Healthcare is a top issue for voters this election cycle. The cost of healthcare is on the minds of voters and healthcare executives alike. And they’re on to something: PwC’s Health Research Institute (HRI) projects that 2020 medical costs will be up slightly from the past two years.
According to HRI, medical costs in 2020 will be up 6%, which represents an increase over the flat trend witnessed in 2018 and 2019. It’s expected that drug spending will increase as the positive impacts of generics go down and new, more pricey specialty therapies enter the market.
Managed Healthcare Executive (MHE) recently discussed with Steve Pearson, MD, founder and president of Boston-based Institute for Clinical and Economic Review (ICER), the impact of his organization’s research on coverage decisions made by public and private payers. This conversation has been edited slightly for clarity.
MHE: Absent ICER’s research, what information do payers have to inform their pharmacy and therapeutics (P&T) committees, coverage policies, and price negotiations with manufacturers? What value does ICER bring?
Pearson: Payers would have to accept publicly available published research studies on new drugs. That’s usually what they give to their P&T committees.
We take a full eight months to do a review on a topic. We work closely with patient organizations to get from them deeper insight on what value looks like to the patient—that’s information payers don’t have the time or ability to get. In addition to our work with clinical experts, we work with manufacturers to get access to confidential data that haven’t been put into the public domain.
We make sure that we have as full a data set as possible across patients, clinical experts, and manufacturers, and we work with academics and biostatisticians to do an indirect comparison of drugs that have never been tested on a head-to-head basis. Head-to-head findings are helpful to payers.
MHE: What are some specific ways that private and public payers are using ICER’s research to inform their work?
Pearson: Without access to our information, payers don’t have access to true effectiveness models to evaluate the long-term cost effectiveness of treatments. Our research gives them an estimate of a fair, value-based price, based on the evidence of how much better this treatment is for patients. This helps payers when they go into negotiations with manufacturers over price and terms.
While the general sense is that a new drug is doing good things or a lot better, ICER provides precise and transparent research to support these claims. The U.S. Department of Veterans Affairs uses our research and surveys have shown that 88% of payers are using our reports.
For example, we looked at Entresto (sacubitril/valsartan), a new heart failure medication from Novartis. It’s pretty expensive compared to generics. Two of our main questions about Entresto: Does this impact patients and the likelihood that they’ll be hospitalized? And is it worth the list price?
[ICER’s analysis found that there’s a moderate certainty the drug provides a small to substantial net benefit compared to the current standard of care in patients with congestive heart failure. The organization found that Entresto increased length of life for patients and that it decreased hospitalizations. Ultimately, ICER determined that while the drug’s list price of $4,560 per year didn’t save money in the long term, its added costs are in alignment with the benefits patients receive.
ICER’s value-based price benchmark for the drug is $3,779 annually, a 17% discount off the list price. The organization notes that private insurers and Medicaid programs are frequently able to achieve these types of discounts.]
An executive at a health plan told me, “Your report turned us around. Instead of treating it as a very expensive drug that we should limit, we decided to loosen our restrictions on prescribing it. You helped us see the value.”
Here’s an example with the New York Medicaid program: In late 2017, the state passed a law that required a drug spending target. That meant the Medicaid program had to identify drugs that were priced too high and then to negotiate for a deeper rate to determine a fair price.
That was a very prominent case where our report identified a target price for Vertex’s Orkambi (lumacaftor/ivacaftor), which is used to treat cystic fibrosis. And the New York Medicaid program negotiated with the manufacturer to reduce the price.
[ICER found that the $272,886 annual list price was “far too high” to pay each year. Its report determined that the list prices of Orkambi and Vertex’s other cystic fibrosis drugs would have to come down 71% to 77% to meet common cost-effectiveness thresholds.]
Aine Cryts is a writer based in Boston.