By Kenneth E. Thorpe
October 10, 2019
A prominent healthcare watchdog has found the solution to high drug prices – or so it claims.
For years, the nonprofit Institute for Clinical and Economic Review (ICER) has analyzed and rated the cost-effectiveness of new drugs. ICER wants insurers and government programs like Medicare and Medicaid to use these ratings to determine which medicines are worth covering. If health plans only cover drugs that provide a good "value" to patients and taxpayers, ICER believes drug expenditures would plummet.
For each drug it evaluates, ICER offers a suggested price range based on how many additional months or years of good health the treatment provides to patients. In the United States, ICER recommends that drugs not cost more than $175,000 for each "quality adjusted life year" – 12 months of good health – they deliver.This approach probably would cut short-term spending – but it would also endanger patients, especially those with rare diseases that afflict fewer than 200,000 people. Millions of Americans could lose access to life-enhancing drugs. And research into rare disease treatments would grind to a halt.
Rare disease drugs hardly ever meet ICER's standards. Four out of the five rare disease therapies that ICER assessed between December 2014 and August 2018 were deemed low value.
Consider revolutionary treatments for spinal muscular atrophy or SMA, the leading genetic cause of death for infants. The FDA approved the first therapy for SMA in 2016. Before that, many patients would die before age two. The drug enabled previously immobile children to stand, walk, and breathe more freely. Parents credit the drug with saving their children and enabling them to hit developmental milestones that were previously unreachable.
But ICER recently determined the therapy fell short of "traditional cost-effectiveness" thresholds. To fit within those thresholds, its price would have to drop up to 90 percent.
So are these treatments overpriced? Not at all. ICER assumes innovators would be willing to take a 70 to 90 percent price cut and still find it financially viable to manufacture and distribute a medicine.
This is wildly unrealistic.
On average, it costs $2.6 billion to bring a new drug to market. If public and private health plans used ICER's cost assessments to deny coverage to certain medicines, drug researchers would have little incentive to develop new therapies.
This is especially true when it comes to drugs for rare diseases, which often affect just a few thousand people. Many companies won't even roll the dice on rare disease drug research. Consequently, 93 percent of rare diseases lack an FDA-approved treatment.
When companies successfully create rare disease drugs, they must set prices high enough to recover their development costs from a small patient population. As a result, these treatments cost much more per dose than traditional drugs, whose costs can be spread over millions of customers.
ICER doesn't sufficiently account for this fundamental difference between mass-market and rare disease drugs. Nor does it consider the smaller-than-average size of rare disease clinical trials when declaring them "inconclusive" in determining a drug's benefits for patients. And it also evaluates drugs before reliable information is available – it is currently reviewing a treatment for Duchenne muscular dystrophy that is still under FDA review.
Despite its limitations, ICER's approach appeals to policymakers and insurers who want to cut drug spending. They could point to an ICER analysis as an "objective" reason to not cover certain drugs.
This is already happening in the United Kingdom, where officials in the national health system only cover drugs deemed cost-effective. The National Institute for Health and Care Excellence -- which uses a framework somewhat similar to ICER's – routinely recommends denying patients access to potentially life-saving drugs for conditions ranging from cancer to cystic fibrosis.
If the United States adopted a similar approach, 30 million rare disease patients could face similar barriers to treatment almost immediately.
The long-term effects would be even worse. If insurers and government programs stop paying for rare disease treatments, the financial incentive to develop these drugs would evaporate. Research into thousands of rare diseases would dry up, along with patients' hope for a long, healthy life.
Lowering drug spending is a worthy goal. But not at the expense of stifling research and condemning millions of patients.
Kenneth E. Thorpe is a professor of health policy at Emory University and chairman of the Partnership to Fight Chronic Disease.