NEW REPORT: Valuing the Societal Impact of Medicines and Other Health Technologies: A User Guide to Current Best Practices
A new paper published in Forum for Health Economics & Policy by 12 leading health economists explains why the conventional math used to value medicines falls short – and lays out a consensus “user’s guide” from leading economists for how to fix it.
For decades, economists have attempted to quantify the value of medicines using incomplete models that overlooked a drug’s broader value.
These outdated, conventional “cost-effectiveness analyses” fail to capture the elements of value that benefit society.
Conventional cost-effectiveness math can harm patients and society when flawed estimates are used by public or private payers as the basis to deny coverage or to charge high out-of-pocket costs to patients in dire need of essential treatments.
Abstract
This study argues that value assessment conducted from a societal perspective should rely on the Generalized Cost-Effectiveness Analysis (GCEA) framework proposed herein. Recently developed value assessment inventories—such as the Second Panel on Cost-Effectiveness’s “impact inventory” and International Society of Pharmacoeconomics Outcomes Research (ISPOR) “value flower”—aimed to more comprehensively capture the benefits and costs of new health technologies from a societal perspective. Nevertheless, application of broader value elements in practice has been limited in part because quantifying these elements can be complex, but also because there have been numerous methodological advances since these value inventories have been released (e.g., generalized and risk- adjusted cost effectiveness). To facilitate estimation of treatment value from a societal perspective, this paper provides an updated value inventory—called the GCEA value flower—and a user guide for implementing GCEA for health economics researchers and practitioners.
GCEA considers fifteen broader value elements across four categories:
1) uncertainty, 2) dynamics, 3) beneficiary, 4) additional value components
The uncertainty category incorporates patient risk preferences into value assessment. The dynamics category petals account for the evolution of real-world treatment value (e.g., option value) and includes drug pricing trends (e.g., future genericization). The beneficiary category accounts for the fact that health technologies can benefit others (e.g., caregivers) and also that society may care to whom health benefits accrue (e.g., equity). Finally, GCEA incorporates additional broader sources of value (e.g., community spillovers, productivity losses). This GCEA user guide aims to facilitate both the estimation of each of these value elements and the incorporation of these values into health technology assessment when conducted from a societal perspective.
The authors categorize the paper’s fifteen elements of value into four categories:
uncertainty
dynamics
beneficiary
additional value components
The paper provides economists and evaluators a checklist for future studies with suggested methods for measurement and operationalization.
This checklist could be added to cost effectiveness analysis manuscripts to help journal reviewers and readers understand which value petals were and were not included in the evaluation.
GCEA Fact Sheet
Generalized cost-effectiveness analysis (GCEA) is an updated health economic modeling approach developed to address key limitations of the conventional cost-effectiveness analysis (CEA) approach. GCEA more comprehensively captures the quantifiable benefits and costs of new health technologies from a patient and societal perspective based on key methodological advances by leading health economists, modelers, and value assessors.
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Conventional CEAs are commonly used by national or regional health technology assessment (HTA) entities in ex-US countries, such as the United Kingdom’s National Institute for Health and Care Excellence (NICE), as well as by the privately funded U.S.-based research organization Institute for Clinical and Economic Review (ICER). Conventional CEAs have faced increasing scrutiny in recent years from diverse stakeholders across the healthcare system as their methodologies have failed to account for real-world market dynamics and quantifiable value elements important to patients, caregivers, and family members, thereby underestimating the true societal benefits of innovative health technologies.
Across a wide range of healthcare decision contexts in the US and globally, conventional CEAs can harm patients and society when flawed estimates are used by public or private payers as the basis to deny coverage or to charge high out-of-pocket costs to patients in dire need of essential treatments.
Using conventional CEAs to determine the value of innovative medicines in healthcare decisions can have negative consequences for pipeline innovations that will hurt current and future patients (which means all of us). Undervaluing innovative medicines will likely result in less investment for essential treatments and cures. This will result in worse patient welfare and will potentially mean higher total costs of care in the longer term as we will require more health services to compensate for the decline in innovative medicines.
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In a paper released on TK DATE, a group of leading health economists built on decades of progress and summarized a total of 15 elements of value captured in GCEA that are either excluded from or incompletely captured in conventional CEA approaches used by government and privately run HTA entities. These elements were categorized in four key domains: uncertainty of future outcomes, dynamics of net health system costs, beneficiary of treatment value, and other values not easily categorized like community spillovers. The paper described latest advances in quantifying each of the value elements, allowing decisions-makers to better address crucial questions like:
How will price drops due to market competition and genericization impact the value of medicines to society over the product life cycle?
How will population changes or disease severity impact assessments?
How do we better measure the benefits of the treatment to patients by considering elements such as productivity or patient risk preference?
How will this treatment impact a patient’s family and caregivers?
How should we better consider the value provided to patients and society when knowledge generated from current innovations spurs advancements in future treatments?
