The U.S. pharmaceutical industry’s greatest worry in Washington, D.C., might not be President Trump’s drug-pricing blueprint or Democrats’ retaking control of the U.S. House of Representatives, but a little-known, non-partisan research firm.
The Institute for Clinical and Economic Review, or ICER, evaluates prescription drugs to determine whether list prices align with the clinical and economic value for patients. Its reports take into account factors such as how many years of life a treatment can add, how quickly it can return someone to work and whether the regimen is easier for patients than a competitor’s product.
While the group validated the list price of seven of the 11 treatments it analyzed this year, it often rates a particular drug as more expensive than its actual value to patients.
Unsurprisingly, such reports have driven intense opposition from the pharmaceutical lobby, which sees the research as too similar to the cost-effectiveness evaluations used by European healthcare regulators like the National Institute for Health and Care Excellence, or NICE, a group that effectively sets the price that the U.K. government will pay for a medication.
The industry argues the criteria ICER uses is too prescriptive and doesn’t work when applied broadly to all treatments, but the group’s influence is only growing.
New York’s Medicaid program is using ICER’s research to negotiate price cuts for Vertex Pharmaceuticals’ Orkambi, a $272,000-a-year drug that treats cystic fibrosis. CVS Health recently said it would employ ICER’s framework to allow insurance clients to exclude some medications the group says are not worth the cost.
The Department of Veterans Affairs partnered with ICER for drug-price negotiations in 2017. Separately, two top companies — Regeneron Pharmaceuticals and Sanofi — significantly reduced the cost of one of their treatments to meet ICER’s value benchmark.
Some critics even say President Trump’s proposal to tie reimbursement under the Medicare Part B program to international pricing is a roundabout way of endorsing ICER’s research.
In an interview with the Washington Examiner, group President Steven Pearson said he has held talks with federal health officials on using the group’s findings in implementing Trump’s drug-pricing framework, a move that would spur intense opposition from Big Pharma.
Pearson also said he envisions a day when ICER obtains federal or state funding to help policymakers in pricing decisions and believes the group could play a key role should Medicare be allowed to negotiate treatment costs.
Washington Examiner: What is your long-term vision for ICER?
Pearson: There is a need for an independent source of review of evidence to help guide discussions that we know are never going to be cut and dried, but they really do need to base themselves on a clear-eyed view of the evidence on both clinical effectiveness and value. What we’ve seen over the past couple of years is a growing acceptance of the idea that linking prices to the added benefits for patients is a good basis for drawing the right line, where we are creating incentive for innovators where they can be handsomely rewarded if they create new drugs that really benefit patients.
Examiner: Have you had any conversations with the Trump administration on using ICER research for any of the initiatives in its drug-pricing blueprint?
Pearson: I have had discussions with people inside the Centers for Medicare and Medicaid Services, but they do a good job of talking to a lot of different people to gain perspectives on their options going forward. People have recognized the value that an independent reviewer of information could bring to policy in any number of ways.
Examiner: The drug industry has been critical of your evaluation framework. Has that criticism led to any changes in ICER’s process?
Pearson: Criticism is incredibly valuable. Every good learning organization is very open to it. Fortunately, we seem to never be in short supply of criticism. The criticism sometimes gets put on a megaphone, certainly when the company is not happy with a review’s findings. But the criticism is almost a sign itself of the advance of where we are from a few years ago. Instead of vague statements about price being needed to support future innovation or because it’s really expensive to create a drug in general, we are now having disagreements over how do we value the improvements in quality of life that these treatments bring.
Our results don’t shine favorably on drugs that make minimal improvements to patients and cost more; that’s just not going to fly. When we heard a couple years ago from companies that they need more time to try to read our draft and give us feedback, we built that into the system. When they told us they had their own confidential data and they wanted to give it to us but we didn’t have a formal procedure for handling it, we created a new pathway for that. So we’ve made some very important adjustments to our approach because we know our work depends upon having the best information we can get from all perspectives. We’re still going to have some disagreements, but we are starting to disagree about the right things.
