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Industry working group identifies the value characteristics that may, collectively, become part of a higher-level, shared approach to valuing pharmaceutical treatments.
After decades of decline, the industry pipeline of approved products has rebounded1 over the last five years and in 2018, 59 new drugs were approved by FDA, the highest number in history. This includes 19 (32%) novel drugs approved as first in class. More than half of the new drugs (34 out of 59) were approved to treat rare or orphan disease.2 These innovative drugs enter into constrained healthcare systems that struggle to cope with demographic change and complex incentive and payment systems. While patients demand fast access to these new treatment options, payers are forced to make trade-offs in allocating their constrained budgets.
There is broad consensus that a focus on “value” is the appropriate approach for optimizing spend of constrained healthcare resources. By focusing on value, payers aim to optimally and equitably allocate constrained resources to areas of greatest need and to treatments with greatest impact on patients and healthcare systems. However, value assessments are not only about the equitable allocation of resources and funding, but also need to cover the creation of appropriate rewards to spur innovation.
Today, every pharmaceutical product at the time of its introduction into the market is assessed based on the value it offers in the majority of countries. Although pharmaceutical products only represent about 15% of total healthcare expenditures, they are still the only category subject to rigorous assessment of value and there are considerable differences in the perspectives and frameworks used to assess this value.
Multiple value frameworks have been put forward, and each approach embeds-quite naturally-the perspective of its issuing entity or stakeholder. Providers, payers, academics, and health economists have each seen the same treatment through their individual lens, assigning different emphasis to different aspects of a treatment, leading to variation in perceived value. Further, the multiple frameworks do not share a common set of value characteristics or language, leading to even further variation in the value assigned to a drug treatment.
In this report, we first present observations about current value assessment frameworks, and outline the unintended implications of many current value assessment approaches. We then identify and define value characteristics that might, collectively, become part of a higher-level, shared approach to valuing pharmaceutical treatments. We do not intend to propose yet another value assessment framework. Rather, we offer a more holistic approach to bridge across different frameworks and stakeholder perspectives and provide common language to describe value.
The Boston Consulting Group (BCG) Market Access Roundtable is a forum that brings together senior market access leaders and serves as a platform for interactive discussion on industry-level topics. Roundtable members
collectively select critical topics that are relevant but not handled in other forums, and which can have either near- or long-term relevance. Members work in smaller working groups on specific topics to develop thought pieces, relevant frameworks, or policy-related publications, which are collectively ratified by the Roundtable on a bi-annual basis. As of summer 2019, 20 companies are full-time members of the BCG Market Access Roundtable. The opinions expressed in this report are solely those of the authors and do not represent the positions of the organizations they are a part of.
Beauty is said to lie in the eye of the beholder. This is true also for the value of a pharmaceutical product, even though we expect it to be objectively assessed. In theory, value assessments should provide an unbiased, objective, and transparent evaluation of a wide range of clinical and economic benefits of a new therapy relative to what is already available for patients. In practice, all valuation approaches make certain choices to keep assessments manageable and practical. Thus, value assessments incorporate inherent trade-offs and perspectives. By setting a focus or emphasis on some value elements over others, the perspective of the assessing entity or stakeholder naturally influences the outcome of value assessments.
For this reason, no value assessment is fully objective or perfect. Yet, given the increasing importance of fair and transparent pharmaceutical evaluation, it is important to note and understand their limitations. Payers make formulary and reimbursement decisions based on assessment of pharmaceutical value. Since these assessments also guide where drug manufacturers invest, all healthcare stakeholders should have an interest in further improving the current value frameworks. Looking across the different value assessment models in use today, we make four observations.
1. Narrow and static value definitions
A multitude of factors help evaluate and determine the total value of a treatment or therapy. Clearly, clinical efficacy/efficiency, typically measured in terms of mortality, morbidity, and patient quality of life, and safety/tolerability are core aspects of value. These aspects, despite being quantifiable and thus easily comparable across different products, do not match real-life effectiveness measures and do not necessarily represent a healthcare patient-centered context.
