A Conversation With Steven Pearson, MD, President of the Institute for Clinical and Economic Review (ICER)

The Value of Drugs: It Is Not About the Money!
Interview by Peter Wehrwein

Boston comparative effectiveness organization ventures into drug reviews and sounds the alarm if the price is high.

The Institute for Clinical and Economic Review (ICER), a comparative effectiveness research organization in Boston, received a $5.2 million grant last year from the Laura and John Arnold Foundation to conduct reviews of newly approved drugs. Steven Pearson, MD, is the president and founder of the organization.

How do the drug reviews differ from the other sorts of reviews you’ve done of devices and procedures?

Really, not at all, because our basic approach is pretty much the same. You’re going to have different kinds of evidence, depending on what kinds of interventions you look for. For instance, it’s not very common to have randomized trials of diagnostic interventions available to look at, and for some procedures. Usually for drugs, we expect to see randomized controlled trials as part of the FDA approval process.

Steven Pearson, MD

How many new people have you acquired to take on drug review?

We are basically going to double in staff. The goal is to hire 10 to 12 new staff.

You do these reviews with New England Comparative Effectiveness Public Advisory Council (CEPAC) and the California Technology Assessment Forum. Now there is a third group, Midwest CEPAC.

We feel it’s very important for our reports to serve as a vehicle for public discussion of these issues, so everything is in a public domain. But we also think it’s important to have them vetted in public meetings. We recruit and convene an independent panel of clinicians, methodology experts, and public representatives to basically debate the merits of the evidence and of our review, and to take votes.

So you’ve modeled this like the FDA—a staff report, a public meeting, and an advisory panel–type vote.

Yeah, elements are like that. It’s also like MedPAC.

And you are planning on doing 15 to 20 reports a year, and you published a list of drugs that you’re going to review this year, right?

Right. It’s a tentative list because we’re somewhat at the mercy of what happens in the late stages of review. If we anticipate doing a drug in an area and suddenly the evidence doesn’t look so good, sometimes we have to kind of punt.

Your reports have proved to be pretty controversial. Let’s talk about hepatitis C drugs. You came out with a report about the hep C drugs and revised it a couple months later.

The very first report we did on the hep C drugs was on Sovaldi. Well, it was technically on Sovaldi and Olysio, a drug that has kind of fallen by the wayside. At that point, the panel voted that Sovaldi was low value. It was clinically superior but low value, and we just had one kind of vote on value. And we recognized that buried in that judgment of low value by our independent panel were really two things. One was the long-term cost-effectiveness, which was actually quite good, and the second was potential short-term budget impact, which was really intense. It was really going to strain a lot of budgets.

So, that’s kind of what our reports do now. Whatever the list price is, we use our calculations to suggest a price at which it’s aligned with the long-term value to patients. And we provide kind of a price at which it would or wouldn’t ring an alarm bell as far as short-term budget impact.

What sets off the alarm bell?

There are several states that have laws that say that the health care costs cannot go up higher than state GDP, or things start happening. Alarm bells start ringing. And the ACA had a provision that said that Medicare needed to do something when its costs were going up faster than GDP plus 1%. So, we decided to adopt the GDP plus 1%, and then the rest is just math. You have to figure out how many drugs are likely to come into approval over the next year. And you come up with a kind of average budget impact for each new drug if you want to stay within the GDP plus 1% rate.

I think you have angered some drug companies by using health system value. I think the word value bugs them.

It does. And that’s part of almost a cultural divide. If you talk to payers, they will say, “How can you talk about value without thinking about the short-term impact on budgets?”

We developed our model with input from manufacturers, payers, patient groups, and others. Not everybody wants budget impact to be part of the conversation about value. But it is a very important concern for employers, for payers. To us, it didn’t make sense to leave it out.

Adoption rates are not factored into your calculations of budget impact, and the budget impact might look quite different depending on your assumptions about adoption rates.

This is tough because we don’t view it as our role to try to prejudge how tightly health plans will try to manage utilization of a new drug. That’s up for them to decide, and to work out kind of going forward from the time that we try to assess the evidence. At the same time, we know that a new drug is not going to be taken by 100% of the eligible patients. So we model what we call a potential budget impact based on unmanaged adoption assumption.

The PCSK9 inhibitors. Your assumption was that everybody eligible for it would get it?

No, 20%. After five full years of being out there, we said if the health plans don’t manage it tightly, and they just basically let doctors and patients do what they want to do, we said maybe 20% of eligible patients would be using it.

How did you arrive at 20%?

We basically looked at the history of other adoptions and the issues around the fact that it’s injectable. We look at some of the companies’ own statements. In our reports, we actually have this graph that we developed so that you can say, “I think it’s only going to be 10%,” and you can easily see what the budget impact is going to be. Or you can say, “I think it’s going to be 50%” and see what it will be.

Are you guys the answer to our high drug costs? Is this sort of research a sword in the hand of St. George slaying the health care cost dragon?

We want to foster the kinds of dialogue and give people the tools to have the dialogue. We don’t have all the answers. We help ask the questions. So, if you don’t think that our approach to value and pricing is the right one or the best one, let’s talk about what a better one could be.

I understand the focus on drugs, and right now, they are a sector of the health care economy that seems to be growing faster than others. But it’s all connected. So, I think it’s important for people to recognize that drugs do often bring good value to the health care system. But we have to think a little bit harder because the policy structure gives so much power to manufacturers to set their prices. I think it’s created a need for information like what ICER provides.

Do you think Medicare ought to negotiate prices?

I think they should only consider doing that if they know what the endgame is. The question is, how are they going to know what to negotiate to? What’s a fair price? I think it’s reasonable to try it in the private market before we try it out at a federal level. So, I’m not against it full stop, but I think we have a lot to learn before we decide to have Medicare negotiate prices.

Why do we need ICER to do this? Some professional organizations, like ASCO, are coming up with value-based systems. For the public, it’s going to be confusing that one group, with strange initials, comes out with a value assessment, and another group comes out with a different one.

Welcome to America, where we chose not to have a single federal agency do this. When PCORI was set up, there was the thought that it might do cost-effectiveness research. But they interpreted their own statute as meaning that they could not even fund cost-effectiveness research. AHRQ—it helps provide the evidence on clinical effectiveness and that is always the anchor on any kind of cost-effectiveness research. Medicare is not allowed to negotiate drug prices, so it doesn’t look at cost as part of their decisions about coverage for Medicare. There is a gap, and people struggle to understand value and to generate information around it.

If you look at what ASCO has done, they’re designing a framework for use by the individual patient and doctor. That’s different than a framework that’s supposed to be used by payers and others. We’re not going to have a monolithic approach to value because we don’t have a monolithic system.

Isn’t there some criticism that what you guys are doing puts a damper on innovation? You’re kind of the wet blankets of the biotech industry.

Well, some people would say that Martin Shkreli needed a few more wet blankets on top of him at some point.

We’re kind of holding a mirror up to the system and saying, look, if you want to talk about value, the benefits brought to patients over the long term, and you want to also keep your eye on the short-term budget impact, this is what it looks like. Should that mean we do something? Again, we’re not trying to provide all the answers; we’re trying to provide the material with which to have the right conversation.