Disparities in drug pricing across the US and UK markets

Introduction

Value appraisal through health technology assessment (HTA) is a hot topic in the United States (US), where the Institute for Clinical and Economic Review (ICER) is the de-facto HTA. ICER's value assessment runs in parallel to a market-based system of access and reimbursement which is orchestrated between private and government payers and pharmaceutical companies.

In contrast, in the UK the National Institute for Health and Care Excellence (NICE) is the established HTA issuing binding reimbursement recommendations.

Despite mandate differences, parallels exist between ICER and NICE in evaluating medical technologies, from the methodology (employing quality-adjusted life years (QALYs) in cost-effectiveness analyses) to advising coverage and payment for pharmaceutical and medical technology products.

Background

Until the advent of ICER in 2010, the US lacked a formal HTA. ICER filled the gap, and today a relative comparison can be made between ICER and NICE methods, as shown in Table 1.

HTA impact on drug list price differences in the US vs UK

List prices for pharmaceutical products are generally understood to be higher in the US based on the willingness to pay and open market negotiating standards. With HTA now in place in the US, and the calculation of economically justifiable prices in use, what is the impact on the list price differential?

Among products that have been assessed by both ICER and NICE, the following is true:

• List prices of identical products in the US and the UK are separated by a 3.1-fold difference (list prices in the US are 3.1x higher than the UK),
• This equates to a $73.2K average list price in the US vs a $23.8K average list price in the UK.[1]
• Additional studies have suggested even higher multiplier values for ALL products (not just those dually assessed by ICER and NICE), ranging from 3.6 to 4.3 times higher in the US vs the UK. [2], [3]

Table 2 highlights examples of the drug list pricing differential for those products assessed by both NICE and ICER in the US compared to the UK.

?The drugs featured in Table 2 are among the costliest in the US market and were chosen for reimbursement by ICER based on affordability concerns linked to price, as well as other attributes. Because ICER has disproportionately targeted high price therapies for assessment, the significant difference in pricing (the magnitude between NICE and ICER) is likely exacerbated further in this analysis. Previous studies mentioned employing a more extensive range of drugs for comparison give us a more comprehensive assessment of price differences.

Differences between NICE and ICER and how this may explain drug pricing differences

NICE vs ICER Mandate

Mandate differences trickle down to all methodological aspects of HTA in both the US and UK, and help to explain the difference in the approaches taken by ICER and NICE in each country.

In the UK, NICE operates in a ‘single-payer’ healthcare system, prioritising maximizing benefits for all individuals. NICE, a government-operated institute, is crucial in allocating resources effectively within the National Health Service (NHS). NICE's primary function revolves around efficient resource allocation within a system constrained by budget limitations. NICE's process for technology assessments is characterised by transparency and stakeholder involvement, requiring manufacturer submissions, engaging patients and the public in appraisals, and publishing cost-effectiveness models and thresholds on its website. In contrast, ICER lacks the authority to compel manufacturer input, has limited involvement of patients and the general public, and offers relatively restricted transparency regarding its models. Even Medicare, a public insurance program, is banned from negotiating drug prices with manufacturers. The lack of drug-pricing regulation in the US has resulted in soaring prices.

In the US there are multiple payers, including public insurance programs (Medicare and Medicaid) for select groups (retirees and impoverished populations) and private, employer-sponsored insurance programs for the remainder of the population. The US healthcare relies primarily on market forces to determine pricing, with price controls as a secondary and less pervasive lever. Drug evaluation is executed independently of government influence, focused on evaluating clinical benefits rather than solely relying on cost-effectiveness in pricing decisions. From a price elasticity of demand perspective, high prices do not dampen enthusiasm or demand for products as they would in other consumer categories, as third-party insurance companies pay most of the prescription drug costs, not patients.[10] ICER is thrust into this dynamic and thus prioritizes assessing the clinical advantages of medical interventions, linking those back to costs and underscoring a commitment to optimizing patient outcomes above all else.

NICE vs ICER Modeling

NICE employs cost-effectiveness as its main decisive factor in pricing, whereas ICER stipulates that cost-effectiveness is not the main driver of pricing but is used as more of a tool. This is evident in the cost-effectiveness inclusion criteria and pricing thresholds for NICE and ICER, ￡20K-￡30K/QALY and $50K-$150K/QALY respectively. These thresholds represent the willingness to pay for each system and the large difference will result in large variations in drug pricing.

Another difference is that for NICE, the cost-effectiveness evaluation does not include value-based pricing (VBP), however for ICER, VBP is included. VBP is when drugs are priced according to the proportion of value they provide to patients over existing drug options. VBP has the potential to drive development in truly innovative technologies. Drugs similar to pre-existing drugs on the market with comparable clinical outcomes will grant lower prices compared to innovative drugs. Whether the difference in drug pricing between the US and UK markets is attributed to VBP assessments requires investigations. Nonetheless, there is an important difference in strategies used by NICE and ICER to evaluate medical products/technologies.

A key difference between NICE and ICER in the inclusion criteria for cost-effectiveness analyses is that NICE omits productivity costs and out-of-pocket expenses for patients and caregivers not under NHS or social services coverage. In contrast, ICER incorporates productivity losses, caregiver burdens, and other indirect costs into its assessments. ICER’s cost-per-QALY estimate was on average 4.3x higher than NICE’s estimate ($234.7K vs $54.4K) for the same product. [1]

From our research, evidence suggested that including productivity costs results in more favourable outcomes in terms of cost-effectiveness. [11) Data comparing the same ICER pharmaceutical value assessment reports with and without productivity costs identified that across 60 comparisons, 72% of the estimated values increased. [12] This means that the cost-per-QALY estimate decreased when productivity costs were included. Therefore, ICER’s 4.3x higher cost-per-QALY is likely not attributed to including productivity/societal costs.

