The BioCentury Show: ICER’s Pearson on value and pricing

Pearson cited unaffordable health insurance premiums in the private sector and tax increases in the public sector as adverse consequences of drug prices that exceed socially acceptable thresholds. At the same time, he called for changes to health insurance benefit designs that restrict access to drugs. 

Patients, Pearson said, are being ill-served by the U.S. healthcare system, including by excessive out-of-pocket costs and unaffordable health insurance premiums. Insurance companies “need to come to the table” and change benefit designs that prevent patients from accessing drugs.

ICER has been widely criticized by patient advocates and biopharma companies for relying on quality-adjusted life years (QALYs). Pearson acknowledged the limitations of QALYs and said ICER incorporates another measure, equal value of life years gained, that avoids some of those limitations.

He also addressed criticisms of ICER’s funding, as well as about the absence of price erosion from generic competition in the organization’s pricing models.

The collapse of the Build Back Better Act, which sought to regulate the prices of some drugs purchased by Medicare and to cap drug price increases, could bolster ICER’s influence as public and private payers look for tools to align payments with value. While drug companies often dispute its assessments, ICER’s contention that prices should be tied to value is more closely aligned with the industry’s perspective than are the views of many politicians and policy makers, including the current and previous U.S. presidents.

Biden recently suggested that drug prices should be regulated like utilities, an idea Pearson said won’t work for innovative drugs, Pearson said. “Drugs aren't widgets,” and “trying to tie the price to the cost of the drug doesn’t really work very well, except for when they’re in their generic phase.”

Instead, he proposed assessments that “try to assess the added value of drugs or other healthcare interventions and scale the price that’s willing to be paid to reflect the risk, but also that time window during which it will have monopoly pricing.” In this “innovation phase,” Pearson said, “we would expect the price to be far above the cost of production.”

While the system is predicated on a limited duration of market-based pricing, ICER does not incorporate price erosion from generic competition in its economic models. ICER may change its methods to incorporate the loss of exclusivity, he said. 

BioCentury asked Pearson to respond to concerns from patient advocates that the QALY is a misguided attempt to put a number on their suffering. Patients also contend that QALY’s don’t value the lives of people who are living with serious diseases as highly as those who are healthy, so assessments based on the metric will devalue treatments for patients who are living with serious diseases.

He responded by asserting that QALYs should never be the “only fact on the table when you’re making any kind of judgment about healthcare priorities.”

The concerns BioCentury cited have led ICER to also use equal value of life years gained, Pearson said. For drugs that extend life, the metric “gives a full credit to that time, whether you’re spending it in perfect health or in very poor health because we do understand that we don’t want to have the risk of saying to anybody that extending your life is worth less than somebody else, some other condition, just because you have a preexisting disability, or you’re very seriously ill.”

Pearson agreed with BioCentury’s suggestion that reforms to health insurance benefit designs are essential to improving access to drugs in the U.S.

“The system is broken, and patients are suffering,” Pearson said.

Drug pricing, he contends, plays a part in perpetuating a system that doesn’t meet the needs of patients. “It’s a two-way street,” in which drug prices can fuel increased premiums, out-of-pocket costs and demands for drug companies to pay rebates, he said. “We’re stuck in a system in which the out-of-pocket [cost] is often too high, and it has created all these games around co-pay coupons and rebates” that prevent patients from receiving the medicines they need, Pearson said.

The complete interview with Pearson is available at www.TheBioCenturyShow.com.