What The U.S. Can Learn From Other Countries About Health Technology Assessment (Setting Drug Prices)

Kirsten Axelsen, a visiting scholar with the American Enterprise Institute, recommends the Centers for Medicare and Medicaid Services (CMS) develop a consistent methodology and process to set pharmaceutical prices under the 2022 Inflation Reduction Act (IRA):

https://www.realclearhealth.com/blog/2024/05/30/the_us_can_learn_from_other_countries_about_setting_drug_prices_1034913.html

The U.S. Can Learn From Other Countries About Setting Drug Prices
By Kirsten Axelsen - May 30, 2024

For the first time, the Inflation Reduction Act (IRA) has given the U.S. government the authority to set the price for certain drugs in Medicare. Like many other countries with government-run health care, the IRA specifies evidence standards to set prices. Policymakers and stakeholders should take care to avoid pitfalls other countries have faced. Unfortunately, the draft guidance released by the Centers for Medicare and Medicaid Services (CMS) risks worsening the problems seen in other countries rather than mitigating them. But there is still time to revise the process.

There is a tradeoff in any centralized price-setting system, including those that use Health Technology Assessment (HTA). Countries with price-setting wait longer for new medicines and have fewer medicines available on their national formularies than Medicare. But for however long the IRA and the price setting program remain in place until its flaws are inevitably revealed, it is incumbent upon CMS to provide a more transparent, more consistent approach with meaningful ways to consider what value to patients means. If price-setting agencies define what evidence is valuable, that encourages drug companies to invest in the analysis of how their drugs work to show, or not show if that is the case, that they are worth the asking price.

The IRA directs CMS to set the price below a ceiling, considering data elements but gives broad flexibility in how the data are considered. However, CMS has failed to be transparent about how much weight it will put on each data element, such as therapeutic benefit, compared to other data, such as manufacturing cost. This gives little direction to biopharmaceutical companies or their investors about what type of data is valuable. If CMS were clear, for example, that therapeutic benefit would be the primary consideration, this would motivate even more investment in that kind of evidence generation.

Other countries have also struggled with transparency and predictability in their HTA. For example, in South Korea, the rationale for pricing and access decisions by the National Health Insurance Service are not shared publicly. This has contributed to a history of controversial reimbursement decisions, with new products not approved for reimbursement even if they showed superior efficacy or safety. CMS is on the verge of repeating a similar mistake. For example, CMS has yet to confirm what will be included as an explanation in March 2025 for the Maximum Fair Price decisions they are making now.

Patient engagement isn’t just letting people talk at pricing hearings; it involves assessing patient-relevant outcomes and giving them meaningful consideration. CMS provided pathways for patients to provide verbal and written feedback, but it wasn’t clear how the input would be used. CMS saw lower-than-expected participation in its listening sessions, which should signal that people didn’t feel their feedback made a difference. Truly meaningful stakeholder engagement is an area where many other countries struggle. Still, when it is done well, it goes beyond just having a person representing a disease join a meeting. Effective patient-centric value assessment means having metrics that matter to patients in the evaluation, such as the ability to live independently or with less nausea or dizziness. It involves giving those outcomes a significant amount of priority in the assessment.

In its interpretation of the law, CMS asks for data irrelevant to the drug’s value to the health system, including just some, but not all, of the amount of money spent on research and development (R&D). HTA-based systems worldwide do not rely on R&D data, with the exception of Japan, which may use a complex cost accounting system for medicines with no treatment alternative. A cost accounting method of price has no bearing on the value of the medicine. Some quick development programs yield very valuable medicines, and some very long, expensive R&D programs result in a failed effort. Cheaper-to-manufacture pills can be even more valuable than complex biologic injections. CMS’ current process gives no clarity on how it will weigh factors such as these input costs compared to evidence of how well the drug works. This falls far short of the requirement for CMS to develop a “consistent methodology and process” under the statute.

Because CMS’ price setting evaluation is 7 to 11 years after initial approval, CMS has a unique opportunity to use real-world data. Countries that use real-world evidence in their value assessment typically do so in limited areas such as orphan or rare diseases. For example, Germany is only collecting and evaluating post-market data for two rare disease medicines, despite millions of years of patient experience with many other drugs. CMS is the biggest payer in the biggest pharmaceutical market in the world; it has excellent access to real-world data and could use it to explore and share elements of value, such as adherence to treatment, failure rates, and use of combination therapy. Data could be generated to include endpoints relevant to patient experience, such as if people of different income levels, geography, or races and ethnicities are using specific treatment protocols and investigate if there is value to them.

The IRA required CMS to introduce the first round of price setting quickly. The IRA allocated $3bn with little clarity into how that money should be spent, and CMS has a significant opportunity to reconsider the process in future years. In fact, CMS recently released draft guidance for the next year of the negotiation program and solicited feedback on a number of issues. This creates an opportunity to learn from the mistakes made by other countries and revise the process to be more predictable and responsive to the outcomes that matter to people who depend on the Medicare program.