BOSTON, July 2, 2020 – The Institute for Clinical and Economic Review (ICER) today published a white paper to inform public and policy maker discussion of “Alternative Policies for Pricing Novel Vaccines and Drug Therapies for COVID-19.” To complement the white paper, ICER will host a three-part online colloquium series featuring leading health policy and industry experts from around the country who will debate the advantages and disadvantages of many different potential approaches to developing and pricing medicines during a pandemic.
“Leaders in government, business, and society all seek to adopt policies that will spur the development of treatments and preventive therapies for COVID-19 that can be delivered as rapidly as possible in an affordable and equitable manner,” said Steven D. Pearson, MD, MSc, ICER’s President. “One critical issue will be how new treatments will be priced to ensure that this goal can be met. In the exceptional circumstances of the coronavirus pandemic the early decisions made regarding pricing policy will guide further decisions in the coming months that will have enormous consequences for the United States and the rest of the world.”
WHITE PAPER: “Alternative Policies for Pricing Novel Vaccines and Drug Therapies for COVID-19”
Released today, ICER’s new white paper provides a brief overview of approaches to manage the pricing of novel vaccines and treatments in times of public health emergencies. After summarizing the experiences and lessons learned from previous epidemics and the annual flu vaccine, the paper analyzes the potential advantages and disadvantages of six alternative approaches to pricing that policymakers from around the world must now confront:
- Status quo: unrestricted pricing. Private companies develop vaccines and treatments, are rewarded with patent rights, and are allowed to decide how much to charge for the resulting products within a monopoly pricing paradigm.
- Cost-recovery pricing. Private companies develop vaccines and treatments, are rewarded with patent rights, but government and/or private insurers use an analysis of the cost of development and production to set a ceiling price.
- Value-based pricing. Private companies develop vaccines and treatments and are rewarded with patent rights, but government and/or private insurers use some form of cost-benefit analysis to set a ceiling price based on the degree of added benefit for patients and society.
- Monetary prizes. Government establishes a specific prize amount to incentivize discovery, with the first private company to discover a successful vaccine being awarded the prize. The government keeps the intellectual property and contracts separately with entities to manufacture and distribute the vaccine at cost.
- Compulsory licensing. In exchange for royalties paid to the innovator, government permits others to make, use, sell, or import patented pharmaceuticals without the patent-holder’s permission. This approach includes the possibility of exercising “march-in” rights to mandate licensing of the product directly to the federal government.
- Advanced market commitments and subscription models. Advanced market commitments (AMCs) are designed to incentivize the development of novel treatments and vaccines by subsidizing the research and development costs through a commitment by the funder or a pool of funders to a future purchase price, if the development is successful. Subscription models can work somewhat similarly, with funders and innovators agreeing on a price for a treatment in a way to provide a guaranteed minimum return on investment and a cap on total costs no matter how many patients need treatment.
COLLOQUIUM SERIES: “Pricing in a Pandemic: Options, Debate, a Path Forward”
ICER will also host a three-part colloquium series of 90-minute webinars with policy makers and experts from diverse perspectives to debate alternative pricing policy approaches for current and future treatments for COVID-19:
- Session One: Cost-Recovery Pricing (July 24, 2020, 12:00 – 1:30 PM ET). Confirmed speakers include: Afton Cissell, JD, Senior Counsel to Congressman Lloyd Doggett (D-Tex); Ronny Gal, Analyst, Sanford C. Bernstein; David Mitchell, Founder, Patients For Affordable Drugs; Aaron Kesselheim, MD, JD, MPH, Professor of Medicine, Brigham and Women’s Hospital/Harvard Medical School; and Randy Burkholder, Vice President, Policy and Research at PhRMA. Register to virtually attend Session One.
- Session Two: Cost-Effectiveness and Value-Based Pricing (July 31, 2020, 12:00 – 1:30 PM ET). Confirmed speakers include: Jon Campbell, PhD, Associate Professor, Pharmaceutical Outcomes Research, University of Colorado; Bobby Dubois, MD, PhD, Chief Science Officer and Executive Vice President, National Pharmaceutical Council; Craig Garthwaite, PhD, Associate Professor of Strategy, Kellogg School of Management, Northwestern University; Steve Miller, MD, Chief Clinical Officer, Cigna; and Eleanor Perfetto, PhD, Executive Vice President of Strategic Initiatives, National Health Council. Register to virtually attend Session Two.
- Session Three: Monetary Prizes, Compulsory Licensing, Advanced Market Commitments (August 7, 2020, 12:00 -1:30 PM ET). Confirmed speakers include: Peter Bach, MD, Director, Center for Health Policy and Outcomes, Memorial Sloan Kettering Cancer Center; James Love, MPA, Director, Knowledge Ecology International; Nicole Lurie, MD, MSPH, Strategic Advisor to the CEO, Coalition for Epidemic Preparedness Innovations, and Former Assistant Secretary for Preparedness and Response at the U.S. Department of Health and Human Services during the Obama Administration; and Carl Schmid, Executive Director, HIV + Hepatitis Policy Institute; Adrian Towse, Emeritus Director & Senior Research Fellow, OHE, and Visiting Professor, London School of Economics. Register to virtually attend Session Three.
