In this interview, Steven D. Pearson, MD, MSc, FRCP, founder and president of the Institute for Clinical and Economic Review, talks about the various value tools that have been developed, the need for understanding the budgetary impact of healthcare costs, and why stakeholders are interested in innovative models such as indication-based pricing.
Evidence-Based Oncology (EBO)’s managing editor Surabhi Dangi-Garimella, PhD, recently interviewed Steven D. Pearson, MD, MSc, FRCP, founder and president of the Institute for Clinical and Economic Review (ICER), Boston. ICER has been actively involved in changing how drugs are evaluated and priced. In this interview, Pearson talks about the need for value tools, compares the various tools that have been developed, explains the need for understanding the budgetary impact of healthcare costs, and why stakeholders are interested in innovative tools such as indication-based pricing.
EBO: Why do we need the value discussion?
Pearson: I think value has always been a part of the decision-making process for patients, health systems, and insurers—both public and private—forever. I think there has always been a mix of different approaches to doing it. In the United States, we tend to assess comparative clinical effectiveness, and we are less clear and transparent about how value has been assessed or has been woven into decisions in clinical guidelines, coverage policies, etc. Ethicists, health policy experts, and insurers have, for a long time now, recognized that we need to do a better job of being transparent. And any time that people feel [that] the overall cost of healthcare seems to push the envelope of what people can afford, they come back with greater attention for the methods that can be used to help them make better judgements about value.
EBO: Can you describe the key features of ICER’s value framework? Does it distinguish itself from the frameworks developed by the American Society of Clinical Oncology (ASCO) and by the National Comprehensive Cancer Network (NCCN)?
Pearson: At ICER, we have been generating evidence reports that integrate value for about 9 years now. Our methods have evolved over time, because a large part of our goal was to figure out how to provide evidence for value in a way that would be helpful for multiple decision makers in the healthcare system. Over the past 2 years, we have worked to bring together different stakeholders to gain their input as we revised our approach, trying to make it as explicit and transparent [as was possible].
ICER’s framework is specifically designed for payers; to do that, it has to include perspectives of other stakeholders. But it’s [also] supposed to be a tool that’s more focused on the payer perspective—we look at the cost to payers and not the out-of-pocket (OOP) cost to patients. Our general approach was to discuss with various stakeholders the elements that they would want payers to think about as they made [coverage] decisions. Based on that, we generated a list of components of value. However, there was never any consensus on these elements because there was debate over whether budget impact or measure of affordability should be a part of the value assessment.
What our system develops is something called the “care value,” which is a long-term perspective that is used as an anchor to query the value that will also have a short-term impact on the budget. So ICER’s framework identifies the threshold at which cost might create a stress on affordability.
ASCO’s framework aids the shared decision-making process between an individual doctor and an individual patient. We, too, have developed tools to assist that process: it’s called Proven Best Choices. However, our value assessment framework itself is more oriented toward integrating patient perspectives into tools that are more likely to be used by payers. We develop benchmarks for the cost-effectiveness threshold—in the long term as well as the short term—that would have budget impacts that none of the other [frameworks] officially use, although some have said that the ASCO model tries to do 2 things at once by using the OOP costs and payer costs in the same model.
EBO: Does ICER’s framework extend beyond drugs and devices, and help establish the value of a treatment pathway?
Pearson: Yes, it can be applied to evaluate the value of anything, including introducing behavioral healthcare into primary care. So anytime you look at the long-term cost effectiveness of something, you are creating a pathway—trying to determine what happens to a patient next year and the year after that. It can also be used to compare sequencing of treatments as well.
EBO: Can you comment on the societal willingness to pay for a drug or treatment? Do we, as a society, need a better understanding of this?
Pearson: You do make certain assumptions in our framework. You can use different thresholds, which, in turn, are linked to various methodological anchors. There’s of course no perfect answer to what society is willing to pay across the board for different services. Clear empirical evidence does come out of England, where they believe these thresholds are too high. In their healthcare system, the true threshold at which you start to lose value by adding new things is much lower. Numerous studies have been conducted to understand society’s willingness to pay for certain things. Some studies also lump this value to the nation’s GDP [gross domestic product], so that poorer nations would have a much lower threshold. So what we end up doing, since there’s no perfect answer, is we use a range of $100,000 to $150,000, which does seem to represent a consensus, if there is one. That’s more with the long-term effectiveness.
But in the short term, we need to understand “how much is too much.” For this, we survey payers and ask them, say, in the next 2 years, how much new spending can you afford? Would it need you to raise premiums, delay services, or hold back on other areas that may cause patients more harm than good? We did get an answer when we tried that.
At the societal level, we made a very big assumption that the US society would want an alarm bell that would indicate when healthcare costs are growing much faster than our overall economy. We therefore developed a way to figure out when a single agent would potentially contribute enough to make a significant impact that would tilt healthcare spending. This would mean that everyone from patients to doctors to insurers to manufacturers may need to think hard and hopefully work together to ensure that if it has a good long-term value, we bring it into the healthcare system in a way that it doesn’t create significant short-term budget impact problems.
EBO: Healthcare providers would like to see standardization across the value tools and frameworks. Your comments?
Pearson: The United States is the only developed country that does not have a national or federal process [for healthcare]. Our healthcare system has always been decentralized, so it’s not surprising that we do not have a single approach. I think it’s healthy to have the discussion and comparison, because these tools have very different objectives. I do think that it would be better if manufacturers and payers understood the approach to assessing value, because manufacturers often do not know what the evidence standards are or how the value will be assessed by payers. This creates uncertainty and lack of efficiency.
I don’t think we’ll have 1 tool for every purpose—that wouldn’t be the right approach to start with—but at least what we are doing with drugs, where we plan to put out reports on all new drugs at the time of FDA approval, we do hope that by providing a transparent framework, it can create a paradigm so the use and assessment of value can be more consistent.
EBO: At ICER’s recent policy summit, stakeholders held discussions on indication-specific pricing for drugs. What were some of the findings? Are payers and manufacturers interested in developing and implementing this model?
Pearson: Payers and manufacturers are interested in this model. Sometimes it gets pitched as a great idea and they are definitely interested in learning more about it. The paper that was published off of the summit tried to explain the basic approaches to indication-specific pricing (ISP) and to explore the international experiences.1 I think they are interested in it, along with outcomes-based contracting and some other approaches, as tools that are certainly worth considering in specific circumstances. I think they know that any one approach will not be a silver bullet to solve all issues around affordability and value and access—but payers and manufacturers are both interested in innovation. They do feel a bit stuck in the current models of pricing and coverage and negotiation, and they are looking for ways by which they can achieve their mutual goals. I think ISP will get a lot of close looks, although it’ll be a lot harder than many people think when they first started out looking at it, and that is one of the purposes of our paper.