How Can the U.S. Healthcare System Better Measure Cost-Effectiveness?

The frequent outcry over expensive drugs, especially in recent months, has made evident the need in the United States’ healthcare system for a method to measure the effectiveness of drugs in comparison to price. Such a method would enable decision making based on a consistent and logical framework for the provisioning and pricing of drugs. In a recent post, we explored a valuation framework for cancer drugs proposed by the American Society of Clinical Oncology (ASCO) and compared it to the Health Technology Assessment (HTA) agency approach used in other countries. While no perfect system exists, these HTA agencies have developed methodologies for efficacy and/or cost-effectiveness evaluations to guide their respective countries’ drug provision and reimbursement decisions.

In many countries with HTA agencies, a drug must receive a recommendation from the HTA agency after regulatory approval in order to be prescribed and funded. The United States operates differently and does not have a central authority for listing or funding drugs after approval. While such a centralized system may not be necessary, U.S. citizens and governing bodies currently lack any robust and transparent means of assessing the effectiveness and value of new drugs. Examining and comparing HTA agencies and their evaluation methodologies offers insights that can be considered as guideposts to assist in structuring a methodology for the United States.


National Institute for Health and Care Excellence (NICE), United Kingdom

NICE provides HTAs for The National Health Service (NHS) England, specifically reviewing drugs that are likely to significantly benefit patients and that are likely to be priced very differently from existing products. An independent academic center carries out the evaluation and submits a report. NICE’s Appraisal Committee evaluates the report along with additional commentary from clinical experts, commissioning experts, and patient groups. The NICE Appraisal Committee releases a provisional decision, and stakeholders have an opportunity to comment on that decision before NICE releases the final reimbursement decision.

NICE is primarily interested in the clinical efficacy data and in the manufacturer’s cost-effectiveness model. The manufacturer must make an acceptable case for the drug’s cost-effectiveness, which may include confidential discounts, in order for the drug to be reimbursed in England.

Scottish Medicines Consortium (SMC), Scotland

The SMC evaluates all drugs newly-approved by the European Medicines Agency (EMA) and determines if they represent acceptable value for money for NHS Scotland. As with NICE, a manufacturer must make a submission to SMC containing evidence of a drug’s comparative clinical efficacy and a justification of the drug’s cost. SMC makes a recommendation based on the submitted evidence and local NHS boards are expected to fund the cost of SMC-recommended drugs.

SMC places a special emphasis on the patient perspective. SMC evaluations for drugs for end-of-life situations and ultra-rare disease conditions may involve Patient and Clinician Engagement (PACE) meetings, allowing for a more detailed discussion of the impact of a drug on patient quality of life.

Federal Joint Committee (G-BA), Germany

Institute for Quality and Efficiency in Healthcare (IQWiG), Germany

Manufacturers are required to submit a dossier of clinical efficacy compared to an approved comparator to G-BA for each new drug launched in Germany. G-BA generally commissions IQWiG, an independent scientific institute funded through the statutory health insurance funds, to evaluate each drug first and IQWiG offers an opinion on the extent and probability of its clinical benefit in a report to the G-BA. The G-BA then evaluates IQWiG’s benefit assessment along with further evidence from an oral hearing including physicians, experts, and manufacturer representatives to generate a final additional benefit score for a drug compared to the appropriate comparator (usually the most cost effective standard of care).

Drug pricing is negotiated on the basis of the additional benefit score. A drug showing “no additional benefit” is only reimbursed at the maximum price within a reference group and the patient is expected to pay the difference. If the drug demonstrates an additional benefit, The Statutory Health Insurance association and the manufacturer enter price negotiations to determine the price of the drug in Germany.

French National Authority for Health (HAS), France

HAS, an independent public body with financial autonomy, assesses all drugs seeking reimbursement on the National Health Insurance positive reimbursement list in France. HAS’s Transparency Committee (TC), consisting of health professionals and patient and manufacturer representatives, conducts the evaluation, considering:

  • Clinical efficacy
  • Impact on patient care
  • Public health
  • Organization of care

They offer an opinion on the actual benefit of the drug (SMR score) and the improvement in medical benefit compared to existing therapies (ASMR score). Based on these scores, the TC makes a recommendation to the Ministry of Health on reimbursement. The Economic Committee on Health Care Products, an interministerial body under the joint authority of the ministers for health, social security, and the economy, uses the TC opinion, particularly the SMR and ASMR scores, to negotiate a price with manufacturers. For example, a drug that receives an ASMR score indicating “no additional benefit” will be reimbursed only if the price is lower than its comparators. Since October 2013, further economic evaluation is conducted for drugs demonstrating significant improvements in medical benefit over existing treatments. Using the evidence provided by HAS, final reimbursement decisions are made by the Ministry of Health.

What Can We Learn?

Just as each HTA system is tailored to its own country’s specific needs, the health system in the United States should consider what matters most to its unique health care system. There are likely relevant insights that can be gained from studying the approach and methodologies from these bellwether HTA agencies to inform the establishment of any evaluation system in the United States.

For example:

  • It may not be necessary to conduct thorough reviews of every single drug; instead, only high-impact drugs may be evaluated.
    • NICE only evaluates drugs it expects to have a significant impact on budgets or a major benefit to patients while the other agencies mentioned evaluate all new drugs.
  • Depending on the needs of the healthcare system, cost-effectiveness can be a routine part of drug evaluation. Alternately, it can be assessed as part of a separate process or only under certain special circumstances.
    • NICE and SMC explicitly evaluate the cost-effectiveness of new drugs. G-BA/IQWiG do not, but their clinical evaluations are later used in pricing negotiations with manufacturers. HAS conducts cost-effectiveness evaluations only on drugs that represent a significant advancement in efficacy compared to existing treatments.
  • The patient voice can have an important place in the drug evaluation process.
    • Drugs for rare or end-of-life condition that receive negative decisions in Scotland are eligible for a PACE meeting, which gives patients and caregivers the opportunity to explain the need for the drug and the positive effect it has on patients’ lives. SMC places significant weight on the PACE meeting when re-evaluating the drug. Other agencies also consider comments from patients, caregivers, and other interested parties.
  • Comparative Effectiveness Research forms the basis for price discussions.
    • Regardless of whether an agency conducts its own cost-effectiveness evaluations (NICE, SMC) or not (HAS, G-BA/IQWiG), comparative effectiveness is the foundation for price discussions. NICE and SMC rely on comparative effectiveness evaluations to estimate cost-effectiveness while HAS and GBA/IQWiG use their comparative effectiveness reviews to negotiate prices with manufacturers.

These agencies have very different ways of evaluating drugs based on the needs of their respective healthcare systems. It is what they have in common that is more important— an interest in developing a predictable process for evaluating a drug’s impact on the health care system (at both an individual and a societal level) in order to best allocate resources.