The question of how to price new medications is constantly under debate, but the development of drugs to treat Covid-19 makes this question even more urgent. For example, how much should remdesivir–an antiviral drug shown to reduce time in the hospital for some Covid-19 patients–cost hospitals and patients to purchase?
What is ICER?
Policymakers and insurers often turn to the Institute for Clinical and Economic Review (ICER) for guidance on the value of new drugs. ICER is an independent non-partisan research organization that “objectively evaluates the clinical and economic value” of drugs and other medical treatments. Insurers and policymakers notice when drug companies price their products above ICER’s recommended price, and often put pressure on pharma to lower their prices.
Because ICER’s reports provide a foil to skyrocketing drug prices, they are often under attack by pro-pharma groups who say that their reports do not take into account the true “value” of medications on improving people’s lives. Some especially take issue with ICER’s use of the QALY (quality-adjusted life year) as a component of cost-effectiveness analysis, saying that human lives cannot be quantified. Every human life is priceless, true, but without a framework for estimating drug value, we are left accepting whatever price the market will bear, which is usually too high for most patients.
How much should Remdesivir cost?
ICER recently released a report with alternative prices for remdesivir, taking into account the uncertainty of its effectiveness in actually saving lives. They estimate that a dose of remdesivir could be priced up to $50,000 if the drug does save lives, but only $1,170 if it turns out the drug does not save lives. ICER also provides what is called a “cost recovery” pricing model, which estimates how much a drugmaker would need to charge to recoup their investment. For remdesivir, ICER found that it costs $10 to manufacture one 10-day course of the drug. Since remdesivir was already an existing drug, there were no additional research & development costs for Gilead to create it.
The leaders of a new drug-pricing group called the Innovation and Value Initiative responded to ICER’s report with an op-ed in STAT. They objected to ICER setting research and development costs to zero, writing that “evaluating a plausible range of assumptions regarding R&D costs would yield a more nuanced discussion of accompanying price estimates that show the trade-offs between incentives for further development.” Translation? Drug companies should be able to charge high prices for old drugs being repurposed for Covid-19, and to make them sell these drugs for less would stifle “innovation” of more Covid treatments. It’s the same tired argument we hear time and time again about drug prices needing to be high for the sake of innovation, even though the price of a drug is often completely divorced from its effectiveness.
A closer look at IVI
A further look at the Innovation and Value Initiative turns up a list of their members (ie. funders), including PhRMA, Abbvie, Genentech, Merck, Pfizer, and several other drug developers. They also have several patient advocacy organizations as their members, but watch out– many of these groups are also funded by pharma. For example, the National Patient Advocate Foundation is an affiliate of Patient Advocate Foundation, Inc., which received $14 million in funding from pharmaceutical companies in 2015, according to Kaiser Health News‘ Prescription for Power database. In contrast, ICER produces all their reports with funding only from non-profit organizations free of conflicts of interest from drug companies and insurers (they do accept funding from industry for their policy summit event.)
While many groups have tried to take down ICER, the IVI is doing this in a new way–by creating their own value framework that they claim is more “transparent” and “patient-focused.” This is a very slick strategy; who wouldn’t want a more transparent and patient-focused way of determining drug value? According to the op-ed and one of their policy briefs, IVI wants to incorporate a wider range of estimates for drug cost-effectiveness, by adding in a ton of new variables to the equations (one of which, apparently, is “hope”??). This would create uncertainty in the cost-effectiveness of drugs and build more ammunition against ICER’s analyses.
As this project gains steam, we will be keeping an eye on the IVI, and holding them to their word on transparency, both in their models and their funding sources.