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Drug Pricing and the Broader Quality of Life

By Jason Shafrin, Ph.D.
Precision Xtract

Published in the Wall Street Journal opinion section  Nov. 14, 2019:

The economic models created by the Institute for Clinical and Economic Review (ICER) have had a significant impact on the price negotiations between drug companies and health plans (“Obscure Model Puts Price On Healthy Year of Life,” Page One, Nov. 5). What ICER gets right in its approach is that drug prices should be linked to the benefits each drug provides.

This economist believes that ICER’s models based on a quality-adjusted life year (QALY) have three fundamental flaws. First, ICER measures benefits and costs only from the health-care-sector perspective and often ignores benefits that accrue to other stakeholders. Employers, for instance, care about getting people back to work. Reducing the burden on the family members who care for sick patients is also important. Second, people place higher values on health gains for certain patients, such as young children and patients with severe disease, like cancer. Finally, if the U.S. government were to adopt ICER’s recommendations as a centralized pricing mechanism, this could result in a world where it is increasingly difficult for patients to access treatments considered low-value for the average patient.

Instead, information on treatment benefits and costs should be used to promote the optimal matching of patients to existing therapies based on each patient’s unique characteristics.

By limiting the benefits included in its model and inappropriately valuing these health benefits, ICER risks mispricing innovative health therapies and disincentivizing investments in research and development.