How Manufacturers Can Use Value Assessments to Their Advantage

In an interview with Radar, Specialty Pharmacy News, Precision’s Tricia Garland, Todd Edgar, and Stephanie Kennedy, discuss how payers could be incorporating elements of value frameworks as a part of their decision-making.

Read the full article below.


With QALY Use Rising, Manufacturers Can Use Value Assessments to Their Advantage
AIS Health – Radar
by Angela Maas

As payers struggle to keep their drug costs down, many are turning to independent health technology assessment organizations as a source of information. Various surveys show that more and more pharmacy and therapeutics (P&T) committees consider this information valuable and are turning to organizations such as the Institute for Clinical and Economic Review (ICER) to help make formulary decisions. And while many manufacturers may take issue with the way some assessments are conducted, there are steps they can take to have more of an influence in how their drugs are perceived.

For years, many countries outside the U.S. have used quality-adjusted life years (QALYs) to help determine whether they will extend coverage to a drug. As U.S.-based payers struggle to rein in the costs of pharmaceuticals, they are increasingly turning to evaluations by health technology assessment organizations, and ICER, which uses QALYs to assess products, appears to be the most popular one.

Following a 2017 ICER report on rheumatoid arthritis therapies, Decision Resources Group (DRG) surveyed MCO medical and pharmacy directors on tactics they would use to control their spending in RA. More than half said that “they expect to set reimbursement criteria for emerging therapies based on the ICER analysis,” according to a DRG blog.

And in a Sept. 20 article in Managed Care, ICON plc’s Nathan White, senior vice president; Adam Johns, senior principal; and Eric Latch, analyst, wrote about a survey their firm conducted this year of more than 20 payers. According to the article, “more than three quarters of respondents said that they would use an ICER cost-effectiveness threshold as a basis for negotiating a rebate contract. More than a third said it was likely or extremely likely that they would request a rebate to match the net ICER cost effective price. And a similar proportion said they would request a rebate worth more than 50% of the difference between the product list price and the ICER-assessed cost-effectiveness threshold, although payers indicated that this would be capped when actual rebates approached ‘double digits.’

 “Judging by these survey results, ICER’s numbers are, at the very least, serving as important starting points for the consistently tense negotiations between drugmakers and payers,” wrote the authors, who are all in ICON’s global pricing and market access practice.

They also compared the wholesale acquisition costs (WACs) of almost 40 products with their prices at $150,000 per QALY. If drugs with WACs larger than the QALY threshold lowered their prices to meet it and drugs below the threshold raised their prices to be in line with it, total annual expenditures on the therapies would decline $6.2 billion.

According to Lisa Kennedy, Ph.D., chief economist at Epiphany, a company that performs health economics, reimbursement and market access studies, “the best thing that a value framework can do is bring all the evidence together — especially clinical, safety and tolerability — not just clinical trials but real-world evidence — into one place so that all treatment options can be evaluated. A large number of payers have told us that this is the most useful part of value frameworks. This is hard to find and can help physicians, payers — and increasingly patients — make more informed individual choices on treatments.”

“I think payers within their own health plans…just don’t have the breadth of data that these other organizations are able to tap into to do their various health economic data analyses, so they are looking for an unbiased view informed by a really robust set of data beyond the claims data that a payer might have” or the patient records that a provider would have, says Peter Gilmore, a principal at KPMG Strategy.

In addition, says Stephanie Kennedy, Ph.D., senior engagement manager at Precision Xtract, “External unbiased validation supports value-based decision-making, particularly when management and coverage choices may be challenged by employer groups, patients, advocacy groups, and physicians. This can be extremely helpful if the issue is controversial, as it provides the external support from a group that is not funded by the manufacturer or a payer. A second advantage occurs where a payer may be resource-constrained. In such a situation, the valuation organization may have access to expertise and resources that would otherwise be unavailable to the payer.”

