Thinking Differently About How We Assess Health Value

Health care stakeholders remain divided over how the value of health care treatments—especially medicines—should be assessed, and whether existing evaluation tools known as value assessment frameworks are utilizing appropriate measures.

Four experts debated value measurement during a May 22 symposium at the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) 21st Annual International Meeting. Moderated by National Pharmaceutical Council (NPC) President Dan Leonard, the conversation showed that while there are still differences of opinion on whether budget impact analysis (BIA) should be considered when assessing the value of a health treatment, there is agreement that health system policy changes are needed.

Research organizations such as NPC are concerned that BIAs, if used by payers as an integral part of a value assessment for making coverage and reimbursement decisions, could restrict the use of life-saving treatments for patients. A BIA is only a measure of resource use, not a measure of value, noted Leonard in his opening remarks. It can inform end users about what they are paying, but not about what they are paying for—value. The way they are used collectively could have a considerable impact on society, such as discouraging innovation in highly prevalent diseases, he said.

Not every health stakeholder views BIAs in the same way. Steven Pearson, MD, MSc, FRCP, president of the Institute for Clinical and Economic Review (ICER) and a symposium panelist, has developed the only value assessment framework that uses budget impact analysis as part of his review of new drugs.

“Drugs are one part of health care, and health care is one part of our national economy. Part of why budget impact is important is to understand where the money came from,” Pearson said. “It’s really hard to have a conversation with policymakers without a conversation about budget impact.”

Pearson’s value assessment framework, meant for use by payers as part of their evaluation of new drugs, is composed of two parts:

  • “Care value,” which is determined by looking at four elements: comparative clinical effectiveness, incremental costs per outcomes achieved, other benefits or disadvantages, and contextual considerations.
  • “Health system value (HSV),” which is an assessment of the potential short-term budget impact.

Based on these two components, Pearson and ICER derive a “value-based price benchmark” for each new therapy reviewed as part of its new drug assessment program. Until recently, Pearson had publicly released the care value and HSV numbers in draft reports, resulting in a frenzy of media coverage. As he acknowledged, the HSV number was often updated at a later point in time, sometimes with more favorable results, but this update was rarely captured in the media. His organization now only releases the HSV number and a press release when the assessment is finalized.

“I give Steve a lot of credit, but I think there are problems with Steve’s budget analysis,” said Peter Neumann, ScD, professor and director, Center for the Evaluation of Value and Risk in Health, Institute for Clinical Research and Health Policy Studies, Tufts Medical Center.

Neumann offered a few suggestions as to what ICER could do differently, such as changing the name of the HSV component to “affordability cap” or “budget impact” to more accurately reflect its intent. “He might also relax some of the constraints, such as not using a five-year budget window and including a societal perspective,” said Neumann.

“For public policy purposes, we need to find what’s in line with the public good. We should be thinking broadly about value, that’s in the public interest,” he added.

Yet considering value is not an easy venture for all health organizations. As a federal program run by states, Medicaid faces unique challenges when it comes to determining health coverage and payment mechanisms. Matt Salo, executive director, National Association of Medicaid Directors, explained that the members of his organization “Get in trouble because we aren’t spending enough on everything—this happens every single day. So do we need a new way of thinking about how we pay for things in the Medicaid space? Absolutely. It’s pretty clear that what we are doing now does not work.”

By law, Medicaid is unable to have a closed formulary, meaning that it cannot decide which treatments it will or will not cover. Medicaid, said Salo, needs to cover “everything approved by the [Food and Drug Administration]. We need to confront whether we want Medicaid to operate like a market or entitlement program,” he said.

Darius Lakdawalla, PhD, Quintiles Chair, pharmaceutical development and regulatory innovation and professor, Sol Price School of Public Policy, School of Pharmacy, University of Southern California, sees health value through a different lens. He said, “Health care is not an expense as much as an investment. We want to invest where we have the greatest return on health designed to yield better health. Treatments should be covered whenever their benefits outweigh costs; when returns are positive, high costs mean even higher health benefits. We should invest in health care whenever the rate of return is high enough.”

Lakdawalla said that cost and value “rarely travel together.” He also believes that shifting the focus to shorter budgetary time frames does not align with society’s goal of long-term health and that budgetary caps “anchor [health care spending] to the status quo,” which sets the spending threshold too low to achieve socially desirable innovation.

According to Lakdawalla’s analysis, setting a fixed “share of health care spending on drugs will have modest effects on bending the cost curve. If the share of spending is fixed, what we’d see is that health spending as a percent of GDP [Gross Domestic Product]” goes down very little.

The symposium conversation also turned to potential policy solutions for addressing health value, cost and coverage challenges. Suggestions include aligning prices with value, as well as aligning payer costs with patient benefits. In particular, Lakdawalla recommended encouraging investments in future health, considering value-based contracting, and recognizing that dynamic cost-effectiveness provides a better indicator of long-term value.

Salo was adamant that Medicaid could not utilize a “mortgage system,” in which payments for more expensive and effective health treatments are meted out over a longer time horizon. “States are not set up to do that,” he said. “We cannot overhaul state government and how it works.” Instead, he suggested one solution that could involve blending the funding streams for both Medicaid and Medicare, because much of the value realized through a cure for a Medicaid patient today will accrue to the Medicare system down the road. He acknowledged that it will be difficult to change these bureaucratic programs, but it will be important for those running the programs to begin thinking differently.

For now, value assessment frameworks remain an evolving area, and Leonard noted that some frameworks “might not be ready for prime time.” “We are a learning organization, and we commit to that, but we don’t think we should stop and wait to the future until we get it all right,” said Pearson in response.

As health stakeholders continue to consider value assessments and their various components, NPC has developed Guiding Practices for Patient-Centered Value Assessment Frameworks, which outline six key aspects of value assessments: the assessment process, methodology, value factors, cost factors, evidence, and dissemination and utilization. Said Leonard, “Establishing good practices to guide value assessments can help ensure they are effective tools to support value in patient care and outcomes, rather than well-intentioned but flawed tools that impede it.”

Learn more about value assessment frameworks by downloading NPC’s “Current Landscape: Value Assessment Frameworks” and “Guiding Practices for Patient-Centered Value Assessment Frameworks.”