Pandemic Pricing: The Risks and Rewards of Fast-Tracking Value-Based Drug Evaluations
As we consider the implications of the COVID-19 pandemic and the release of remdesivir, ICER’s expedited evaluation raises some questions related to value-based pricing evaluations.
Pharmaceutical companies and researchers around the world are desperately searching for treatments to help battle coronavirus disease 2019 (COVID-19). Recently, Gilead’s investigational antiviral drug, remdesivir, has been touted as a possible treatment following a government study that showed positive preliminary results, including reducing hospital stays for critical COVID-19 patients by 3 to 4 days.
Although Gilead has not yet set a price for the medication, an influential drug-pricing watchdog, the Institute for Clinical and Economic Review (ICER), evaluated remdesivir and suggested 2 prices for the drug: a cost-recovery price of $10 for a 10-day treatment and a cost-effective price of approximately $4460 per treatment course. ICER cautiously and correctly positions the evaluation as a “preliminary modeling exercise,” citing that “cost-effective results will evolve as further data are released and as the context for the patient population treated evolves.”
However, with the close public scrutiny of all COVID-related news, ICER’s $4460 price tag has already been widely featured in media coverage. As we consider the implications of the COVID-19 pandemic and the release of remdesivir, ICER’s expedited evaluation raises some questions—namely, what are the risks and rewards of fast-tracking this type of value-based pricing evaluation?
The Risks of Rushing
As ICER’s report notes, the main obstacle to establishing a fair, value-based price for remdesivir is the lack of data surrounding the clinical benefits of the drug and the epidemiology of COVID-19 itself. There are several factors that go into ICER’s drug pricing framework, but the overarching driver of its analysis is the drug’s short- and long-term clinical efficacy, which is used to determine the drug’s long-term value and allows for projections of a value-based price.
Although the National Institutes of Health’s (NIH) Adaptive COVID-19 Treatment Trial (ACTT), which was primarily used for ICER’s evaluation, demonstrated remdesivir can reduce the length of hospital stays, less is definitively known about its effect on mortality rates as well as its ability to alleviate COVID-19’s potential long-term complications following hospital discharge.
Extending life, as well as the quality of life, and avoiding potential medical costs from complications would substantially improve the long-term value of remdesivir and would therefore impact the range of value-based prices for the drug. ICER’s model does account for the unknowns surrounding remdesivir’s effect on mortality by suggesting 2 prices, the first formulated on a base case analysis accounting for a mortality benefit ($4460) and a second based on an alternative analysis removing this benefit ($390); however, it is unclear which price should be used in the meantime or when additional clarity can be expected.
With limited data on the clinical efficacy of the drug, it’s difficult to accurately determine the impact remdesivir could have and the value it could evoke. As more real-world data on COVID-19 patients becomes available, there will be opportunities to refine ICER’s modeling efforts to better estimate the long-term value of the drug and thus hone in on a more precise value-based price.
Currently, the most basic sociodemographic data (e.g., age, sex) about who COVID-19 impacts and how is still evolving. For example, it was initially believed that young people were less severely impacted, but recent incidences of COVID-positive children have shown symptoms similar to Kawasaki syndrome, a disease presenting with blood vessel inflammation and known to cause long-term health effects. From a health economic modeling perspective, accounting for an appropriate patient population and its associated sociodemographics is a critical step in any value-based pricing analysis.
In addition to the limited clinical and epidemiologic data, guidelines for adapting health economic modeling standards and practices in the throes of crisis are lacking. In general, when conducting its value-based pricing assessments, ICER bases its evaluation on cost-effectiveness thresholds of $100,000 and $150,000 per quality-adjusted life year (QALY) gained, as described in its 2020-2023 value assessment framework. Adjusting these thresholds up or down will have a direct impact on the evaluated drug’s value-based price.
In its analysis of remdesivir, ICER used a threshold of $50,000 per QALY gained to estimate the value-based price of $4460, which was a deviation from its guiding principles, without adequate justification or proper citation. Using the higher thresholds of $100,000 and $150,000 per QALY gained would have yielded higher value-based prices.
Without additional insight into the efficacy of remdesivir, the progression of COVID-19, and the rationale for adapting economic modeling standards, the risk of improperly pricing the drug remains a concern. If priced too high, widespread access to the medication may be constricted to the most severe cases, even if benefits are observed in patients with moderate manifestations of the disease. If priced too low, we risk disincentivizing manufacturers and impeding future research and development (R&D) for innovative therapies.
The Rewards of Readiness
Conversely, third-party drug price evaluations can ensure a fair price, promoting patient access to medication as well as affordability across the health care system. With the first treatment to market, Gilead currently holds a monopoly on COVID-19 therapies, with no checks and balances to prevent the company from setting an exorbitant price. By initiating the debate of a value-based price range for remdesivir, even if based on preliminary data, ICER has helped established public expectation around a “ballpark” baseline price, making it difficult for Gilead to set a price significantly above ICER’s estimation.
Weighing the Risks and the Rewards
Although COVID-19 is the first pandemic of this scale in the past century, it is certainly not the first infectious disease the world has faced, and it will not be the last. In just the past 20 years, severe acute respiratory syndrome, mumps, H1N1, Middle East respiratory syndrome, Ebola, Zika, and many other highly infectious epidemics have resulted in fast-tracked clinical studies and early release of various treatments.
Although many high-level questions have been raised, there are still more questions to ask and angles to consider. For example, Gilead has received more than $70 million in taxpayer dollars to fund the development of remdesivir, a factor not considered in ICER’s pricing.
Additionally, the size of the population who will benefit from a new medication often plays some role in drug prices, especially when considering the budget impact of the new therapy. Specialty medications can have price tags in the hundreds of thousands to recoup R&D costs across a limited patient population, whereas many popular flu medications typically cost under $100.
Furthermore, there is little historical evidence around society’s valuation of an effective therapy during widescale pandemics—might society be willing to pay more for novel therapies to treat critical care patients during a pandemic than it would during normal, non-critical times?
As we continue to navigate the world’s new normal, it is important to think critically and ask the difficult questions. Although there may ultimately be no universal correct answer, there is much to be learned from questions posed and research considered.