QALYs Are Complicated

However, some criticism of the QALY methodology exists. QALYs, says Lisa Kennedy, are “as complicated as the concept sounds. The purpose of using the QALY is to be able to compare all innovations with a common unit of benefit. The problem is that QALYs are hard to understand and exhibit extraordinary methodological and practical problems: They aren’t reliable across the same patients over time, across different patients and, additionally, fall down when required to measure more difficult things such as QALYs in the elderly or the very young. QALYs are often mapped from quality-of-life measures collected in a trial. What can happen is that the quality-of-life instruments used are not sensitive enough to capture meaningful change for the patient.”

A recent Milliman white paper sponsored by the Pharmaceutical Research and Manufacturers of America (PhRMA) outlines various problems with ICER’s cost-effectiveness analyses, maintaining that there are “several disconnects between ICER’s work and its potential use by private payers.”

David Whitrap, a spokesperson for ICER, responds that “The core question here — do payers find ICER’s work to be useful — is best answered by payers, not PhRMA,” and points to the ICON survey. “Health economists in the U.S. and around the world have yet to find a better metric to measure a treatment’s benefit to patients than the QALY. Critics sometimes decry the QALY as a way to measure the ‘value of a patient, but what it’s really used for is measuring the ‘value of a treatment,’” he tells AIS Health. “Because the QALY records the degree to which a treatment improves a patient’s life, people that begin treatment with a lower baseline health — whether through a disability or serious illness — provide medicines the greatest opportunity to demonstrate more QALYs gained. Relatively, it is far more difficult for treatments that target very healthy patient populations to demonstrate many QALYs gained.”

Yet although “one might argue with the methodology” used to assess value, Elan Rubinstein, Pharm.D., principal at EB Rubinstein Associates, tells AIS Health, “the fact of the matter is that this is a step in the right direction for the United States, where pursuing value is something of a new thing that has had difficulty getting established — and in light of a health care cost trend which regularly exceeds CPI-U [i.e., Consumer Price Index for All Urban Consumers], and which likely holds down wage increases since employers look at the whole ‘package’ of employee costs. When other package costs rise faster, then wages have less room to rise.”

Rubinstein tells AIS Health that “criticism of evidence-based review, whether at the population level or the treatment decision level, is important because it keeps all concerned alert to how to improve — but this criticism does not challenge the importance or existence of evidence-based review. While still evolving as to method, evidence-based review is necessary to improve clinical outcomes and reduce variability that has insufficient basis, while stretching available resources.”

So what can manufacturers do to impact how their drugs are perceived in these value assessments?

Gilmore points out that in clinical trials, manufacturers often study endpoints that are focused on gaining FDA approval but often “are less valuable to payers.…It’s not that they’re completely irrelevant, but they don’t get at the heart of the matter, which is how can I as a payer or provider assess the outcomes the drugs lead to versus the costs? And also factoring in other drivers of cost beyond drug – how do all these interventions work together? Pharma companies aren’t really set up to study that, but they can think about interesting clinical trial designs that reflect real-world clinical practice. They can rethink some of the outcomes that they’re tracking, even if they’re secondary in nature, that are more relevant to payers.” Without those data, assessments will be forced to make assumptions about them based on the endpoints that the company actually studied, which can lead to questions about the validity of the assumed numbers.

 “In the emerging value-based care environment, manufacturers will need to proactively build their own budget-impact/cost-effectiveness models and their own data to stay in control of their product’s value story,” agrees Tricia Garland, engagement manager at Precision Xtract. “In the development phase, they need to carefully study the frameworks that currently have traction, such as ICER, to determine what type of data most effectively move the needle in those assessments and invest to display their data in that way. This means they will need to think through gathering payer-relevant evidence beyond the traditional endpoints. For example, cost- and quality-related metrics, such as a reduction in hospitalizations, etc., will likely gain greater importance in terms of how payers value treatments.”