We would suggest that other significant aspects of value also need to be considered. For example, most stakeholders would agree that the ease of treatment (e.g., whether a patient has to spend several hours on an IV infusion or can, instead, take a pill) constitutes an important aspect of value, both from a patient perspective but in particular also from the perspective of health systems with limited capacity to administer complex treatments. Further, whether a treatment allows a patient to live a near unimpaired life or alternatively, needs to undergo stationary care, would certainly influence the value a patient ascribes to a pharmaceutical product. From a healthcare system or societal perspective, the disease burden addressed and the related productivity impact would contribute additional value.
To manage the complexity of value assessments, current frameworks focus on only a few aspects of value. More specifically, all assessment approaches evaluate clinical efficacy/efficiency and safety/tolerability. On the flip side, assessment approaches vary widely for other aspects for value. For example, quality-of-life aspects such as functional and behavioral outcomes as well as ease of treatment, or the quality of evidence, are often not covered. While understandable from a practical perspective, stakeholders must recognize that applying a specific focus inevitably biases the valuation outcome. The inclusion of one value aspect but not another may, inadvertently, put preference on one product over another or favor one disease over another.
Another common approach to simplify value assessments is the use of point-in-time or static assessments. While a point-in-time assessment method may seem practical, the full-treatment value may often unfold over time. For example, the availability of real-world utilization and outcomes data reduces the uncertainty regarding a product’s clinical benefits in day-to-day practice. However, relying on only a point-in-time assessment (typically before launch) renders it impossible to incorporate the new information and adjust the value of a pharmaceutical accordingly.
In addition, many value assessments only consider summary measures of outcome, such as median overall survival or average number of complications. There may be significant variations in treatment outcomes across patients and it is clearly important for patients to know whether a new treatment offers a significant proportion of patients the chance of long-term benefit or even cure. So, ideally, value assessments should consider the distribution of treatment outcomes across patients.
2. Embedded stakeholder and patient perspectives not always clear
By emphasizing specific aspects of value, a stakeholder makes conscious choices and trade-offs. While these choices are based on rational deliberation, assessment nuances are, of course, shaped by the perspective of the entity performing the valuation. For instance, a provider may value one aspect of a treatment that is important from a healthcare cost perspective but less relevant to a patient. Given their different perspectives, the value assessment of a patient may emphasize different aspects of value than the payer or provider.
In current value assessment frameworks, it is not always clear which perspective is incorporated and for which audience it is intended. Further, we find that the perspective of the patient is often underrepresented. For example, few valuation approaches give adequate weight to quality-of-life aspects, and many do not consider the full distribution of treatment outcomes. Indeed, there is ongoing research into the value of certainty, where a treatment is very precise and has a highly predictable treatment outcome, as well as the “value of hope,” when outcomes are variable but a meaningful proportion of patients have durable benefits and may even be cured.
Importantly, we would add that because of the varying focus of each framework, outcomes will differ and comparability will be difficult.
3. The conflation of value, price, and access
Many frameworks assess value and price simultaneously. Others simply make price a component of value. Indeed, it may seem difficult or even impractical to decouple value from price from access. In the discussion around value-based healthcare, Michael Porter defines value as “outcomes over cost.” This is mathematically equivalent to the approach taken in cost-utility analyses like in the UK or Canada, where value is quantified in terms of incremental cost-effectiveness ratios. In this report, we propose to consider value more in the sense of incremental benefit to patients, healthcare systems and society, and independent of the price of the intervention that is required to achieve these benefits. We believe such decoupling is central to the discussion since price can be adjusted and is “context-specific” while value is more universal and largely equivalent to “benefit.”
