Aligning drug prices with ICER estimates could save tens of billions of dollars — JAMA paper
The passage of the Inflation Reduction Act gave Medicare the power to negotiate prices for certain drugs — and pegging those prices to ICER’s value estimates could save billions of dollars, according to a paper published late last week.
The paper, written by Kai Yeung out of the University of Washington’s School of Pharmacy and several others and published in JAMA Health Forum, wrote that interest in lowering drug spending is high among payers, noting that the National Academy of Medicine has recommended basing drug prices on value. In concept, tying drug prices to the amount of benefit observed could “preserve incentives for innovation,” they wrote.
“One way to do this is to set prices to achieve a certain cost-effectiveness threshold,” the authors wrote, bringing up ICER’s work to determine the balance between clinical effectiveness and economic cost to create value-based prices, or VBPs. And so the authors decided to analyze and estimate the difference in US drug spending if prices for drugs were set to ICER-reported value-based prices.
The writers took a look at 73 drugs — all of them having been the subject of an ICER report published between 2015 and 2020. Those undisclosed drugs, per the paper, accounted for $110.4 billion in annual US drug spending and around 20% of all US drug spending in 2020.
Here’s what they found:
In the base case, applying VBPs at $100,000 per QALY and $150,000 per QALY reduced the median spending per drug by $373 million (IQR, $87 million-$953 million; P < .001) and $164 million (IQR, –$5 million to $600 million; P < .001). This reduction equates to estimated total annual savings of $11.8 billion (11%) to $40.3 billion (37%) for the 73 drugs. Scenario analyses without price increases produced estimated savings of $38.4 billion (35%) to $57.5 billion (52%).
To put that in perspective, total Medicare Part D spending in 2020 was $89 billion, the authors wrote.
Despite the savings potential, the authors conceded that the calculation to determine total national savings was from average net prices, noting that prices and savings can vary from payer to payer. Additionally, the data the researchers obtained from SSR Health accounted for more than 90% of US branded drug sales, excluding certain drugs like those marketed by private companies.
The authors concluded that “applying the ICER-reported VBPs to prescription drugs would yield a substantial savings for US health care payers. Both private and public payers have a substantial policy interest in lowering drug prices, and using VBPs may align prices with health benefits.”
But according to Prevision Policy, ICER is not on CMS’ “radar” for input to price negotiations at this point.