By Kenneth E. Thorpe

A prominent healthcare watchdog claims it has found the solution to high drug prices.

For years, the nonprofit Institute for Clinical and Economic Review has analyzed and rated the cost-effectiveness of new drugs. ICER wants insurers and government programs to use these ratings to determine which medicines are worth covering. If health plans only cover drugs that provide a good “value” to patients and taxpayers, ICER believes drug expenditures would plummet.

This approach probably would cut short-term spending — but it’d also endanger patients, especially those with rare diseases that afflict fewer than 200,000 people. Millions of Americans could lose access to life-enhancing drugs. And research into rare disease treatments would grind to a halt.

For each drug it evaluates, ICER offers a suggested price range based on how many additional months or years of good health the treatment provides to patients. In the United States, ICER recommends that drugs not cost more than $175,000 for each “quality adjusted life year” — 12 months of good health — they deliver.

Rare disease drugs rarely meet ICER’s standards. Four out of the five rare disease therapies that ICER assessed between December 2014 and August 2018 were deemed low value.

Consider revolutionary treatments for spinal muscular atrophy or SMA, the leading genetic cause of death for infants. The FDA approved the first therapy for SMA in 2016. Parents credit the drug with saving their children and enabling them to hit developmental milestones that were previously unreachable.

ICER recently determined the therapy fell short of “traditional cost-effectiveness” thresholds. To fit within those thresholds, its price would have to drop up to 90 percent.

So are these treatments overpriced? Not at all.

On average, it costs $2.6 billion to bring a new drug to market. If public and private health plans used ICER’s assessments to deny coverage to certain medicines, drug researchers would have little incentive to develop new therapies.

This is especially true when it comes to drugs for rare diseases.

When companies successfully create rare disease drugs, they must set prices high enough to recover their development costs from a small patient population. As a result, these treatments cost more per dose than traditional drugs, whose costs can be spread over millions of customers.

ICER doesn’t sufficiently account for this difference between mass-market and rare disease drugs.

Despite its limitations, ICER’s approach appeals to policymakers and insurers who want to cut drug spending. They could point to an ICER analysis as an “objective” reason to not cover certain drugs.

This is already happening in the United Kingdom. The National Institute for Health and Care Excellence — which uses a framework somewhat similar to ICER’s — routinely recommends denying patients access to potentially life-saving drugs for conditions ranging from cancer to cystic fibrosis.

If the United States adopted a similar approach, 30 million rare disease patients could face similar barriers to treatment almost immediately.

The long-term effects would be even worse. If insurers and government programs stop paying for rare disease treatments, the financial incentive to develop these drugs would evaporate. Research into thousands of rare diseases would dry up, along with patients’ hope for a long, healthy life.

Lowering drug spending is a worthy goal. But not at the expense of stifling research and condemning millions of patients.

Kenneth E. Thorpe is a professor of health policy at Emory University and chairman of the Partnership to Fight Chronic Disease.

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