U.S. payers have spent almost a decade reforming healthcare payments to emphasize value rather than the volume of care. Across the continuum of healthcare, decision makers agree that the shift in emphasis from volume to value is irreversible. As the Professional Society for Health Economics and Outcomes Research (ISPOR) notes, “healthcare systems have been moving towards more value-driven approaches that focus on evaluating therapeutic options based on health outcomes, value to the patient and effectiveness compared with other treatment options.” (1). The emphasis on value is steadily growing, and with this growth comes the unique challenge of defining and measuring value through value assessment frameworks. As value assessment becomes ingrained into healthcare decision making, stakeholders need to actively participate in the public value assessment discussion.
What does value assessment look like today?
Value assessment is not a new concept in the healthcare space. Looking abroad, value assessment of drugs through a defined health technology assessment (HTA) process has existed for decades. Indeed, the Biden administration had earlier fueled speculation of creating an HTA body in the U.S. and importing a system modeled after the German regulatory body, the Institute for Quality and Efficiency in Health Care (iQWIG). While many developed nations have national HTA programs to guide coverage and pricing decisions, the U.S. does not. But this has not always been the case. The Office of Technology Assessment, formed in 1972 and closed in 1995, served to inform Congress through non-binding recommendations of the impact of new technologies and included a program focused specifically on healthcare. Nevertheless, the current lack of a single national HTA organization or process reflects the fragmented insurance system and the contemporary U.S. political landscape—including the favoring of market-oriented solutions. Each payer is free to make the coverage decisions it feels best reflects the needs of its members and conduct its own price negotiations. (2)
Who are the players in value assessment?
The fragmented value assessment landscape includes government agencies such as The Agency for Healthcare Research and Quality (AHRQ) and The Patient-Centered Outcomes Research Institute (PCORI), both of which conduct or fund limited HTA research. Professional societies such as the National Comprehensive Cancer Network (NCCN), the American College of Cardiology and the American Heart Association (ACC-AHA), and American Society of Clinical Oncology (ASCO) all publish value assessments designed to inform clinical decisions at the patient level.
Where things begin to get interesting, and where there is most space for shaping, is the application of value assessment for payer-level decisions. In the absence of a national HTA body, the venture-funded third-party organization, the Institute for Clinical and Economic Review (ICER), has stepped in to evaluate the clinical and economic value of drugs. ICER is arguably the most visible and influential HTA in the U.S. and has steadily grown in influence since its foundation in 2006. ICER is an active voice in the drug pricing narrative and has been referred to as a “drug-pricing watchdog.” (3)
The search for a fair price: An interest in value assessment for drug pricing
Stakeholders broadly agree that drug prices should reflect the value of treatments to patients and to society. The “invisible hand of the market” used to guide drug pricing will no longer be sufficient rationale as policymakers continue to drive legislation designed to lower drug prices. In the context of value-based healthcare, there is growing interest in applying value assessment to drug pricing. ICER attempts to fill this void by selectively choosing pharmaceutical products for cost-effectiveness review, publishing a “value-based” price based on cost-effectiveness analysis. ICER’s methodology is modeled similarly to the U.K.’s NICE where cost-effectiveness analysis of a drug is defined in terms of cost per quality-adjusted life year (QALY). While ICER’s QALY-based approach cannot be easily adopted by U.S. payers, most payers cite ICER reports are considered in their decision-making process. (4) ICER is fast becoming the most influential voice in this space and with it, its QALY-based methodology.
The problem is that QALY-based approaches have long faced critiques of being narrowly defined and leave space for discontent and methodological failings. The Affordable Care Act of 2010 (ACA) prohibits the Secretary of HHS from using the QALY, or similar measures, to determine coverage, reimbursement, or incentive programs under the Medicare program [link]. The Chairman of the National Council on Disability, Neil Romano, had the following to say on importing foreign QALY-based cost-effectiveness analysis methodologies in the most favored nations provisions:
“ … adopting foreign drug prices set in reliance on the quality adjusted life year (QALY), a cost-effectiveness measure that devalues the lives of people with chronic illnesses and limits their access to highly effective drugs and treatments; it will cause doctors to stop providing necessary care, thereby worsening chronic diseases and increasing deaths of seniors; and it is a major policy change developed and implemented without providing the opportunity for public comment from affected stakeholders.”
