Why It Is Critical to Include Dynamic Drug Pricing in Cost-Effectiveness Analysis in a Post-IRA World

The drug price-related provisions of the Inflation Reduction Act make the case for including dynamic drug pricing in cost-effectiveness analysis even more compelling.


For Immediate Release: October 18, 2023

Contact: Michael Pratt, 202-827-2088, mpratt@npcnow.org 

Washington, DC –  Practitioners of cost-effectiveness analysis should incorporate dynamic drug pricing into formal analyses to reflect drug costs more accurately over time, according to a new publication in Health Affairs Forefront. The commentary, “The Case for Including Dynamic Drug Pricing in Cost-Effectiveness Analyses in the Aftermath of the Inflation Reduction Act,” was co-authored by Jon Campbell, MS, PhD, chief science officer of the National Pharmaceutical Council, along with Melanie Whittington, PhD, Peter Neumann, ScD and Joshua Cohen, PhD, of the Center for the Evaluation of Value and Risk in Health at Tufts Medical Center.

Cost-effectiveness analyses, or CEAs, may be used as a tool to inform coverage, reimbursement, and pricing decisions for drugs by accounting for their anticipated health outcomes and costs. These analyses are typically conducted around the time of a drug’s market entry, when manufacturers set a list price and negotiate terms with payers. 

The authors note that traditional CEAs can misrepresent the total cost of a drug over time by assuming a drug’s price does not change. By neglecting to adjust for the future drop in price, an analysis may incorrectly and artificially suggest the new drug represents unfavorable value. While dynamic drug pricing better represents a drug’s added cost according to consensus guidelines, 95% of published CEAs assume that drug prices remain constant in their base case.

The authors provide two recommendations for incorporating dynamic drug pricing into cost-effectiveness analyses: 

  • Incorporate dynamic drug pricing into the base care of CEAs because practitioners should use the same tools to address this source of uncertainty as they use to address uncertainty for other model parameters. CEAs should acknowledge all assumptions and make the degree of their uncertainty transparent, including a scenario analysis with static pricing.
  • Decisionmakers can conduct empirical research addressing the proper dynamic drug pricing parameters for the purpose of CEAs. There are several factors that will affect dynamic drug pricing, and these assumptions are all uncertain and vary across drugs.

As the authors state, 

“It is encouraging to see recent efforts toward including dynamic pricing in CEAs.  Although further research will support how best to do so, this should not stop CEA practitioners from incorporating dynamic drug pricing in their work now. CEA should remain a tool to inform decision making, not a rule, but addressing drug price dynamics is a step forward in making its projections more realistic.”

About the National Pharmaceutical Council 

The National Pharmaceutical Council (NPC) is a health policy research organization dedicated to the advancement of good evidence and science, and to fostering an environment in the United States that supports medical innovation. Founded in 1953 and supported by the nation's major research-based pharmaceutical companies, NPC focuses on research development, information dissemination and education on the critical issues of evidence, innovation and the value of medicines for patients. For more information, visit www.npcnow.org and follow NPC on LinkedIn


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