Budget impact thresholds apply a substantial downward pressure on price. NICE maintains a fixed budget impact threshold of ￡20m for the first three years. Treatments that surpass this threshold trigger commercial negotiations to manage additional costs effectively. However, ICER employs a flexible five-year annualised budget impact threshold, set at $991 million, ensuring a dynamic approach to managing healthcare costs. The threshold used by ICER is far higher than the one applied by NICE, both in absolute terms and in relation to the total population of these countries. [13] ICER’s threshold allows approximately three times more patient access (in relation to the US population), than the threshold used by NICE. [13] The threshold used by NICE has a stronger influence on reducing drug pricing than the threshold used by ICER.?

Controversies in HTA

Both ICER and NICE face scrutiny for their methodologies and recommendations.

ICER's influence in the US has led to discussions on explicit rationing, exemplified by Customer Value Store (CVS) Caremark's adoption of cost-per-QALY thresholds in its formulary decisions. This signals a shift towards more explicit consideration of cost-effectiveness in the US healthcare system, previously less common compared to systems with explicit rationing.

In the UK, patient access has been limited to needy populations (such as Cystic Fibrosis) based on the “all or nothing” appraisal approach and results, which has led to economically justifiable prices that aren’t commercially acceptable to the manufacturer. This is a potential downside to binding reimbursement at specific pricing as specified by HTA.

Conclusion

Despite the methodological and mandate differences, the two largest determinants of success in the US and UK are modelling and understanding the submission processes.

In modelling, FIECON has extensive experience with running economic models for both organisations. We encourage our clients to think about this early on so that we can run early cost-effectiveness models for both ICER and NICE independently which will save you time and money in the long run.

For submissions, FIECON can help you decide whether VBP is suitable for your product as not all drugs should include it. Careful considerations must be made as an unsuccessful VBP assessment can be detrimental to all the stakeholders, leading to worse outcomes by pushing up costs for payers and reducing payments to the pharmaceutical company. It should be established whether any generic versions of the product are already or soon to be available to the market. Furthermore, FIECON can perform a deep dive into model strategy (via a workshop) and productivity costs and decide the type of analyses (scenario or base-case) to use, as these factors will influence the estimated value of the price-per-QALY. [HB1]?[KF2]?

Start your US and UK commercial journey with HTA by contacting [email protected] or visiting our website at www.fiecon.com .

References

1.?????? Cockerill K, Ward K, Higgins AS, et al. PMU11 A COMPARISON BETWEEN ICER AND NICE COST-EFFECTIVENESS MODELS. Value in Health 2019. 22: S251.

2.?????? Kang S-Y, DiStefano MJ, Socal MP, et al. Using External Reference Pricing In Medicare Part D To Reduce Drug Price Differentials With Other Countries. Health Affairs 2019. 38: 804–811.

3.?????? J?rgensen J & Kefalas P. A price comparison of recently launched proprietary pharmaceuticals in the UK and the US. Journal of Market Access & Health Policy 2016. 4: 32754.

4.?????? Nawrat A. Most expensive drugs in the US: Price comparison with the UK, Pharmaceutical Technology. Pharmaceutical Technology 2018. at <https://www.pharmaceutical-technology.com/features/us-most-expensive-drugs-uk-prices/?cf-view >

5.?????? 10 of the Most Expensive Drugs in the U.S. Drugs.com at <https://www.drugs.com/article/top-10-most-expensive-drugs.html >

6.?????? Metreleptin for treating lipodystrophy. National Institute for? Health and Care Excellence 2018. at <https://www.nice.org.uk/guidance/hst14/documents/evaluation-consultation-document >

7.?????? Brough A & Hunt M. PNS273 ICER: SIMILARITIES AND DIFFERENCES BETWEEN UK (ENGLAND) AND USA COST-EFFECTIVENESS WATCHDOGS. Value in Health 2019. 22: S808–S809.

8.?????? (4) ICER vs. NICE: Three Key Differences in Approach and Appraisal | LinkedIn. at <https://www.dhirubhai.net/pulse/icer-vs-nice-three-key-differences-approach-appraisal-matthew-sussman/ >

9.?????? Healthcare G. ICER and NICE: are they that different? Pharmaceutical Technology 2017. at <https://www.pharmaceutical-technology.com/comment/icer-nice-different/ >

10.???? Lieberman S, Ginsburg P & Patel K. Balancing Lower U.S. Prescription Drug Prices And Innovation – Part 1. 2020. doi:10.1377/forefront.20201123.804451

11.???? Yuasa A, Yonemoto N, LoPresti M, et al. Use of Productivity Loss/Gain in Cost-Effectiveness Analyses for Drugs: A Systematic Review. PharmacoEconomics 2021. 39: 81–97.

12.???? Karmarkar T, Graff JS & Westrich K. Underestimating the Value of an Intervention: The Case for Including Productivity in Value Assessments and Formulary Design. JMCP 2020. 26: 652–661.

13.???? J?rgensen J, Servos S & Kefalas P. The potential price and access implications of the cost-utility and budget impact methodologies applied by NICE in England and ICER in the US for a novel gene therapy in Parkinson’s disease. Journal of Market Access & Health Policy 2018. 6: 1500419.

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