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ICER will examine drugs with unsupported price increases

By Angela Maas

As the spotlight on manufacturers’ raising the prices of therapies already on the market shows no sign of dimming, one industry group recently unveiled its intentions to dig a little deeper into the topic. The Institute for Clinical and Economic Review (ICER) says it will create a series of so-called Unsupported Price Increase (UPI) reports that will examine whether price increases are justified. At least one industry expert contends that while there may certainly be some benefits to the data ICER will collect, there are multiple challenges in its approach, and the information may be of limited use to commercial payers. With many specialty therapies experiencing large price increases, manufacturers will need to be able to convey their products’ value.

In a draft protocol published on Jan. 17, ICER said it is proposing annual reports of “up to 13 drugs that have experienced substantial price increases over a two-year time period. ICER will review changes in the evidence base for these drugs, and report on whether potential evidentiary support for price increases was found.”

ICER will begin with the top 100 drugs based on their sales revenue and then will whittle those down to the products that have had increases over a two-year period in their wholesale acquisition costs (WACs) of more than twice the medical Consumer Price Index. Of that group, ICER will analyze those whose two-year net price — the WAC net of discounts, rebates and other price concessions — increased. Those drugs then will be ranked in terms of those whose net price increases have had the biggest effect on U.S. spending over the past two years. ICER will review the evidence for the top 10 drugs, as well as up to three other therapies based on public input. In addition to the material it reviews, ICER says it will contact the manufacturers of the drugs it is reviewing to allow them to submit comments. The group will not publicly identify the drugs it is reviewing until the report is released.

Reports Will Have Some Limitations

The organization clarifies that it is unable to perform full economic analyses on the drugs studied or to devote the time needed to produce the reports “in a useful time frame.” Because of this, it explains, “these UPI reports are not intended to determine whether a price increase for a drug is fully justified by new clinical evidence or meets an ICER value-based price benchmark. Instead, we will focus the analysis on whether or not substantial new evidence exists that could justify its price increase. By identifying drugs with substantial price increases for which there is no basis in new evidence we hope to make an important first step in providing the public and policymakers with information they can use to advance the public debate on drug price increases.”

ICER says that “state policymakers and others” have contacted it “for several years” to undertake a review that would fill the gap between states’ seeking measures to address the issue of drug price increases and the lack of a “systematic approach at a state or national level to determine whether certain price increases are justified by new clinical evidence or other factors.”

First Report Is Slated for October Release

The organization is taking comments on the draft protocol until Feb. 13. It plans to issue a revised protocol on March 8 and the final report Oct. 8.
Jason Shafrin, Ph.D., a senior director of policy and economics at Precision Health Economics, notes that the group’s prior approach to measuring therapies’ value “focused solely on value at a drug’s launch. This approach is problematic because not only do prices change over time, but so does the evidence surrounding a drug’s long-run efficacy and safety. For instance, new trials may provide additional insight into subpopulations that may benefit more from a medicine, and real-world data analysis can determine whether effectiveness is better or worse than the efficacy observed in clinical trials. Thus, updating value measurement over time is essential for these reports to be relevant after drug launch.”

That said, he tells AIS Health, “one of the key issues is what determines a price increase.” Various analyses have shown the so-called gross-to-net-bubble continues to increase, mainly due to the rebates manufacturers offer payers in order to gain preferential placement on formularies, a practice that HHS recently targeted (see story, p. 1). Shafrin explains that while a drug’s invoice price may be experiencing fairly big increases, its net price increase may be much lower. “Thus, measuring the net impact on health care costs rather than the top-line ‘sticker price’ will be important.”

“There are two big issues with the report,” contends Lisa Kennedy, Ph.D., chief economist at Epiphany, a company that performs health economics, reimbursement and market access studies. “Calculating net price is really hard — is this something that ICER can do accurately? But more importantly, how does ICER judge if there was enough evidence to substantiate a price increase? The process for this isn’t really clear, and, given that ICER is funded by LJAF [i.e., the Laura and John Arnold Foundation, which also is funding the series of reports], who has a specific interest in reducing prices, there is some question on the impartiality of the report.” She also notes that the report doesn’t focus on out-of-pocket costs for patients, which “would be a nice focus for ICER to consider.”