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Currently, the Center for Medicare and Medicaid Services (CMS) is developing guidance that may use health economic modeling to inform the reimbursement, coverage, and out-of-pocket costs of drugs prescribed to Medicare beneficiaries. Entities like ICER are seeking to have CMS adopt conventional CEAs which undervalue the true societal value of essential medicines.
Rather than adopt conventional CEAs as the status quo, CMS and ex-US government agencies should proactively recognize the growing cross-stakeholder consensus on the limitations of conventional CEA approach and embrace validated methodological progress incorporated in the GCEA framework, which stems from decades of advancements made by global value assessment practitioners. If instead, policymakers use conventional CEAs to produce erroneously low estimates of value to discourage patient access to essential biotech innovations, this is likely to result in the need for more acute health services to compensate for the loss in pharmaceutical innovations. Because these types of services – such as hospitalizations – carry high price tags that are not reduced by genericization, this approach will increase total healthcare spending in the long run. If CMS uses this outdated math in its decision-making, the agency will be prioritizing short-term savings over long-term savings and patient and societal benefits.
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Innovators and investors can use this guide to develop critical evidence to better quantify, assess, and signal an innovation’s likely benefits to patients and society to support decision-making process following the launch of new drugs (e.g., price negotiations with payors). It is important to recognize that GCEA is not meant to be used as a price-setting tool of an innovation; that should be done by the market in a dynamic market-based system like the US.
The paper goes through fifteen elements of value represented in the ISPOR “value flower” and explains the most current, validated methodology to help users in quantifying the value of each petal. Practical case examples were included throughout to illustrate how these applications work in the real world and their potential impacts on the value estimates. The paper also features a checklist that any assessment can use to describe which GCEA petals were incorporated into the evaluation and how each petal was measured. This checklist could be incorporated as a standard practice for journal submission or HTA processes.
Understanding the value of medicines
Medicines do a lot more than help the patient taking it today.
The value flower conceptualizes the broader elements of value in addition to benefits to the patient.
A societal perspective
Some medicines might reduce the time a parent or child needs to devote to caring for a sick family member, allowing them to go back to work or school.
Others can keep people out of hospitals, reducing healthcare spending and preserving beds for others who might need it.
And ultimately all medicines one day become generic, providing inexpensive treatments that continue to benefit society and an increasing number of patients as society’s population grows.
Only a complete accounting of a drug’s societal benefits can accurately assess its value to all of us.
GCEA asks a broader set of questions that more fully capture the value of a medicine:
What will the savings be when this drug goes generic?
Will this drug ease the burden on caregivers?
Does this drug benefit healthy people by lowering everyone's risk?
and many more…
Read from the authors
“Understanding the total value of health technologies is crucial to ensure that treatments are being delivered efficiently while balancing the incentives for innovation that yield a consumer surplus.”
- Melanie Whittington, PhD
Former Director of Health Economics of ICER
“The stakes are incredibly high for improving how the value of medicines is assessed.” said Lou Garrison. “Patients could end up paying more for medicines or going without them entirely if conventional assessment methods, which take a narrow perspective, conclude they won’t be cost-effective. In many cases, when you factor in how patients and society value medicines in the real world and how the market works in practice, those same medicines are actually great bargains for governments, employers, health plans, and, most importantly, for the patients they represent.”
- Louis Garrison, PhD
Professor Emeritus, The CHOICE Institute at the University of Washington
“This paper is an important successor to the work of ISPOR’s US Value Assessment Task Force that popularized the Value Flower and other approaches to augmenting conventional cost-effectiveness analysis. Anyone interested in conducting or interpreting more comprehensive and equitable value assessments will find this paper a valuable source for these new methods, from generalized risk-adjusted cost-effectiveness (GRACE) analysis to a set of other impactful societal and dynamic factors that deserve consideration in the evaluation of innovative health technologies.”
- Richard Willke, PhD
Former Chief Science Officer of ISPOR
“While researchers have called for the incorporation of broader value elements into health technology assessment, one key barrier has been the lack of understanding of how to actually calculate each of these value elements. The generalized cost effectiveness analysis (GCEA) user guide aims to eliminate this barrier by clearly defining what each value element is, why it is important, and how specifically the value element can be calculated.”
- Jason Shafrin, PhD
Adjunct Professor, Division of Healthcare and Biopharmaceutical Business, University of Southern California
“This paper provides a vital new guide to the methodological advances of the Generalized Cost-Effectiveness Analysis (GCEA) framework, and how researchers can implement GCEA in practice.”
- Peter Neumann, ScD
Director of the Center for the Evaluation of Value and Risk in Health at Tufts Medical Center
"This work serves as a practical guide for practitioners, helping them to better understand what the GCEA elements represent and how to implement their inclusion into value assessments so that they more accurately characterize the full range of impacts that people care about."
- Joshua Cohen, PhD
Deputy Director of the Center for the Evaluation of Value and Risk in Health at Tufts Medical Center