The ability and/or willingness to fund certain medicines will vary across different healthcare systems. A health system’s affordability or ability to pay is connected to the country’s GDP per capita and its political decisions on how to prioritize healthcare against other needs like education or defense. The willingness to pay for a certain intervention is ultimately driven by the importance the health system places on a certain disease and/or treatment option. As such, they are context-specific, and the ability/willingness to fund a medicine, therefore, varies in different health care systems and geographies. But from the standpoint of the patient, pharmaceutical value is not impacted by the context of the wealth of a country or the funding priorities of a given healthcare system. Hence, it is important to untangle the value and the price discussions.
As a more tangible example, a consumer’s relative ability to afford a given product (e.g., an iPhone) does not alter the value that he or she assigns to the product. The value is defined by the utility of the iPhone to the consumer (e.g., ease of use, calling features, or the subjective benefit of its design). The price defines the other side of the cost vs. benefit assessment in the consumer calculus, and it ultimately informs whether or not a consumer will buy the iPhone. Similarly, whether or not a payer elects (or is able) to fund a certain medicine does not alter its clinical value to the patient at a given time.
4. Fragmented healthcare systems
Healthcare systems and care delivery are often fragmented and funded out of separate siloed budgets. Assessments of value and decisions around priorities for access are often particular to a specific sector of healthcare, and value is considered only within these constraints rather than across the whole system.
Fragmentation of healthcare delivery systems often do not allow an estimation of the resources that are saved/no longer allocated to a particular therapeutic area or pathway as a consequence of the advent of the new pharmaceutical product. The value framework should assess the value of a medicine on the healthcare system overall, rather than only the segment in which value is assessed.
In addition to the patients’ perspective, all stakeholder perspectives should be embedded in the value framework definition. Better treatment options for Alzheimer’s patients, for example, will provide a significant benefit for the caregiver/family, who are often providing the bulk of care and also suffer the consequences of the disease. Benefits to the healthcare system should be quantified and incorporated in the value definition.
Three principles for value assessments/value characteristics frameworks
With the shift toward value-based healthcare, value assessments are becoming increasingly important. Value assessments impact treatment decisions, funding allocations, and research focus, to name just a few. But crucially, value assessments determine patient access. It is, therefore, paramount that healthcare stakeholders agree on pragmatic, transparent, and equitable approaches for assigning value to medicines.
Stakeholder perspectives on where to focus value assessment will naturally continue to differ. But the healthcare community could begin by using a common language and agreeing on an overarching set of value characteristics. In this spirit, the BCG Market Access Roundtable proposes a set of overarching value characteristics.
Our proposal is driven by three guiding principles (see Figure 1 below):
1. We try to account for the different perspectives of all healthcare stakeholders to identify and define a holistic set of value characteristics. Since we are not suggesting specific weighting of different characteristics, we believe it is possible to generate a common language on the proposed value-determining elements.
2. We differentiate value, price, and access. As previously outlined, it is important to review value independent of price and access, as value can be objectively assessed while price and access are dependent on context.
3. We expand on the concept of context modifiers. Rather than being elements of value, context modifiers modulate the perspective on a number of elements of value. For example, the uncertainty or quality of evidence modulates the value of all value elements, as low quality of evidence puts into doubt all outlined benefits. Similarly, budget impact will modulate the price debate. Generally, payers are able to pay higher unit prices for products treating indications with fewer patients as the total budget implications remain manageable.
We acknowledge that payers will prioritize technologies that demonstrate avoidance of otherwise not-avoidable costs in absence of that specific treatment, and these cost savings will be a critical component of price setting and negotiations. But we also realize that such win-win situations where patients get better benefit at reduced cost are the exceptions and, often, new drugs will increase costs for payers overall-at least until products lose their exclusivity, after which they will be available at significantly lower cost.
Proposed overarching framework of value characteristics and context modifiers
In our proposed meta-framework, we identify two context modifiers and four layers of value characteristics (see Figure 2 below). Unmet need, as determined relative to the current standard of care, and Uncertainty, expressed by the quality of evidence, are the two principal context modifiers.
