| Strategy | Cost | QALY | ICER | Status |
|---|---|---|---|---|
| Lifestyle Modification | 179,200 | 16.93 | ||
| Phentermine/Topiramate (Qysmia) | 182,600 | 17.38 | 7,556 | |
| Semaglutide (Wegovy) | 392,100 | 17.83 | 465,556 | |
| Bupropion/Naltrexone (Contrave) | 207,300 | 17.16 | Dominated (Strong) | |
| Liraglutide (Saxenda) | 277,000 | 17.34 | Dominated (Strong) |
Pricing and Availability of Health Technology in the International Context
Saying ‘No’, Part 1
John A. Graves, Ph.D.
Professor of Health Policy and Medicine, Vanderbilt University School of Medicine
Professor of Management, Owen Graduate School of Management
Please read the first 2 pages of the case study. Class will begin promptly at 4:25pm.
Example Patient
- Lisa is a 45 year old woman with obesity (BMI 32) who has struggled with weight management.
- She does not have diabetes but is concerned about her risk for cardiovascular disease due to weight, family Hx of heart disease, and elevated cholesterol levels.
- Lisa heard from a friend about Wegovy, and inquires about whether she should start taking it.
Example Patient
- Throughout these slides, we’ll consider how Lisa might experience the availability and cost of semaglutide in different health systems.
What outcomes might Lisa experience?
What alternative to Semaglutide might be recommended?
Let’s now quantify the possible health and cost outcomes in different states of the world…
Quality of Life (Health Outcome)
Quality of Life (Health Outcome)
Cost Outcome
Let’s now summarize the overall health and cost outcomes
Cost-Effectiveness Analysis
Cost-Effectiveness Analysis
Quantifies how to maximize the quality & quantity of life from among competing alternatives, given restricted resources
It’s an explicit measure of value for money
A POPULATION-LEVEL decision-making tool
Cost-Effectiveness Analysis IS NOT
- Indiscriminate cost-cutting
- Downsizing
- For individual-level decision making
- The only tool for decision-making
Quality-Adjusted Life Years (QALYs)
QALYs provide a summary measure of health
Allows comparison of health attainment/disease burden
Across diseases
Across populations
Over time etc.
QALYs
Origin story: welfare economics
- Utility = holistic measure of satisfaction or well-being
With QALYs, two dimensions of interest:
Length of life (measured in life-years)
Quality of life (measured by utility weight, usually between 0 and 1)
QALYs
QALY: A metric that reflects both changes in life expectancy and quality of life (pain, function, or both)
QALYs
Example: Patient with coronary heart disease (with surgery)
Source: Harvard Decision Science
Example: Patient with coronary heart disease (with surgery)
Example: Patient with coronary heart disease (without surgery)
Example: Patient with coronary heart disease
- With surgery: 7.875 QALYs
- Without surgery: 6.625 QALYs
- Benefit from surgery intervention:
In QALYs: 7.875 – 6.625 QALYs = 1.25 QALYs
In life years: 10 years – 10 years = 0 LYs
The Cost-Effectiveness Plane
Incremental Cost-Effectiveness Ratio
- The slope of a line connecting two points is the incremental cost-effectiveness ratio (ICER) comparing those strategies.
ICERs
Cost of Intervention
Cost of Alternative
Benefit of Intervention
Benefit of Alternative
ICERs
Cost of Intervention
Cost of Alternative
Benefit of Intervention
Benefit of Alternative
ICERs
Cost of Intervention
\quad - \quad
Cost of Alternative
\frac{\quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad}{\quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad}
Benefit of Intervention
\quad - \quad
Benefit of Alternative
ICERs
C_1
\quad - \quad
C_0
\frac{\quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad}{\quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad}
E_0
\quad - \quad
E_1
ICERs
\Delta C
\frac{\quad \quad \quad \quad }{\quad \quad \quad \quad \quad }
\Delta E
Incremental Cost-Effectiveness Ratio
Most often used, since for most conditions there is already some available treatment.
- C_1: net present value of total lifetime costs of new treatment
- C_0: net present value of total lifetime costs of default treatment
- E_1: effectiveness of new treatment, measured in expected life expectancy, quality-adjusted life years (QALYs) or disability-adjusted life years (DALYs), or some decision-relevant health outcome.
- E_0: effectiveness of default treatment
\frac{C_1 - C_0 \quad (\Delta C)}{E_1 - E_0 \quad (\Delta E)}
The Efficiency Frontier
Efficiency Frontier
Our first mechanism for decisions over how to efficiently allocate scarce resources.
Allows us to identify the set of potentially cost-effective treatments.
Strategies off the frontier cannot provide the same health benefits at equal or lower cost.
Opportunity Costs
Under a constrained budget we’d have to divert resources from other worthy activities (e.g., education services, income assistance programs, other medical treatments) to cover a treatment that achieves, at best, the same health outcome.
