CVS and the $100,000 QALY

CVS Caremark set $100,000-per-QALY as a threshold for its formulary. Patient groups (with pharma backing) say the approach is discriminatory.

Ed Silverman

This summer CVS Caremark took a surprising step and adopted a new plan for assessing the value of medicines. The PBM unit of the health giant CVS decided that any new drug exceeding $100,000 per quality-adjusted life year—QALY for short—may be excluded from the formularies that are maintained by its clients.

To make its plan work, CVS will rely on the Institute for Clinical and Economic Review (ICER), the increasingly prominent cost-effectiveness and drug evaluator in Boston. In many developed countries, government entities do the number crunching that’s used in coverage decisions. But in this country there’s a void and ICER is filling it.

CVS Caremark’s QALY gambit came as PBMs are fighting a three-front war. Many lawmakers see them as perpetuating and benefiting from an opaque pharmaceutical pricing system.

Pharma has tried to shift some of the blame for high drug prices onto PBMs. And the big mergers notwithstanding (CVS’s acquisition of Aetna and Cigna’s acquisition of Express Scripts), some health plans and employers want to push back against PBMs as their budgets get swamped by new medicines with hefty price tags.

One size fits all: discriminatory?

Using QALYs to make formulary decisions suggests that CVS is willing to take on some risks, especially because the $100,000-per-QALY threshold is rather stringent.

“This has been batted around in the academic community forever and is a very commonly used approach in the U.K. and other countries to make decisions,” says Robert Dubois, MD, the chief science officer and executive vice president of the National Pharmaceutical Council, a think tank supported by the pharmaceutical industry. “There is a middle ground, but the problem is in its infancy and we’re only now starting to see some examples in this country.”

Almost immediately, though, CVS was criticized by patient groups that argue that QALY-based coverage is an unfair cost-saving tool. Their complaints underscore how this benchmark is likely to become a flashpoint in the debate over cost effectiveness and the wider discussion about the types of metrics that should be used to inform and decide coverage.

In an open letter sent this past September to CVS Caremark, a coalition of dozens of patient advocacy groups and a few professional medical societies argued that the PBM will rely on a “one-size-fits-all” approach to assessing value that “discriminates against the chronically ill, the elderly, and people with disabilities, using algorithms that calculate their lives as ‘worth less’ than people who are younger or nondisabled.”

Among the groups that sent the letter were the American Association of People with Disabilities, the AIDS Institute, the U.S. Pain Foundation, the American Academy of Nursing, the Autism Society of America, the Black Women’s Health Imperative, and the Epilepsy Foundation. The effort was organized by the Partnership to Improve Patient Care, which counts pharmaceutical industry trade groups among its members.

The pharma funding raises suspicions about this effort being a thinly veiled attempt by pharma to thwart cost-effectiveness evaluations that will call into question high prices and possibly cut into profit margins.

Anirban Basu

“The $100,000 [QALY] threshold is just for guidance and was never meant to be a black-and-white decision,” says Anirban Basu of the University of Washington.

But patient groups have a coherent argument against QALYs. In their view, QALYs are inherently unfair because they assume certain health states are more desirable than others, creating an imbalance when calculating the benefits provided by a particular treatment. Someone in perfect health, for instance, would be assigned the highest starting value, but a disabled person gets a lower score, so they would presumably gain less benefit. In other words, by starting with a lower baseline, the value of eliminating a disease in a disabled person would be lower.

Don’t pick on the QALY

The criticism stung CVS Caremark, which had already planned to exclude medicines that are classified as breakthrough therapies by the FDA from its new $100,000-per-QALY threshold. Nonetheless, CVS maintained its program will get under way next year but did agree to meet with the groups and also conceded some unspecified changes may be considered. One meeting, in October, has been held so far.

“It’s really a debate about how you balance different expectations among different patient groups and using one metric for comparing and allocating resources,” says Anirban Basu, a professor of health economics and director of the Comparative Health Outcomes, Policy, and Economics Institute at the University of Washington.

“But that’s the reason QALY is used in the first place,” continues Basu. “It’s true that QALY has limitations, but it’s unfair to pick on QALY, since there is no metric out there that doesn’t pose this problem. The $100,000 threshold is just for guidance and was never meant to be a black-and-white decision. For patients, the metric just gives you a flag so you can bring perspectives to the discussion, and then you can make a stronger case of value.”

As for payers, he argues that a more holistic view is necessary. Why? A key reason is that QALYs may not capture all the benefits of a medication and the lowering of costs on a wider scale. They may miss, for instance, the time and anxiety spared seeking other forms of treatment. At the same time, Basu acknowledges the need for some kind of standardized assessment for costs and benefits.

“Unless you know who is going to benefit, it’s very difficult to say you should give an expensive treatment to everybody [on] the premise that somebody will benefit,” he explains. “Unfortunately, this can create a situation where there is a tradeoff that appears to pit one group against another.”

Ed Silverman founded the Pharmalot blog and has covered the pharmaceutical industry for 20 years.