Policing Drug Prices in America: The Institute for Clinical and Economic Review

Contributor: Laura E. Happe, PharmD, MPH
To learn more about Laura, click here.


pills-3768919.jpgThe United States lags behind other industrialized nations in systematically allocating limited healthcare dollars to medications that provide the most value at the lowest cost.  In fact, the very institute created by the federal government “to assist…in making informed health decisions,” the Patient-Centered Outcomes Research Institute, is legislatively prohibited from considering costs in their comparative-effectiveness studies.1 Further, the Centers for Medicare and Medicaid Services, our country’s biggest payer, is explicitly prohibited from considering a drug’s price tag in coverage determinations for the Medicare population.2-3 Although private payers have much more latitude to consider medications’ acquisition costs, today’s contracting model between pharmaceutical companies and pharmacy benefit managers is so highly focused on rebates that these negotiations may often become the exclusive deciding factor. Amidst increasing public scrutiny on the high cost of medications to patients, a small Boston-based research firm, the Institute for Clinical and Economic Review (ICER), is gaining influence at a time when the U.S. is poised for a drug pricing revolution.

ICER is an independent non-partisan research laboratory founded in 2005 by physician-researcher Stephen D. Pearson, MD, MSc, FCRP, a prior fellow at the United Kingdom’s National Institute for Health and Care Excellence. The group of scientists conducts health economic evaluations of medications and technologies in collaboration with a network of affiliated academic researchers. Funding for the evaluations comes exclusively from non-profit and government entities without financial ties to either the biopharmaceutical or health insurance industry, although the Institute does receive funding from these industries to support some of their other activities. 

ICER conducts economic analyses using best practices for modeling4 to report cost effectiveness. Cost-effectiveness is expressed as the incremental cost-effectiveness ratio (Table 1), where effectiveness is quantified as quality-adjusted life years, or QALYs. The QALY measures the effectiveness of an intervention by taking into account both the quality and the quantity of life, where one year in perfect health is equal to 1 QALY. Use of QALYs as the effectiveness metric in economic evaluations provides an endpoint that can be compared across disease states which may have different measures of effectiveness, e.g., heart attack avoided, blood pressure goal attained. 

Although there is no definitive rule, $100,000 to $150,000 per QALY is generally considered to be cost-effective.5-6 Thus, a new treatment that exceeds $100,000 or $150,000 per QALY would not be considered to be a cost-effective allocation of healthcare dollars.

A 2018 ICER evidence report on the available therapies for hereditary angioedema prophylaxis reported incremental cost-effectiveness ratios of $5,954,000 for Cinryze (C1 esterase inhibitor [human], Shire), $328,000 for Haegarda (C1 esterase inhibitor [human], CSL Behring GmbH), and $1,108,000 for Takhzyro (lanadeluman-flyo, Shire) compared to no prophylaxis (Table 1).7

Using this information, the list price for Cinryze would need to be discounted by about 60% to be considered cost-effective at a minimum threshold of $100,000 per QALY – Haegarda by 28% and Takhzyro by 34%.


Following publication of the ICER report, the media suggested the results could adversely affect Takhzyro’s launch.8 While that remains to be seen, Shire launched Takhzyro at a price tag of approximately $22,070 per dose, far exceeding the $14,530 price ICER deemed to be cost-effective at $100,000 per QALY. 