Shafrin asserts that ICER has many potential challenges in conducting its research, and three “pivotal” ones are “measuring drug prices, determining the relevant information, and quantifying value. At first glance, determining drug prices should be simple,” but invoice prices and net prices may not be the same. “This is problematic in that it is entirely possible that list prices increase over time while the net cost to payers stays constant or declines due to rebates. ICER makes some effort to address this issue using SSR Health data, but as rebates vary across payers, the true value is best measured in a local context rather than a national one,” he explains.

What Will ICER See as ‘New’ Information?

“Second, it is unclear what type of information ICER will consider ‘new information’ and how that would affect any models,” says Shafrin. “ICER says that it will take into account new evidence from ‘randomized trials, high-quality comparative observational studies, and, for information on low frequency harms, from large uncontrolled studies,’ but to date most efficacy and safety parameters that ICER has used to inform its models come only from clinical trials.” How the organization “would update existing models if it identified high-quality observational studies” is not clear, he says. “Further, the Second Panel on Cost-Effectiveness in Health and Medicine recommends including other value components, such as a treatment’s effect on productivity, caregiver burden, educational outcomes, and other factors.” Shafrin cites a study he co-authored that showed “including these recommended components can significantly affect a treatment’s estimated value. However, it is not clear whether ICER will also include these broader societal benefits in its model updates.”

Value Assessment Will Be Helpful

And third, he says, as new evidence becomes available, “it is important to better capture differences in patient treatment responses and preferences. Real-world evidence may help identify for which patients a drug may work best; if physicians can identify cases where patients are not responding and thus stop treatment, the real-world costs may be lower than those observed in the clinical trial. Further, value assessment should better capture the diversity of patient preferences. Some patients may prefer highly effective treatments regardless of the severity of adverse events; others are willing to give up some efficacy in order to avoid adverse events. The ICER approach assumes all patient preferences are the same when evaluating a treatment’s value, which is problematic in practice when value varies across different patient groups.”

The data ICER produces, contends Shafrin, will be “only somewhat useful for private payers,” due to the fact that they “know very well what they will be paying each year.” However, “what may be informative to private payers is the identification of new evidence and calculating how this new evidence would affect a treatment’s value.” Commercial health plans also may use the information in pricing negotiations with manufacturers, he says.

“I think if anything, this [information] highlights how complicated this area is and that list price has very little to do with net price,” says Kennedy. “Additionally, it might draw attention to the fact that rebates on list price aren’t exactly in the patient’s interest if they are paying co-insurance out of pocket.”

Companies Will Need to Show Evidence

Specialty drugs seem likely to comprise the majority of products that wind up in the ICER reports. “Between 2008 and 2016, specialty drugs were the ones most likely to have the largest price increases,” says Shafrin, citing a January 2019 Health Affairs article. “I would expect this trend to continue. Thus, it is almost certain that ICER will review changes in the price of specialty drugs more frequently than for generic or brand-name treatments. Whether or not price changes will be labeled as ‘unsupported’ by ICER will depend on whether specialty drug manufacturers are able to demonstrate evidence that the expected treatment benefits have improved over time or that uncertainty surrounding treatment benefits and safety has decreased.”

According to Kennedy, though, “There could be some specialty drugs in the mix, but the thing to really think about is that those who make ICER’s list will likely be a function of age of drug and volume — I think that it will be older drugs about to go off patent that are characterized by high volume. This is because the drugs chosen by ICER have to have a material effect on national budget impact.”

Asked about alternatives to ICER’s approach, Shafrin says, “The ICER approach works best for a single payer system like the UK where price setting is done in a centralized fashion,” he asserts, but a dynamic approach is “likely more useful to U.S. payers to be able to document each payer’s own price and value priorities.”

More Transparency Can Help Decisions

“Short of a law on transparency [to get at information around price hikes], I don’t know — it’s such a protected area,” Kennedy tells AIS Health. “Pricing transparency is an issue with all health care services, not just devices and drugs. Greater transparency for decision making would really help consumers because it would imbue ‘sunlight,’ allowing them to understand how different suppliers/providers compare and to make more informed decisions….This is a key area driving ‘market failure’ in health care provision. Who likes surprises, especially when it comes to your health care bill? Moreover, what consumer likes to hear that they’re getting the raw end of the deal — that they paid more than their insurer (which can happen)? Or that despite an insurer negotiating on their behalf, this did not translate to a measurable impact on out-of-pocket costs? “I mean, I have a Ph.D., and even I am surprised at times by what I get charged on my bill despite getting prior authorization, ensuring I’m in network, etc.”

View the full ICER document here.