Additional speakers for all sessions have been invited, and their names will be made public upon their confirmation. If you would like to nominate a specific expert to be considered, please submit your nomination to firstname.lastname@example.org.
The ICER-COVID Models
To further inform public debate around fair pricing for remdesivir (Gilead Sciences) and other future treatments of COVID-19, ICER has also developed its ICER-COVID economic models, which comprise both cost-recovery and cost-effectiveness paradigms. Intended to be updated frequently as new data emerge, the ICER-COVID models were first published on May 1 and most recently updated on June 24.
The Institute for Clinical and Economic Review (ICER) is an independent non-profit research institute that produces reports analyzing the evidence on the effectiveness and value of drugs and other medical services. ICER’s reports include evidence-based calculations of prices for new drugs that accurately reflect the degree of improvement expected in long-term patient outcomes, while also highlighting price levels that might contribute to unaffordable short-term cost growth for the overall health care system.
ICER’s reports incorporate extensive input from all stakeholders and are the subject of public hearings through three core programs: the California Technology Assessment Forum (CTAF), the Midwest Comparative Effectiveness Public Advisory Council (Midwest CEPAC), and the New England Comparative Effectiveness Public Advisory Council (New England CEPAC). These independent panels review ICER’s reports at public meetings to deliberate on the evidence and develop recommendations for how patients, clinicians, insurers, and policymakers can improve the quality and value of health care. For more information about ICER, please visit ICER’s website.
— Updated cost-recovery benchmark price now framed as a range with maximum of $1,600 per 10-day regimen when incorporating assumptions regarding manufacturer’s 2020 development expenses, uptake of remdesivir, and consideration of early examples of real-world generic pricing —
— Highlighted “cost-effectiveness” benchmark price shifts modestly higher to a range from $4,580 to $5,080 based on new peer-reviewed data on remdesivir; however, a new scenario analysis assuming the likely incorporation of dexamethasone as standard of care produces a lower benchmark price range for remdesivir of $2,520 to $2,800 —
— Report contains additional scenario analyses to help policy makers debate what assumptions and pricing paradigms are most appropriate to achieve rapid development and distribution of treatments for a global pandemic —
BOSTON, June 24, 2020 – The Institute for Clinical and Economic Review (ICER) today released updated analyses to inform public debate of pricing for remdesivir (Gilead Sciences) and other future treatments of COVID-19.
Adhering to ICER’s adapted methodology for evaluating treatments for a pandemic, the ICER-COVID models comprise two alternative pricing paradigms for COVID-19 treatments: 1) “cost recovery” for the manufacturer, in which the price is adequate to return the costs of production of the drug and may also recoup drug-specific development costs; and 2) traditional cost-effectiveness analyses looking at the incremental health benefits and costs within the health system. ICER had previously published results from an initial iteration of the ICER-COVID models on May 1, and today’s updated models incorporate changes based on recent clinical data, updated cost estimates, public comments, and interactions with the manufacturer.
“Reaction to our initial ICER-COVID analyses confirms policymakers are eager to weigh and debate multiple approaches to pricing in a pandemic,” said Steven D. Pearson, MD, MSc, ICER’s President. “We hope that our ongoing updates to these models will continue to spur public discussion about determining the most equitable and productive way to improve public health and economic stability during times like these. As with all drug pricing decisions, policy makers should weigh potential other benefits of treatment and broader contextual considerations as important in framing the results of cost-recovery and cost-effectiveness analyses. Future updates to our report will continue to assess the evolving clinical landscape, including emerging peer-reviewed data on remdesivir, dexamethasone, and other emerging therapies.”
ICER-COVID Model 1: Cost Recovery
ICER’s updated cost-recovery benchmark price range for a full course of remdesivir is $10 to $600 if only considering the marginal cost of producing the treatment, and $1,010 to $1,600 if also considering the manufacturer’s forecasted 2020 clinical development expenses related to the treatment.
To understand the cost of producing the next course of remdesivir therapy, we continue to use as one part of our estimate an article by Hill et all in the Journal of Virus Eradication (2020) that suggests the raw materials needed to make remdesivir would cost approximately $10 for a 10-day course of treatment. In addition to this estimate, we are now incorporating an estimated $600 price based on the pricing announced by three early generic producers of remdesivir in Bangladesh and India.