The four value characteristics comprehensively cover all aspects of value. First, clinical benefit, which is unequivocally core to the value proposition of a pharmaceutical product. It is followed by additional benefits derived by patients and caregivers. From a healthcare system perspective, the drug’s broader impact is critical, including the clinical and economic benefits, and among these, especially, any cost savings that are conferred both on healthcare systems and on society more broadly.
This is the anchor component of value, describing the most profound impact on a patient’s health and life, including but not limited to mortality, disease- and treatment-related morbidity, and quality of life. Current value assessments consistently cover drug efficacy/efficiency, and the majority also cover safety/tolerability. While this risk/benefit balance is also considered by regulators in their approval decisions, value is always relative to the current standard of care; in this sense, value frameworks should address “incremental” risk/benefit (N.B. The ICER framework3 is the most notable exception not covering safety/tolerability). Clinical benefit can be objectively measured with well-established variables, and pharmaceutical companies can normally present robust data from clinical trials.
Additional patient /caregiver benefit
From a patient’s perspective, there are additional benefits of a pharmaceutical product that can have a profound impact on their well-being. Take the mode of administration as an example. The difference between spending half a day in an infusion room each week for months at a time versus being able to receive the same drug through a quick, subcutaneous injection can make a world of difference to a patient. Faster administration also confers value to the provider, who does not need to provide costly IV infusion infrastructure. Yet, if one were to limit consideration to the clinical benefit, both drug formulations would seem to offer the same value.
In addition, value assessments sometimes need to consider the concepts of option value, value of certainty, and value of hope. Option value is created when a therapy allows a patient to survive until new or existing therapies may become available. A typical situation is for patients with blood tumors, where bone marrow transplantation is a curative treatment but it takes time to find a suitable donor, so that extended survival creates the option for such a curative treatment. Value of certainty and value of hope are relevant in situations where two therapies with the same “average” outcome may have very different consequences for patients; certainty reduces the hit and miss approach that is still the case for many therapies, where the biology of the disease and the mechanism of action of the drug are not fully understood. On the other hand, this uncertainty may also have the positive aspect that a proportion of patients may have a much better outcome and potentially even experience a cure.
Healthcare system benefit
The value delivered by a pharmaceutical product often goes beyond clinical and patient benefit. More pointedly, the impact on the broader healthcare system differs from drug to drug. Value assessments need to take this additional factor into account to assign adequate value. Let us examine two hypothetical products that are comparable in all aspects of value with a single exception: one product addresses a condition with a large disease burden, while the second product addresses a condition with a lower disease burden. In this situation, the first product clearly offers greater value to the health system, a fact that needs to be represented in value assessment methodologies.
Now consider the same two hypothetical products. One product addresses a condition that consumes significantly more healthcare resources than the other condition. Clearly, the product that addresses the resource-heavy condition and thus frees up the time of a healthcare professional or lowers the cost to treat provides greater value. From the perspectives of the provider (and some payers), the healthcare cost-avoidance benefit that a pharmaceutical product can offer is a substantial part of the value offered. Hence, an adequate and comparable value assessment needs to account for the impact on other healthcare resources.
Social and macro benefit
Finally, pharmaceutical products can deliver value to society as a whole. If a drug therapy enables a patient to return to the workplace during treatment, or resume work earlier than with an alternate treatment, the incremental productivity benefits both the economy and society overall.
Pharmaceutical innovation often comes in increments rather than in big jumps. The first drugs that improved outcomes for HIV/AIDS patients did not have impressive benefits, but they paved the way to better understand the disease and develop better treatments so that today’s patients can expect good control of the disease, enabling them to live normal lives. We can expect a similar stepwise innovation as we address difficult diseases like Alzheimer´s. The development of a truly new mechanism of action (MOA) in one product can lead to further downstream innovation by applying this MOA to other conditions. Consequently, a product that uses a novel MOA provides more value than one leveraging an established one (all else being equal).