Examiner: Drug spending is just one portion of federal healthcare spending. How do you take into account other benefits that drive broader savings, like reduced hospitalizations?
Pearson: If a drug prevents hospitalizations downstream or [leads to] fewer doctor visits, we’re not just looking at the individual patients. We are looking at how it influences the rest of the healthcare system. A hospital is different. You can build a hospital down the street and compete with the current hospital. You can bring in a different doctor to do the same surgery. So the competitive aspects, the barriers to competition, are very different. That doesn’t mean there aren’t imbalances between pricing and value in other parts of the healthcare system. But it’s one of the reasons that policymakers, payers and others have tended to look at drugs as a special case.
Examiner: Do you view Trump’s policy to link reimbursement under Medicare Part B to international pricing as a roundabout endorsement of ICER’s work?
Pearson: The way that European countries negotiate and set prices, it’s very different country to country. They may not even look at cost-effectiveness over the long-term. Other countries benchmark NICE’s work in the U.K., which is a cost effectiveness-based approach. There are reasons that prices in our country are higher and should be higher. We are wealthy enough to spend more on drugs. If you’re going to do reference pricing and the goal really is to get a fair price, we can do that here. [Trump’s approach] is really not an endorsement of us, it’s an endorsement of the idea that we pay more than we should. We don’t know when we are getting good value.
Examiner: Has the organization planned for a future where the federal government appropriates funding to conduct this research?
Pearson: Going forward, it could be from states. New York basically leveraged our report on the Vertex drug for cystic fibrosis as it was trying to determine a fair price. It could be that state governments seek to leverage our work in that way and could potentially be a source of funding. I think the federal government could commission work. The idea of the federal government commissioning or helping to support independent, objective reviews of evidence could happen. We certainly don’t plan on needing that to happen.
Examiner: How do you address critics who routinely cite your funding from philanthropic sources. For instance, the Laura and John Arnold Foundation, which was founded by a hedge-fund billionaire and has supported a variety of drug-pricing research?
Pearson: It’s a little misguided. If we were funded by the government, they would find that more objectionable somehow. I don’t know what the perfect spot is here. The Arnold foundation funds lots of things; healthcare is just a piece of it. They clearly have a lot of people in the area around drug pricing, but I can honestly tell you that we care a lot about our funding sources and the ability that it leaves us to be independent and objective. We do not take money to do specific topics. We don’t get a call from the Arnold Foundation saying ,“Hey, look at diabetes medicine.” They do what founders should do, which is to allow us to use our process and our science and they judge us by the policy impact that we have, but they do not meddle in what we do. The criticism is they feel that the Arnolds or other foundations have some agenda, and I think the agenda is to have better information and a more functional market that is more sustainable over time.
Examiner: Do you think pharmaceutical companies have come closer to being able to define value, or is disagreement within the industry on that issue driving opposition to ICER?
Pearson: We have this precious thing in the U.S., where we manage to get venture capital and the stock market and science and federal funding; all these pieces are precious and fragile. If you intercede with any entity that is going to give payers or others some more principled reason to think that the prices aren’t right, it will undermine or cripple the entire structure. That’s a worldview. In that case, it doesn’t matter what form we use or how many public comment periods we have. They just don’t really believe in the fundamental idea of external evaluation as a method for basically assigning value or judging whether a price can be fair.
On the other side, I talk to a lot of pharmaceutical companies who said they knew this day was coming in the U.S. They actually have told me that they would be happy if there was a level playing field where their innovation could be judged, and priced and rewarded in a way that could make the system more sustainable. Whether we are viewed by some companies as an existential threat, I totally disagree. We are about trying to say value is long-term. We have a window to get there, and I hope we don’t get lost in the dire political pushback to the changes to the current system. That way is not going to work for anybody.