“The more that manufacturers can directly study relevant health economic endpoints, the better off they’ll be in communicating the value,” Gilmore tells AIS Health. However, he adds, “that’s easier said than done and introduces a lot more risk to a clinical trial program. You risk also not focusing on the endpoints that matter most to regulators, and drug developers are first and foremost interested in getting their drugs approved, so it’s sort of a balancing act.”

For manufacturers that set “endpoints focused on health economic relevance and that really show demonstrable health economic value,…and their competitors don’t, they certainly have an advantage” until those competitors can produce similar data, maintains Gilmore. “Early movers with good data who introduced more risk by setting endpoints that were most value to payers will often be rewarded with differential pricing and formulary positioning versus competitors.”

According to Todd Edgar, Pharm.D., senior vice president, payer access solutions at Precision for Value, “Manufacturers have significant opportunities to influence the perception of their products with respect to value assessments.”

One way is to “model how their products will likely ‘score’ in these different frameworks. If done far enough in advance, this information can be used to inform their pricing discussions. As the product gets closer to approval, some of the organizations have a formalized process for manufacturer input,” allowing drugmakers to weigh in on their product’s perceived value. “Finally, many manufacturers have prepared ‘rebuttals’ to valuations, in which they explain the perceived shortcomings of the assessment and offer an alternative view as to the value of the product,” he tells AIS Health.

“Before or during launch a manufacturer has worked in a given disease and the design of trials for that disease for years — they might arguably be the world leading experts into research in that indication,” says Lisa Kennedy. “In this case, manufacturers can work with those developing value assessments to ensure that trial data, endpoints comparisons, costs, quality of life measures, etc. are designed, assessed and modeled correctly. This is extremely important — many of those who work in value frameworks assessments have not worked in the therapeutic area before or, alternatively, have outsourced this to an academic institution such that a professor’s student researchers are assessing the evidence and modeling the disease but can be light on the disease context.”

“Manufacturers should continue to monitor the environment to see if one framework is ‘winning,’ as this will dictate the rules that they need to play by in the future,” Garland recommends. “Manufacturers should really look to align with physician and patient groups to ensure that all of these groups have a seat at the table in terms of how ‘value’ is measured. This means having public engagements with these value framework groups to provide alternative viewpoints when appropriate with these value frameworks’ methods.”

It’s beneficial for a manufacturer to align a drug’s price within the ICER QALY benchmark. Sanofi and Regeneron Pharmaceuticals, Inc. did this at the launch of their atopic dermatitis drug Dupixent (dupilumab), as well as with their PCSK9 Praluent (alirocumab) almost three years post-launch. “If an assessment proves to be positive, this is excellent — there are some products that have been recently seen as ‘responsibly priced’ and praised by groups such as Express Scripts — this could be a real advantage for manufacturers in payer negotiations,” Lisa Kennedy tells AIS Health.

Per the ICON authors, “We recognize that payers have a major opportunity now to use ICER pricing to their advantage, especially as drug rebating is becoming increasingly unpopular in public perception. In pricing wars, they will be able to wield ICER’s numbers as weapon, as demonstrated by CVS Health’s recent announcement that their employer group clients will be able to create formulary exclusions based on ICER pricing. The flip side is access and pricing challenges (but also some opportunities) for manufacturers.

“We expect contracting negotiations to be significantly affected by ICER assessments in the coming years,” they continued. “Manufacturers need to be prepared to reconcile their economic evaluations with ICER’s. If they don’t, manufacturers should be prepared to counter payer pushback that is bristling with cost-effective evidence and value positioning.”

View the ICON article at, read the DRG blog at and download the Milliman white paper at Contact Todd Edgar, Tricia Garland and Stephanie Kennedy via Tess Rollano at, Gilmore through Bill Borden at, Lisa Kennedy at, Rubinstein at and Whitrap at 

Precision Medicine Group is an integrated team of experts in fields from advanced lab sciences to translational informatics and regulatory affairs, payer insights to marketing communications. Together, we help our pharmaceutical and life-sciences clients conquer product development and commercialization challenges in a rapidly evolving environment.