If we select a strategy off the frontier, there is an opportunity cost and a potential loss in social welfare.
How do international health systems sort through these issues?
Explicit Thresholds
The World Health Organization’ Choosing Interventions that are Cost-Effective (WHO-CHOICE) recommends a threshold of less than three times the national annual gross domestic product (GDP) per capita.
Poland legislated in 2012 a cost-effectiveness threshold of three times per capita GDP.
Thailand uses a 0.8x per capita GDP as its threshold.
Slovakia uses a threshold of 25-40x the average monthly salary (per QALY gained).
Explicit Thresholds
- England’s National Health Service is most likely to pay for drugs that cost £20,000, or about $25,000 per QALY.
Source: ICER Final Report on Semaglutide
Would our example patient have access to Wegovy in the UK?
Patient Heterogeneity
Returns to treatment may vary by relevent patient subgroups.
“Heterogeneity” refers to the extent to which between-patient variability can be explained by patients’ characteristics.
Patient Heterogeneity
Clinically-relevant heterogeneity suggests identification of subgroups for whom separate cost-effectiveness analyses should be undertaken.
Such analyses may inform alternative decisions regarding the service provision to each subgroup, or contribute to a weighted analysis of the aggregate group
Source: Briggs et al (2012)
Would our example patient have access to Wegovy in the UK?
Availability and Access to Wegovy
| Country | Would National Health Program Cover? |
|---|---|
| US ($1,349) | No and Yes (with PA) |
| UK ($378) | No |
| France [not yet avail.] | No |
| Germany ($328) | No |
| Spain [not avail.] | No |
| Netherlands ($296) | No |
Criticisms of Explicit Determinations
The willingness-to-pay threshold (\lambda) is not universally agreed upon and can vary significantly between countries and over time.
Often “all or nothing,” or at least targeted at certain clinical subpopulations.
A treatment strategy that fails to meet an explicit threshold test may actually be cost-effective to adopt if we impose some patient-level cost-sharing.
- Example: Patient pays some non-zero percentage of the cost of semaglutide.
Does the US use explicit mechanisms?
Short Answer
- No for most federally-financed programs (e.g., Medicare, Medicaid)
- Yes for some clinical society recommendations and pricing recommendations.
Why No?
- Coverage determinations based on QALYs banned from use in Medicare (Affordable Care Act)
- Protecting Health Care for All Patients Act would prohibit all federal health programs (e.g., VA, Medicaid, Marketplaces) from using QALYs to make coverage or reimbursement decisions.
- Passed by House in February 2024
Context: Banning QALYs
In 2017, the Department of Veterans Affairs began integrating CEA into its drug pricing & formulary negotiations (e.g., PCSK9 inihibitors).
The 2022 Inflation Reduction Act authorizes Medicare to negotiate the price of certain drugs.
- Explicitly bars Medicare from using QALYs (or other similar measures) to help negotiate a value-based price.
Why Ban QALYs?
The bans reflect concerns that QALYs could be used to ration care. (Plus intense lobbying from Pharma … )
Patients with multiple comorbid conditions have lower quality of life and thus an extension of life by reducing the burden of any disease would not generate as many QALYs.
QALYs are fundamentally a measure of the health gains of treatments, not a measure of the value of people (Cohen, Neumann, Ollendorf 2023).
Why Ban QALYs?
An ICER makes comparisons across treatment strategies, not people.
QALY alternatives (DALYs, equal-value life year gained, health-years-in-total) exist.
My view: debate is really about the use of explicit thresholds, not the outcome measure used.
Why Yes? Clinical Recommendations
“Choosing Wisely” campaign targeted so-called “low-value” services.
The American College of Cardiology and the American Heart Association use cost-effectiveness analyses to inform clinical guidelines.
Choosing Wisely
Choosing Wisely
For more, see Pandya (JAMA 2018)
Why Yes? Value-Based Pricing
- The Institute for Clinical and Economic Review (ICER) is a non-profit organization that evaluates the cost-effectiveness of new drugs and therapies.
- Reports are used by payers to inform coverage decisions.
- Reports are also used by manufacturers to inform pricing decisions.
Value-Based Pricing: PCSK9 Inhibitors
- Sanofi and Regeneron lowered the price of their PCSK9, Praluent, to benchmark it closer to ICER’s VBP.
- In return, Express Scripts, one of the largest pharmacy benefit managers in the U.S., agreed to provide Praluent with exclusive formulary placement (more on this when we discuss implicit mechanisms!)
Value-Based Pricing: Gene Therapy
- Zolgensma (gene therapy for spinal muscular atrophy) is an example where the value-based price informed the drug maker’s pricing decision.
Value-Based Pricing: Gene Therapy
Source: Health Affairs
Case Study: Value-Based Pricing