To be complete, ICER reports more than just the incremental cost-effectiveness ratio. In the case of hereditary angioedema, for example, they included recommendations for manufacturers to consider a “shared savings” model for on-demand treatment, for payers to give all market share to Haegarda and Takhzyro due to simpler administration, and for providers to develop a consensus statement for when to initiate long-term prophylaxis. 7

Market research reports suggest that between 29 and 79% of payers are using ICER evidence reports in their formulary decision-making,9-11 and manufacturers are integrating ICER reports into their evidence generation and market access strategies.12 

An example of this at work is the case of PCSK9 inhibitors, which are used to treat patients with familial hypercholesterolemia as well as has high-risk patients with heart disease and high cholesterol. In November of 2015, ICER published an evidence report evaluating two PCSK9 inhibitors, Praluent® (alirocumab, Sanofi/Regeneron) and Repatha™ (evolocumab, Amgen), which they then updated in September of 2017 to reflect new clinical data.13-14 Both reports called for an 85% discount from the list price to be cost-effective. A third report was published in March of 2018 to reflect new Praulent clinical trial data, and the discounts needed were updated to 45 to 84% depending on the indication.15  Sanofi/Regeneron responded by contracting with Express Scripts, the largest pharmacy benefit manager in the U.S., to reduce the cost of Praluent in the form of a rebate, provided that Express Scripts exclude Repatha from their formularies.16 Rebates are paid by the manufacturer back to the pharmacy benefit manager, but in this case, Express Scripts reported it would pass on a portion to patients who met certain criteria. How much Express Scripts actually passed on and reduced patient out-of-pocket costs for patients has not been reported. Amgen responded in turn, not by offering matching rebates, but by lowering the list price of Repatha by 60%, citing that rebates generally don’t reduce costs for patients.17 

In another example, CVS Caremark announced in August 2018 that it would allow employer clients to exclude drugs that exceed a cost-effectiveness ratio of $100,000 per quality-adjusted life year as determined by ICER, although it remains to be seen how that will be operationalized. This announcement sparked ample media attention, with headline words like “rationing healthcare” and “a dangerous plan.” Robert Dubois from the National Pharmaceutical Council asserted the CVS Caremark move was “too much, too soon,” while Forbes contributor Joshua Cohen postulated that ICER could become America’s NICE (National Institute for Clinical and Economic Excellence).18-19

America has never been a society in which one single institution (e.g., ICER) holds the breadth of power across an entire sector (e.g., NICE). Except when it does. Like the Centers for Medicare and Medicaid Services. And Social Security. So sometimes in the U.S., we do give a tremendous amount of power to something that we have deemed a right.

The current Administration has prioritized lowering prescription drug prices by calling for a “Blueprint” to accomplish this goal.  Yet a singular entity that determines which drugs are and are not paid for in this country is the polar opposite of the Trump Administration’s capitalistic viewpoint.

While ICER has been gaining influence, other entities have been joining the cost-effectiveness game. There is the Innovation and Value Initiative that is beginning to stand up cost-effectiveness analyses, and several organizations are publishing standards and best practices on how such analyses should be completed.  

It is far more likely a constellation of organizations committed to cost-effectiveness, and even comparative-effectiveness without the costs (like PCORI), will fill the evidentiary gap long before the U.S. commits to one entity. 

This begs the question…at what cost do we have multiple entities producing cost-effectiveness data? And at what benefit?

