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Pharmacoeconomics Refresher: The CVS $100k/QALY Announcement (Part 3)
December 05, 2018
Pharmacoeconomics Refresher: The CVS $100K/QALY Announcement (Part 1)
October 09, 2018

Pharmacoeconomics Refresher: The CVS $100k/QALY Announcement (Part 3)

Joey Mattingly, PharmD, MBA, currently serves as an assistant professor in the Department of Pharmacy Practice and Science at the University of Maryland School of Pharmacy, where he teaches business strategy to PharmD students and is a strategic consultant for the University of Maryland Medical Center. In addition to his work as a faculty member, he serves as Director of Operations for the PATIENTS Program and Principal for A & J Consulting, LLC.  His primary research interests include cost-effectiveness, patient-centered outcomes, and health policy.

Scenario B: Brand new (expensive and effective) drug is NOT covered because it is not cost-effective compared to the current standard of care for a subset of patients in our population (determined by our cost/QALY calculation >$100,000/QALY).
For patients & caregivers, this negative coverage decision will ultimately limit the access to the treatment.  Maybe a few patients will gain access through charitable networks or they may pay 100% out-of-pocket if they have the means to do so (which may create an equity issue). From the patient perspective, being denied a new treatment that is efficacious but not cost-effective could be incredibly disheartening as they see are denied health gains because it “costs too much.” This may be compounded by the numerous ads on television of smiling actors over-selling the effects, but we can save that issue for another post.

For the clinicians, this coverage decision can be extremely frustrating. From a clinical viewpoint, the gains in efficacy in the clinical trials are exciting (I mean, who settles for “good” when you can have “even better”?).  In this case, the clinicians may share a patient-centric viewpoint and just want to find a way to get increased access. Many clinicians are amazing patient advocates who will gladly jump through administrative hurdles to get the drug to the patient. 

For the payer, this is an extremely tough decision politically. Theoretically, by denying the treatment they are allocating the health plan’s dollars more efficiently (*DISCLAIMER* This assumes that everything else currently on the formulary is held to the same cost/QALY standard, which is likely not the case). Denying the treatment will certainly create a very unhappy subset of patients who may become vocal and slam the payer from a customer service perspective. In the case of the for-profit insurance market, customer service could potentially hurt future business. In the case of the government, denials could result in advocacy to our elected representatives. 

For the pharmaceutical manufacturer, this certainly limits the revenue potential for the new therapy.  The manufacturer could conduct more research to demonstrate greater clinical effectiveness or simply lower the price (also another topic that deserves its own post). 

For society, whether or not there is a net benefit or loss with this decision may be unknown. If the cost/QALY calculation was only determined using a “health sector” perspective, then there is a chance the negative coverage decision will actually hurt society. 

The Balancing Act
Moving to a system where formulary decisions made by a large health plan or pharmacy benefits manager incorporate economic analyses in a formal way will certainly create some controversy.  Especially in Scenario B after a drug is approved, shown to be clinically effective, and fails to meet the cost-effectiveness threshold. When we step back and view a health plan as a large group of people, rather than individuals, it really is just a mathematical calculation (Which this series was meant to simplify for a broad audience). 

Philosophically, many people support the idea of balancing the potential clinical gains with the additional costs to achieve those gains…until they are the one sick and hoping to receive the best treatment money can buy. We can all relate to the patient & caregiver group, as we have likely all experienced a situation where we faced a diagnosis with a poor prognosis if left untreated (either for ourselves or close relative). In future posts, I would like to discuss a few more nuances that might challenge our understanding and interpretation of a pharmacoeconomic analysis. Stay tuned!

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Pharmacoeconomics Refresher: The CVS $100K/QALY Announcement (Part 1)
Pharmacoeconomics Refresher: The CVS $100K/QALY Announcement (Part 2)
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