A case study in differing approaches to reimbursement approval in Europe and the US

Pharmaceutical CommercePharmaceutical Commerce - March/April 2016

Looking at 'cost' and 'value' under different evaluation processes

In November 2013, the National Institute for Health and Care Excellence (NICE) in the UK began its assessment of Sovaldi (sofosbuvir) for hepatitis C. Fifteen months later, in February 2015, NICE published its final recommendation, recommending Sovaldi for use and reimbursement for hepatitis C genotypes 1—6, with various conditions set to ensure the drug reaches those populations for whom the drug was found to be the most cost effective.[1] At its initial price of £35,000 per 12-week treatment, Sovaldi was cheaper in the UK than in the United States; however, it was still extremely expensive relative to other drugs in the UK market and it placed considerable strain on the NHS’s resources.

NICE based its recommendations on a detailed independent analysis of clinical and economic evidence submitted by the manufacturer. The agency engaged and received comments from numerous stakeholders, including patient advocacy groups such as the British HIV association, professional organizations such as the Royal College of Physicians, government organizations such as the National Health Services, and other pharmaceutical companies including Roche and MSD.

In July 2014 the US Senate Committee on Finance launched what was to become an 18-month evaluation of Sovaldi. The committee sought to understand why, exactly, the cost of Sovaldi was so high. While recognizing that Sovaldi was “the first to offer more effective treatment,” the committee concluded that the manufacturer, Gilead, priced the drug to maximize revenue, not access to the drug.[2]

To reach this conclusion, the committee investigated cost components of the new drug: Gilead’s cost to acquire the asset: the research, development and marketing costs; internal communications about its cost; and communications between Gilead, payers, and other stakeholders about the potential impact of the drug’s price.

There are numerous fundamental criteria that differentiate the European system of HTA agencies from the current approach undertaken in the United States, which has no centralized system for determining reimbursement. As demonstrated by the Solvadi example, European HTA agencies utilize a methodical approach to reimbursement decisions based on established criteria while stakeholders in the US have a tendency to fixate on drug prices.

For Sovaldi, NICE was able to recommend the drug for use in specific populations that would benefit the most because it evaluated the effectiveness and cost-effectiveness of the drug utilizing the clinical evidence and cost-effectiveness models. Understanding the value was the first step toward ensuring it would reach those whom it would most benefit. Yet, the US committee’s conclusion asks if “value” is even a valid concept in debating pricing and access restrictions for pharmaceuticals, while other key players in the US healthcare system clearly recognize it as so.

Those familiar with the US health system will likely wonder whether the value comparison is appropriate of an HTA agency to the US government’s perspective. Enter Pharmacy Benefit Managers (PBMs). The primary responsibility of a PBM is to process and pay prescription drug claims through a process that applies plan benefit rules and regulatory guidelines to the claims made to private insurers. As such, it would seem that PBMs conduct some kind of cost-effectiveness or comparative effectiveness evaluation as to the assignment of value. Are they a better comparator for the HTA agencies?

While both PBMs and HTA agencies evaluate effectiveness and cost, they have different primary stakeholders, levels of influence and motivations. Most HTA agencies provide advice used by governments to decide whether to provide and/or reimburse drugs for government health systems. PBMs, for-profit businesses, develop formularies that become part of the plan rules according to which they process reimbursement for submitted prescription claims. They are not obligated to disclose their assessments or methodologies. PBM stakeholders—customers that value cost containment and investors focused on revenue—may place different relative weights on the value of effectiveness, cost and safety than the stakeholders of HTAs. Despite these differences, PBMs are among the few groups in the US that evaluate drugs on the basis of efficacy and cost—a form of cost-effectiveness research that directly affects the availability of drugs in the US.

Ultimately, even extremely expensive drugs, if effective, may save the healthcare system money in the long run. Conversely, inexpensive drugs may work poorly, result in higher rates of hospitalization, and eventually adding up to a higher total cost than more expensive alternatives. Fixating on drugs’ price tags alone does not allow us to distinguish between such situations. However, a focus on effectiveness gives us a common framework and a common language for discussing the broader problems of value and pricing. And the hope is that a common lexicon will allow us to stop asking the question: “Is the price for this drug too high?” and instead ask “Is the price for this drug appropriate for this specific population who will gain a higher benefit than alternative therapies?”


1. Since then, one new Gilead product and products from Merck and AbbVie have entered commercial distribution, with more in the pipeline.

2. http://www.finance.senate.gov/imo/media/doc/1%20The%20Price%20of%20Sovaldi%20and%20Its%20Impact%20on%20the%20U.S.%20Health%20Care%20System%20%28Full%20Report%29.pdf


Yin Ho is the founder and CEO of Context Matters (New York, NY), a healthcare-information and data-analytics company. A licensed physician, she has been vice president of corporate strategy at Medidata Solutions and held senior positions at Pfizer. Yin holds a BA from Brown University, MD from Yale University School of Medicine, and MBA from Harvard Business School.

Daniel Liden is a data analyst at Context Matters. He received his bachelor’s degree from the University of Chicago in the history, philosophy and social studies of science and medicine, and has worked as a biomedical research assistant at labs at the University of Chicago and the Van Andel Institute in Grand Rapids, MI.

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