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  1. Patient Protection and Affordable Care Act: Subtitle D of Title VI – Sec. 6301. Patient-Centered Outcomes Research.
  2. Health Insurance for the Aged Act (Medicare Act), Pub. L. No. 89-97, 79 Stat. 286 (1965).
  3. Medicare Program; Revised Process for Making National Coverage Determinations. Centers for Medicare and Medicaid Services. Department of Health and Human Services. Federal Registrar/Vol. 79, No. 152, August 7, 2013.
  4. Eddy DM, Hollingworth W, Caro JJ, Tsevat J, McDonald KM, and Wong JB, on behalf of the ISPOR−SMDM Modeling Good Research Practices Task Force. Model transparency and validation: A report of the ISPOR-SMDM Modeling Good Research Practices Task Force-7. Value in Health 2012;15:843-850.
  5. Bertram MY, Lauer JA, De Joncheere K, Edejer T, Hutubessy R, Kieny MP, and Hill SR. Cost-effectiveness thresholds: pros and cons. Bull World Health Organ. 2016 Dec 1;94(12):925-930. Epub 2016 Sep 19.
  6. Woods B, Revill P, Sculpher M, and Claxton K. Country-Level Cost-Effectiveness Thresholds: Initial Estimates and the Need for Further Research. Value Health. 2016Dec;19(8):929-935.
  7. Institute for Clinical and Economic Review. Prophylaxis for Hereditary Angioedema with Lanadelumab and C1 Inhibitors: Effectiveness and Value. Final Evidence Report. November 15, 2018. Available at: https://icerreview.org/material/angioedema-final-report/ 
  8. Armstrong M. Cost-effectiveness doubts could hit Shire’s Takhzyro launch. Vantage. October 12, 2018. Available at: http://www.evaluate.com/vantage/articles/news/pricing/cost-effectiveness-doubts-could-hit-shires-takhzyro-launch 
  9. Schafer J, Galante D, and Shafrin J. Value tools in managed care decision making: Current hurdles and future opportunities.  J Manag Care Spec Pharm. 2017;23:S21-217.
  10. Survey on Use of Comparative Effectiveness Studies. AHIP. Available at: http://icer-review.org/wp-content/uploads/2017/02/Summary-Findings-of-AHIP-Survey-on-Use-of-CER_Jan2017.pdf 
  11. Tennant L, Gittings K, Migliaccio-Walle K, Campbell C, Danavar A, and Kanaskar A. Payer Perceptions and Utilization of the Institute for Clinical and Economic Review (ICER) Value Assessment Framework. Poster presented at: International Society of Pharmacoeconomics and Outcomes Research, 22nd Annual International Meeting 2017; May 20-24, 2017; Boston, MA.
  12. White N, Latch E, Johns A, Pace M, and Stevens C. Manufacturer perspectives of ICER: Impact on payers. Poster presented at: Academy of Managed Care Pharmacy Nexus Meeting. Orlando, Florida. October 23-25, 2018.
  13. Institute for Clinical and Economic Review. PCSK9 inhibitors for treatment of high cholesterol: effectiveness, value, and value-based price benchmarks. Available at: https://icer-review.org/wp-content/uploads/2016/01/Final-Report-for-Posting-11-24-15-1.pdf Accessed January 15, 2019.
  14. Institute for Clinical and Economic Review. Evolocumab for treatment of high cholesterol: effectiveness and value. Available at: https://icer-review.org/wp-content/uploads/2017/06/ICER_PCSK9_NEU_091117.pdf Accessed January 15, 2019.
  15. Institute for Clinical and Economic Review. Alirocumab for High Cholesterol – Preliminary New Evidence Update. https://icer-review.org/wp-content/uploads/2018/03/Alirocumab-Preliminary-New-Evidence-Update_03102018.pdf Accessed January 15, 2019.
  16. Miller S. This is how you do value-based care. Express Scripts. May 1, 2018. Available at: http://lab.express-scripts.com/lab/insights/industry-updates/this-is-how-you-do-value-based-care.  Accessed November 13, 2018.
  17. Amgen makes Repatha® (evolocumab) available in the U.S. at a 60 percent reduced list price https://www.amgen.com/media/news-releases/2018/10/amgen-makes-repatha-evolocumab-available-in-the-us-at-a-60-percent-reduced-list-price/ Accessed January 15, 2019.
  18. Dubois RW. CVS to restrict patient access using cost-effectiveness: too much, too soon. Health Affairs Blog. September 17, 2018. Available at: https://www.healthaffairs.org/do/10.1377/hblog20180913.889578/full/. Accessed November 13, 2018.
  19. Cohen J. Will CVS Caremark make ICER the American NICE? Forbes. September 20, 2018. Available at: https://www.forbes.com/sites/joshuacohen/2018/09/20/will-cvs-caremark-make-icer-the-american-nice/#1c63ab366173. Accessed November 13, 2018.