It is important to note that how we value pharmaceutical products also influences the R&D decisions of drug developers. While all stakeholders benefit from the discovery of a new MOA, on average, it is far riskier to develop a product using a novel approach. It is, therefore, sensible to reward innovation and also to assign value based on the degree of innovation within a product.
Ultimately, pharmaceutical innovation has an impact on broader societal issues. Advances in the treatment of certain conditions can further efforts to fight poverty and hunger. Healthy individuals are likely-and perhaps even predisposed-to both take care of themselves and to positively impact their children and elders. Since this more obscure pharmaceutical benefit is predominantly important for emerging market diseases, it is often overlooked in current value frameworks, which tend to focus on oncology, cardiology, and other diseases of established markets.
Regulators have provided special regulatory pathways for products of potentially significant patient benefit in areas of high unmet need. Unmet need is not very well-defined, but typically includes absence of effective treatments and a significant gap between the health experienced by patients with this condition compared to otherwise healthy patients despite standard of care. We believe that unmet need equally should be considered in the determination of value. We would posit that there are very few disease areas of unmet need, where inventors have not tried to develop treatment options. The fact that unmet need remains, for example, in pancreatic cancer or Alzheimer´s disease is testament to the fact that these are complex diseases that do not have simple solutions. The benefits delivered to patients with these conditions by new therapies should potentially be rewarded beyond proportion, in the end “a QALY is not a QALY” but depends on the underlying disease severity and unmet need.
Ultimately, all stakeholders prefer proof of value over mere promise. To this end, well-controlled randomized clinical trials in the appropriate patient population demonstrating improvements on final outcomes like mortality, morbidity, and patient quality of life against the current standard of care remain the hallmark of clinical development. However, we also need to balance timely access for patients to new treatment options against our expectations for certainty. In particular as we address diseases at an earlier stage, it will take longer to observe these final outcomes and we may have to resort to intermediate outcomes and biomarkers. Also, with increasing personalization of healthcare, we are addressing smaller and smaller patient populations, in which randomized trials may not be feasible. It is important to have flexible standards that align practicality of evidence-generation with evidence expectations with time, while, simultaneously, appreciating that less certainty of value will likely require adaptation of price expectations and adjustment of price with time.
This is an area where the increasing availability and usage of real-world data will allow for a “conditional” assessment of value based on initial, perhaps less mature clinical trial data with clear requirements for the manufacturer (and health system) to collect additional evidence in the real world; this data can then be used to update the value of the medicine at a later stage. We believe this enables a balanced approach where risk is shared between manufacturers and healthcare systems for the benefit of patients in need. Roundtable members recognize this is an area that is still evolving and could benefit from greater solidarity amongst all stakeholders. Towards this objective, the Roundtable is launching additional working groups to tackle specific themes within real-world evidence.
Each stakeholder will, quite naturally, have a different perspective on how to weigh the various elements that determine value. Most likely, different vantage points will prevent finding a consensus on valuation weight factors. However, we believe that all stakeholders can come to agreement on an overarching set of value characteristics and common language to describe them. Thus, we are not advocating the weightings and methodology that should be applied for each element, but rather a framework that enables informed dialogue on whether society is paying for the right things, and incentivizing the right behaviors. We further believe that such a holistic approach will, in fact, lay the groundwork for more structured dialogue and debate.
We see our framework of overarching value characteristics as a first step toward a more unified debate on the value of pharmaceuticals. While we made every effort of accounting for the perspectives of multiple stakeholders, the framework can certainly be further fine-tuned through multi-stakeholder debate. To fully account for all stakeholder perspectives and gain consensus on value calculation, we encourage and welcome follow-on debate and structured multi-stakeholder discussion.
1. The Endless Frontier? The Recent Upsurge of R&D Productivity in Pharmaceuticals, Fabio Pammolli et al, bioRxiv 670471; doi: https://doi.org/10.1101/670471
2. Advancing health through innovation: 2018 new drug therapy approvals, Center for Drug Evaluation and Research, U.S. Food & Drug Administration