Ought to Dynamic Drug Pricing be Integrated into Value-Effectiveness Analyses? – Healthcare Economist

Value effectiveness analyses (CEA) goal to look at how a brand new Health applied sciences affect Health outcomes and prices over a affected person’s lifetime. Whereas extrapolating long-run Health advantages and measuring potential price offsets are necessary, one other necessary merchandise to estimate is how the price of the brand new Health Technology is prone to evolve over instances. That is significantly related for prescription drugs.

Whittington et al. (2024) write:

A drug’s internet worth typically will increase following launch and will later fall as opponents enter the market. Costs often fall extra noticeably after the drug loses exclusivity and generic substitutes grow to be accessible. Nevertheless, CEAs in the past have rarely accounted for these possibilities and as a substitute assume {that a} drug’s worth stays fixed over time.

Why is IT necessary to include dynamic pricing? FDA estimated that generic medicine accredited in 2022 yielded $18.9 billion in total savings through the 12 months after their approvals.

…a CEA evaluating a brand new drug to a reasonable various can overstate the brand new drug’s added price over its life cycle if IT assumes that the drug’s introductory worth will persist indefinitely. By neglecting to regulate for the “downstream” drop in worth, the CEA could incorrectly counsel the brand new drug represents unfavorable worth. Importantly, assumptions about drug worth dynamics also needs to apply to comparator therapies in an evaluation. Assuming no change in comparator drug costs can overstate the worth of the brand new drug if the comparator therapy is nearing its lack of market exclusivity. A static drug pricing assumption fails to account for anticipated financial savings from the genericization of the choice therapy…
Nonetheless, 95 percent of published CEAs, together with these performed by ICER, assume that drug costs stay fixed of their base case.

The necessity for dynamic pricing is especially necessary when evaluating pharmaceutical to non-pharmaceutical Health applied sciences.

…omitting anticipated worth declines could make a drug look no extra engaging than an equally efficient non-drug intervention (for instance, surgical procedure) with the identical preliminary worth, despite the fact that worth declines following lack of exclusivity imply that the drug (in contrast to the surgical procedure) can be inexpensive over the long term.

The commentary continues by including that IRA has make the trajectory of drug pricing extra predictable as a result of (i) worth will increase are restricted to inflation and (ii) IRA permits CMS to barter chosen medicine earlier than lack of exclusivity.

To learn the authors suggestions for incorporating dynamic pricing into CEA, you’ll be able to learn the total article here.