The extent to which research and development costs should be considered as an empirical element in considerations of pricing for new treatments is disputed. In our updated analysis, we continue to provide a cost-recovery pricing estimate linked solely to the marginal cost of production, but we have now added a second approach that seeks to include projected spending by Gilead Sciences for research directly related to understanding the risks and benefits of remdesivir for patients with COVID-19. To estimate this investment, we reference public statements by Gilead that the company plans to spend $1 billion in clinical development on remdesivir in 2020. Based on additional statements from Gilead, we have assumed at this stage that approximately 1 million treatment courses will be available and sold within the first year, and that the $1 billion cost should be recovered over this number of treated patients. Using these assumptions, the cost-recovery pricing for remdesivir would need to include $1,000 for each course of treatment sold. As the manufacturer spends new money going forward on clinical trials for the COVID-19 population, consideration will be given to including these costs as a possible component of a cost-recovery price estimate.
ICER-COVID Model 2: Traditional Cost-Effectiveness
In ICER’s updated base case analysis, our highlighted cost-effectiveness benchmark price range for remdesivir is $4,580 to $5,080 per treatment course. This benchmark assumes a mortality benefit for remdesivir, that treatment is within a predominantly “severe” population as represented in the ACTT-1 trial, and that the standard of care does not include treatment with dexamethasone. An important new scenario analysis evaluates remdesivir if used within a population also receiving dexamethasone as standard of care; under those conditions, the same cost-effectiveness price benchmark for remdesivir falls to a range of $2,520 to $2,800, due to the estimated contribution of dexamethasone in reducing the underlying risk of mortality.
The new scenario analysis was based on striking – but preliminary and non-peer reviewed – data suggesting that dexamethasone, an inexpensive and widely available steroid medication, reduces mortality in hospitalized patients with COVID-19. Clinical experts advised us that dexamethasone will rapidly become standard of care, but we have chosen not to make it the ICER base case at this juncture pending further details and peer review of the data. In another scenario analysis, we consider the cost-effectiveness of remdesivir based solely on its demonstrated benefit of shortening time to improvement, but without a mortality benefit – an outcome that did not reach statistical significance in the Adaptive COVID-19 Treatment Trial (ACTT-1); without an assumption of mortality benefit, the cost-effectiveness benchmark price falls to $310.
ICER continues to calculate pricing levels to meet various cost-effectiveness thresholds while highlighting the policy relevance of pricing in a pandemic at $50,000 per quality-adjusted life year (QALY) and per Equal Value of a Life Year Gained (evLYG). The report provides cost-effectiveness benchmark prices at higher cost-effectiveness thresholds, but we continue to believe that the $50,000 per QALY/evLYG threshold is more likely to be policy-relevant for consideration of a treatment being evaluated for use in a public health emergency.
Since publishing our initial ICER-COVID models, we have incorporated several key adjustments into our cost-effectiveness model, including:
- Newly available peer-reviewed data from the Adaptive COVID-19 Treatment Trial (ACTT-1) was used, including an adjusted hazard ratio for mortality and an adjusted rate ratio for time to recovery.
- Average age at death was estimated based on US epidemiological evidence that was adjusted to the ACTT-1 population.
- Annual health-related costs for those who recovered were updated to be consistent with evidence.
- Added scenario analyses assuming use of dexamethasone as part of standard care, incorporating emerging evidence on the impact of dexamethasone on mortality.
To inform understanding of our model and guide public comments, a full list of assumptions and updated inputs are included within an appendix of the updated report.
Broader Societal Benefits of an Economic Recovery
ICER is aware that a very effective treatment for COVID-19 may alter how society contemplates the risk/reward tradeoffs of relaxing social distancing measures, which in turn could spur an economic recovery. The ICER-COVID models do not include these potential effects because ICER assumes that policymakers would view it inappropriate to set a price for a treatment for COVID-19 to capture the potential broader economic benefits associated with future economic recovery. However, as with all drug pricing decisions, policy makers should weigh potential other benefits of treatment and broader contextual considerations as important in framing the results of cost-recovery and cost-effectiveness analyses.
Additional Information and Public Input
Adhering to ICER’s adapted methodology for assessing treatments for a pandemic, this ongoing initiative is a collaboration between ICER and Drs. Melanie Whittington and Jon Campbell, academic researchers from ICER’s Health Economics Council. Additional assumptions, citations, and scenario analyses can be found within the detailed summary of the ICER-COVID models. Following the May 1 publication of our initial ICER-COVID models, we received public comments, which we considered when producing this update. Further, an independent member of ICER’s Health Economics Council reviewed the ICER-COVID CEA model code. We will continue to re-assess each model regularly based on feedback and emerging data, and we will publish frequent updates. Click here for a complete timeline of the history of this assessment.
All feedback and suggestions can be emailed to ICER at email@example.com.
The Institute for Clinical and Economic Review (ICER) is an independent non-profit research institute that produces reports analyzing the evidence on the effectiveness and value of drugs and other medical services. ICER’s reports include evidence-based calculations of prices for new drugs that accurately reflect the degree of improvement expected in long-term patient outcomes, while also highlighting price levels that might contribute to unaffordable short-term cost growth for the overall health care system. For more information about ICER, please visit ICER’s website.