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An influential calculation of how new drugs impact annual spending is flawed – and patients may be paying the price in reduced access to innovative medicine.

The news comes from a recent Avalere Health analysis.  It examines the Institute for Clinical and Economic Review, or ICER’s, annual budget threshold – used to gauge whether the U.S. health care system can shoulder a given drug’s cost in the short term. To calculate the threshold, ICER uses the average number of drugs approved each year by the Food and Drug Administration.  

But there’s a problem.  The number of FDA approvals vary substantially from year to year.  That means the budget threshold also varies, leaving patient access dependent upon a fundamentally irrelevant factor – the year a new drug is introduced.

ICER’s threshold has ranged from $904 million to $991 million.  Based on the lowest, average and highest number of FDA approvals over the last 20 years, Avalere Health determined, the budget threshold could be $1.81 billion, $1.18 billion or $684 million respectively.   

In other words, the metric is unreliable and unpredictable.

And the threshold’s variability has serious implications for patient access.  ICER uses the threshold to estimate how many patients could receive treatment with the drug in question.  As Avalere’s analysis explains, “As [the] number of FDA approvals falls, the percent of patients that can be treated while remaining under ICER’s budget impact threshold rises.”  

Health plans can use ICER’s calculations to shape their coverage policies.  Thus, a difference of millions of dollars from one year to the next could influence whether innovative drugs are accessible to patients.  Patients whose needed therapy happens to become available in a year where many other new drugs are also approved may – for no medical or rational reason – struggle to access their medicine.

Granted, shortcoming in ICER’s process are hardly new.  The calculations informing another aspect of ICER’s valuation – its value-based price – also have flaws.  As detailed in the Institute for Patient Access’ “The ICER Myth,” ICER’s cost-effectiveness determinations are undermined by:

Nevertheless, ICER has used its approach to deem innovative medicines for cystic fibrosis, genetic high cholesterol and the movement disorder tardive dyskinesia, among others, too costly.  

To learn more, see Avalere’s analysis and IfPA’s white paper, “The ICER Myth.”

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