pay for this when the manufacturer can pick any price they want? Because there is no competition for that particular molecule. That’s why it continues to demand a lot of our attention. As we look at topic selection, we absolutely look at things outside of drugs (such as vaccines for COVID-19, supervised injection facilities, and apps to treat opioid use disorder), and you can expect that from us in the coming years.
WG: The monopoly is essentially the patent life, that period of exclusivity that small-molecule or biologic or gene-therapy makers have for a number of years. Trade groups have argued that the expiration of that patent and the introduction of generics, and now with biosimilar uptake reasonably good in the US, is really the solution—that we still allow for that monopoly or patent protection to inspire innovation.
A lot of the arguments over the past year with regard to the US position on Most Favored Nation are saying that the US is perhaps paying more than its fair share for innovation. Does ICER have a view on how we find balance in the system but still promote innovation and incentives for manufacturers?
SE: $3.94M for a gene therapy, which was our judgment of the fair price for Lenmeldy, is a pretty good motivation to incentivize future innovation. We have had reviews, and not just the single or short-term therapies like gene therapies, of drugs that can command hundreds if not hundreds of thousands of dollars because of how good they are.
We think that the solution to this problem is not to just become price checkers no matter how good the drug is; it’s to pay a lot of money for drugs that are really good. That should be plenty of motivation for future innovation. That incentivizes decisions about which drugs to develop early on.
We’ve recently launched the ICER Scientific Advice program to help companies learn how to think about the potential value of their asset early on, in the hope that some of those assets won’t get developed because they never had a chance at being good for patients and that we use those investment dollars in programs that have a chance for that “knock-it-out-of-the-park” (i.e., extraordinary) innovation that we all want for ourselves and for our families.
A fundamental shift needs to happen in the drug-development pipeline. We can have good conversations about how much we as a country are contributing back into the system for research and development for future innovation versus what happens in other countries. But the way we think about it reflects our own financial considerations, our own social values, our own perspective on how much we should pay for units of health gain, which is what those other countries do, given their own systems. Our approach is to do it with good valuations that incentivize the next round of innovation.
WG: Coming back to the top of the conversation, where we said that drug pricing is perhaps not reflective of fully competitive markets and all those things we learned in Basic Economics: It does seem as if ICER is taking a position, through your evaluations, that is helping to direct manufacturers to areas of high unmet need, areas where we can extend longevity and quality of life; and that in and of itself is a market mechanism, as opposed to jumping into crowded spaces with perhaps marginal gains.
SE: As I think about what conditions are likely to hit me and my family because of our family history, as I watch my parents get older, as I think about what I want out of this ecosystem, I want things that will help them have better quality of life and live longer. It has been unfortunate that incentives for that have not always been there across the entire biopharmaceutical ecosystem.
That’s not a blanket statement meant to apply to everyone. There are companies that are doing tremendously innovative work. There are companies that are good about killing programs early because it was just going to be the 21st drug for rheumatoid arthritis and wasn’t going to have a really big impact for patients, and they’ve shifted those dollars to other places in the drug pipeline. Industry has been moving that way, and there is room to continue to move that way so that investment capital is going into things that are truly transformative.
I had a conversation with an investor the other day who said, “That’s my entire investment thesis.” He’s an academic physician who turned into an investor, and he said, “I don’t invest in it unless I think it’s going to be transformative.” He just will not invest in something that is going to be a “Me Too,” or it’s going into a crowded drug class. I do think that the incentives have started to shift, and that’s a real positive for patients.
WG: Is there anything else you’d like to add?
SE: One thing I’d like to say, especially to this audience: We fundamentally believe we’re only going to make things better if we all have a conversation with each other. That’s why our process involves working with the manufacturer of the drug, the patient groups, the clinical experts, the payers, the purchasers. Engaging in an ICER review, in our Policy Leadership Forum, in our ICER Analytics platform, are terribly important ways to maybe voluntarily de-escalate this “arms race.”
What we have been seeing in the broader health-policy landscape—the Inflation Reduction Act, negotiation for Medicare, Most Favored Nations, the Center for Medicare & Medicaid Innovation (CMMI) models—are symptoms of a problem: People are still really upset about drug prices.
If industry participates in processes like ICER reviews, participates in conversations about how we measure value, how we de-escalate this arms race, that’s an opportunity to blunt the need for government intervention, which is not always going to look pretty for industry in terms of its incentives for innovation.
So just keep showing up. Please participate in the ICER review. Think about being part of our Policy Leadership Forum. Use the ICER Analytics platform in your arguments and conversations with payers. That’s how we get ourselves out of this place in a way that will preserve incentives for the innovation that we all want.