Governors should reject unscientific and discriminatory approaches to drug pricing

Governors should reject unscientific and discriminatory approaches to drug pricing
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When the National Governors Association convenes in Washington this weekend, prescription drug costs will no doubt be on the short list for discussion.

According to the Centers for Medicare & Medicaid Services, Office of the Actuary, Medicaid spending on prescription drugs is projected to increase by 36.5 percent (from 35.8 billion to 56.4 billion) between 2019 and 2027. Some of this escalation in costs can be attributed to our aging population and accompanying disease-related disabilities, but drug prices need to be addressed.

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As drug costs take center stage, states are becoming laboratories for new payment arrangements. While some, like Louisiana’s subscription-based “Netflix model” for hepatitis C medication are showing promise, others are cause for concern.

For example, New York's Medicaid program used “cost-effectiveness” research to evaluate whether the impact a drug had on a patient’s life was worth the price of a new cystic fibrosis treatment. The research was generated by the Institute for Clinical and Economic Review, or ICER, which issues reports about whether new, FDA-approved medications are worthy of insurance coverage.

In addition, CVS Health last year announced its intention to employ ICER’s framework so that payer clients can exclude some medications; and the Department of Veterans Affairs partnered with ICER for drug-price negotiations in 2017.

Some big players are aligning with ICER, so why should we be concerned? To put it simply, ICER’s methodology for determining drug value is unscientific and discriminatory.

The cornerstone of ICER’s approach is based on quality-adjusted life-years (QALYs). QALYs originated in the 1960s and found application when the British government was searching for ways to ration health care for its National Health Service.

The QALY is a measure invented to estimate the cost-effectiveness of a medical treatment using mortality, morbidity and cost data. When applied to health-care decisions, ICER’s methodology can mean older adults, people with disabilities and veterans are deemed “too expensive” to receive care. ICER's description of its “equal value of life years gained” metric, which is simpler than QALYs, states they do not adjust for quality of life differences arising from “age, severity of illness, or level of disability.”

ICER’s use of QALYs means that, if a 30-year-old and a 60-year-old receive identical treatments for a fatal disease, which result in a 100 percent cure and expectation of a lifespan to 80 years old, it is 2.5x more cost-effective to treat the younger patient than the older one. In layman’s terms—this is health rationing at its worst and takes treatment options off the table for doctors and their patients. What other product pricing model bases price on the characteristics of the consumer or patient over the product itself? 

ICER relies on “black box” models and its budget targets vary with the count of FDA approvals. Unfortunately, there is little transparency into exactly what goes into ICER’s formulations or how they arrive at their conclusions. This means other researchers and even payers are unable to analyze and replicate ICER’s results.

Research has also found that the QALY approach produces arbitrary results, so it does not have a sound scientific foundation despite the complex calculations. The 2013 European Consortium in Healthcare Outcomes and Cost-benefit Research project surveyed more than 1,300 people from four countries and found that the QALY model can lead to both “highly divergent costs/QALY estimates and to inconsistent recommendations relevant to providing patient access to innovative medicines and technologies.” 

Federal law reflects long-standing opposition by policymakers and the American public, of using blunt, subjective standards in public policy to determine the value of caring for patients and people with disabilities. 

The U.S. has repeatedly rejected QALYs and similar assessments as the basis for making drug coverage and reimbursement decisions. The Rehabilitation Act ensured individuals with disabilities would not “be excluded from participation in, be denied the benefits of, or otherwise be subjected to discrimination,” under any program offered by any executive agency, including Medicare.

Title II of the Americans with Disabilities Act (ADA) extended this protection to programs and services offered by state and local governments. In 1992, President George H.W. Bush’s Administration established it was an ADA violation for states to employ cost-effectiveness standards in Medicaid out of concern it would discriminate against people with disabilities. 

Making the most cost-effective choices in health care is a priority. There is no question that high prescription drug costs require immediate attention. But there are better solutions than using methodologies that are biased against seniors and people with disabilities. Buyer beware.

Susan Peschin MHS, is the president and CEO at Alliance for Aging Research.