The ICER Value Framework: The Importance of Empirical Estimates of Opportunity Costs

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1 The ICER Value Framework: The Importance of Empirical Estimates of Opportunity Costs Steven D. Pearson, MD, MSc The ICER Value Framework Takes a population level perspective as opposed to trying to serve as a shared decision-making tool to be used by individual patients and their clinicians. Even with its population-level focus, the ICER value framework seeks to encompass and reflect the experiences and values of patients. 1

2 Goal: Sustainable Access to High-Value Care for All Patients Long-Term Value for Money Short-Term Affordability Comparative Clinical Effectiveness Incremental costeffectiveness Potential Budget Impact Other Benefits or Disadvantages Contextual Considerations Cost per QALY Thresholds Societal willingness to pay WHO 1-3x per capita GDP Individual willingness to pay ~2 times annual salary Opportunity cost for the health system ~1x per capita GDP in UK, Latin America ICER: $100,000-$150,000 per QALY** 2

3 Opportunity costs and affordability Affordability is assumed unless funding would cause a net harm through one or more of the following ways By requiring cuts or other changes to existing health care services that cause a greater loss of benefits than the corresponding gains anticipated from the new service By absorbing available new resources that could be spent on other identifiable services that would provide greater overall benefit to the same or different patients By increasing the amount that individual patients must pay to an extent that would require unreasonable individual sacrifice By requiring the reallocation of spending form other social goods or an increase in new revenues that would cause a greater loss of benefits to society than the anticipated benefits from adoption of the new service Copyright 2017 ICER Opportunity Cost and Affordability Is there an opportunity cost threshold related to affordability? Linked to rough judgment of opportunity cost by payers Linked to some estimate of societal willingness to pay 3

4 PRICE OF TREATMENT Potential Budget Impact threshold Item Parameter Estimate Estimate Source 1 Growth in US GDP, 2017 (est.) +1% 3.75% 3.20% World Bank, Total personal medical health care spending $3.08 trillion $2.71 trillion CMS NHE, Contribution of drug spending to total health care spending Contribution of drug spending to total health care spending Annual threshold for net health care cost growth for ALL drugs Average annual number of new molecular entity approvals Annual threshold for average cost growth per individual new molecular entity Annual threshold for estimated potential budget impact for each individual new molecular entity 13.3% 17.7% CMS NHE, 2016; Altarum Institute, 2014 $410 billion $479 billion Calculation (Row 2 x Row 3) $15.4 billion $15.3 billion Calculation (Row 1 x Row 4) FDA, 2016 $452 million $457.5 million Calculation (Row 5 Row 6) $904 million $915 million Calculation (doubling of Row 7) $ $90.00 POTENTIAL BUDGET IMPACT SCENARIOS $80.00 $70.00 Budget impact threshold $60.00 $50.00 $40.00 Affordability and access alert $30.00 $20.00 $10.00 $0.00 1% 10% 25% 50% PERCENT UPTAKE AMONG ELIGIBLE PATIENTS AT 5 YEARS 4

5 ICER value-based price benchmark Long-Term Value for Money Goal: Sustainable Access to High-Value Care for All Patients? Short-Term Affordability ICER Value- Based Price Benchmark Conclusions Opportunity cost is the foundation for considerations of long-term cost-effectiveness thresholds AND of short-term affordability concerns It must be acknowledged that opportunity cost will vary for different payers and will always raise difficult questions regarding societal willingness to pay for health vs. other social goods Empirical measures of opportunity cost will be critical to solidifying trust in the use of costeffectiveness thresholds to guide decision-making 5

6 Thank you Copyright ICER 2017 ICER Reports and Value-Based Pricing Drug Approximate Discount to Meet Value-based Price Range Short Term Affordability/Access Alert? High cholesterol 50% from list price Yes Heart failure 100% premium over list price Yes Multiple myeloma 50% from list price No Asthma 70% from list price No Rare liver disease 70% from list price No TKIs for lung cancer* 0% from list price No PD-1s for lung cancer 50% from list price No Psoriasis* 5% from net prices No Multiple sclerosis 25% from net prices No Rheumatoid arthritis 15% from net prices No Atopic dermatitis (draft) 0% from anticipated net price Yes 6