Simply put, the QALY is an inappropriate measure for assessing value stemming from its potentially discriminatory nature, and its use in healthcare decision making should not happen in the U.S.
Innovators must recognize that as the healthcare paradigm shifts to value over volume, demonstration of value will follow suit. Decisions on how we define and measure value can impact pricing, coverage, access, and therefore the ability to develop future innovations. For these reasons, innovators should critically assess what value means to them and “get value assessment right”.
Novel sources of value
Standard HTA methods fail to capture many important aspects of value. The most obvious aspects are spillover effects of healthcare investments into other areas and on inequities in access to healthcare. An ISPOR Special Task Force on defining the elements of value developed the Value Flower (Figure 1), where elements of value not traditionally captured are defined and brought into consideration. Obvious sources of value such as productivity, equity, and scientific spillovers, etc. are spelled out for consideration along with many other sources of value to be considered as part of a drug’s value. This new framework goes far beyond QALYs and provides an alternative way forward to value assessment that can fairly and transparently capture the value of an innovation.
Figure 1. Elements of value as a framework for value assessment. Circles represent core elements of value (green), common but inconsistently used elements of value (light blue), and potential novel elements of value (dark blue). Lines represent value element included in traditional payer or health plan perspective (blue) and value element also included in societal perspective (red). (5) Reprinted from Lakdawalla DN, et al. Value Health. 2018;21(2):131–139, Copyright 2018, with permission from Elsevier. [link]
Never have novel elements of value been more obvious than with COVID-19 vaccines. These innovative vaccines have no doubt saved lives and healthcare dollars, but their value is not strictly limited to traditional HTA measures. Broader public health impacts stemming from isolation such as the rise in mental illness and rise in drug overdoses may not be captured by traditional HTA measures. However, they need to be explicitly considered. Using the Value Flower, we can also ascribe novel sources of value to these vaccines such as scientific spillover, as mRNA technology promises to transform areas of medicine [link]. In addition, the elephant in the room is the ability to “return to normal”, a value-add not captured in traditional healthcare value measures. The societal impacts of the “return to normalcy” facilitated by the vaccines as the population returns to work, students return to classrooms, and families reconnect are immense and should be considered in the value of these innovations as allowing the world to interact again has real and measurable economic and social value. To begin to really assess this value, we must critically ask ourselves: What exactly do we value, and what are willing to pay for?
In asking the questions on value and willingness to pay, we must also consider societal priorities and moral obligations. Addressing inequity in healthcare and reducing disparities in outcomes should be priorities. The causes of health inequity in the U.S. are complex, with deep historical causal chains where today these inequities are manifested broadly along socioeconomic and racial lines. (6) Allocating resources to innovations that increase equity is important to our society and should be explicitly included in our definition of value and measured when assessing value. When considering health and welfare, this extends to other considerations, including societal preferences for allocating treatment to those with the most severe illnesses, those with rare/orphan disease, diseases with no or limited treatment options, and those afflicted by the greatest disabilities.
As we’ve written before, times are changing in the value and pricing space. Innovators now have both the additional burden and opportunity to demonstrate the value of their products to healthcare decision makers. By asking the critical questions, innovators can be active participants in the definition of value assessment. It is crucial in these still formative days of value assessment in the U.S. to define what value means or risk having it defined on our behalf. To learn how we can help you demonstrate the value of your drugs, please visit this webpage.
1) Value Assessment Frameworks. ISPOR.
2) Mulligan, K. et el. (2020, February 26). Health Technology Assessment for the U.S. Healthcare System. USC Schaeffer.
3) Weintraub, A. (2021, June 17). Cost watchdog ICER will bless some high-priced gene and cell therapies, but only with solid proof of benefit: Analyst. Fierce Pharma.
4) (2019, November 15). Payers Report that ICER Analyses Increasingly Guide US Price Negotiations. ICON.
5) Lakdawalla DN, et al. Value Health. 2018;21(2):131–139, Copyright 2018, with permission from Elsevier
6) Lakdawalla, D. et el (2021, October 21). How COVID Can Help Us Refocus On The How And Why Of Value Assessment. Health Affairs.