ICER’s Growing Impact On Drug Pricing And Reimbursement
The Institute for Clinical and Economic Review (ICER) is sometimes called America’s `NICE,’ referring to the National Institute for Health and Care Excellence in England and Wales. In certain ways, ICER and NICE do resemble each another. Both institutes undertake clinical and economic reviews of medical technologies, endorse and utilize the Quality-Adjusted-Life-Year (QALY) in their cost-effectiveness analyses, and make recommendations to payers. Both entities have also been subject to criticism from the drug industry and patient advocacy groups with respect to their methodology and certain controversial recommendations they’ve made.
In the U.S., ICER is gaining traction, in ways perhaps unimaginable several years ago. For many years it was thought that the U.S. would be immune to cost-effectiveness thresholds. It was common to hear the refrain: “We don’t do rationing here, at least not explicitly.” Well, explicit rationing is no longer something that’s merely done in single-payer systems or international markets. ICER is partly responsible for reintroducing the discussion of explicit rationing in the U.S.. Last summer, CVS Caremark established a formulary based on cost-per-QALY estimates, Specifically, CVS Caremark provided clients the option of excluding drugs from coverage if they don’t meet a benchmark of $100,000 per QALY in analyses carried out by ICER.
But, as a private organization without public funding or accountability ICER is obviously operating in a very different environment. The U.S. healthcare system is still a mostly private market, with multiple payers of all sizes and shapes. The characteristic fragmentation implies a lack of payer monopsony. In this respect, given that NICE operates in a single-payer healthcare system, it will invariably have more clout, as positive recommendations carry a responsibility for acute and primary care trusts throughout England and Wales to fund treatments. At the same time, negative recommendations tend to have a system-wide impact throughout the National Health Service. Indeed, NICE’s most controversial decisions have been the negative recommendations, that is, advising non-coverage for certain drugs.
There are also important methodological differences, one of which is the use of budgetary impact analysis. Unlike NICE, ICER systematically considers a treatment’s affordability or budgetary impact in addition to cost-effectiveness. Only very recently has NICE considered budget impact, and specifically a budgetary impact threshold above which new treatments will be subject to affordability calculations. Also, NICE’s process for carrying out technology assessments is relatively transparent and participatory. That is, NICE has an explicit mandate to require manufacturer submissions of product dossiers, include patient and public involvement in the appraisal of technologies, and post the cost-effectiveness model and willingness to pay thresholds on the institute’s website. On the other hand, ICER cannot require manufacturer input (and must therefore sometimes rely solely on its own data collection and modeling for certain assessments), does not actively involve patients or the public (though public comment periods following draft analyses have become commonplace), and offers only limited transparency of its models.
A recently released ICON report suggests that the impact of ICER assessments on payer decision-making is higher than expected, especially considering the fact that ICER wasn’t widely known until 2015. Increasingly, payers view ICER as a “decision resource” for budgetary and formulary policy decision making.
In the U.S. context, non-coverage decisions by payers are less frequent than in international jurisdictions. ICER’s greatest influence therefore is not on the binary drug coverage decisions (cover or not), but rather the net price (post rebate) and the conditions of reimbursement or utilization controls once a drug is covered. To illustrate, the above-mentioned ICON report suggests that more than a third of leading payers surveyed said it was likely or extremely likely that they would request a rebate to match the net ICER cost-effective price. The report also demonstrated that payers that use ICER analyses would be likely to alter prior authorization criteria or step edits to favor the most cost-effective product in a therapeutic class.
According to the ICON report, ICER analyses of particular interest to payers focus on big ticket items with the potential for significant budgetary impact. Here, payers perceive an opportunity to achieve cost savings by following ICER recommended pricing based on cost-effectiveness thresholds. ICER’s role in seemingly aligning price and value has been highlighted in the case of the PCSK9-inhibitors. In this regard, perhaps ICER is contributing incrementally to the ever expanding gross-to-net bubble. But, while the impact on the net transaction price is viewed favorably by payers, what patients care about is their ever-increasing out-of-pocket cost burden. And here, ICER has not had any palpable influence.
The ICON report indicates that drug manufacturers are more reactive to ICER than proactive. This wait-and-see approach made sense when ICER’s influence was less pronounced. But, in light of evidence of ICER’s growing influence drug makers will need to be prepared for push-back from payers on the basis of ICER analyses. Moving forward, it is believed that risk-sharing arrangements could be significantly impacted by ICER assessments. In the face of a growing number of treatments (e.g., gene therapies) with costs over $500,000 per patient and a relatively high degree of uncertainty regarding efficacy and safety, the use of value-based contracts will likely increase. Such contracts are based on technology appraisals and measurements of value, which is precisely the kind of work ICER does.