The U.S. has never had a publicly funded, independent health technology assessment organization to evaluate prescription drugs, diagnostics, and devices, and subsequently provide recommendations on pricing and reimbursement. This may soon change as the Biden Administration considers creating such a national health technology assessment entity with advisory powers.
Details are sparse regarding the Biden Administration’s possible plans to launch a national evidence gathering entity that would advise public programs like Medicare on drug, diagnostic, and device pricing and reimbursement issues. In passing, the Biden team has mentioned Germany’s drug pricing watchdog, the Institute for Quality and Efficiency in Health Care (IQWiG) as a possible template.
The federal government does have the Agency for Healthcare Research and Quality (AHRQ) and the Patient-Centered Outcomes Research Institute (PCORI). AHRQ is a federal agency that produces “evidence to make healthcare safer, higher quality, more accessible, equitable, and affordable.” PCORI is a non-profit research institute established by the Affordable Care Act that “funds studies that can help patients and those who care for them make better-informed healthcare choices.” Both AHRQ and PCORI are, however, currently prohibited from advising government directly on pricing and reimbursement. While PCORI’s authorizing law was amended in 2019 to include a mandate to consider the full range of clinical and patient-centered outcomes data relevant to patients and stakeholders, it is still barred from funding cost-effectiveness analyses and comparative studies regarding the costs of care.
Perhaps the Biden Administration’s bid for a national health technology assessment body would expand the mandates of AHRQ or PCORI to include the ability to make recommendations on pricing and reimbursement, similar to what Medicare’s Coverage with Evidence Development program currently does in a limited capacity. If so, the entity could be patterned after IQWiG.
IQWiG in Germany
In the German healthcare system, IQWiG plays an integral role in national drug pricing negotiations to determine drug prices. Launched in 2011 under the Pharmaceutical Market Restructuring Act the German approach to drug pricing and reimbursement is based on a centralized assessment by IQWiG of a drug’s safety and effectiveness profile; in other words, a determination of how much added benefit (value) the drug offers. This then forms the starting point for pricing negotiations.
The negotiation process is governed by the German Joint Federal Committee (G-BA), which also oversees the so-called sickness funds in Germany. These are not-for-profit health plans which must provide a comprehensive medical and pharmacy benefit package. For the purposes of conducting a rigorous value assessment, the G-BA contracts with IQWiG to conduct a drug dossier review.
Of note, the German system of pharmaceutical evaluation may have some advantages over, say, the British system which uses cost-per-Quality-Adjusted-Life-Year (QALY) analysis and explicit cost-effectiveness thresholds. Coupled with thresholds, cost-per-QALY analyses facilitate comparisons across therapeutic classes, but may leave out certain qualitative differences between drugs indicated for qualitatively (very) different disease states. If IQWiG becomes the template, then the assessment body would be doing clinical and cost-effectiveness analyses within therapeutic classes; not across classes.
Also, IQWiG is considered more inclusive in its decision-making process than the U.K.’s National Institute for Health and Care Excellence (NICE). IQWiG allows pharmaceutical manufacturers and patient representatives to weigh in on value determinations. Furthermore, the G-BA covers drugs at launch and permits manufacturers to set prices freely for the first year following approval while the drug is being assessed.
As the figure below shows, IQWiG has taken a dim view of the added benefits of many newly approved drugs, across multiple therapeutic categories. This has led to a large number of drugs that IQWiG suggests do not offer added benefit compared to existing treatments. Such assessments can help drive down the price that is ultimately negotiated.
If a drug is shown to offer added value, the G-BA negotiates a price with manufacturers. If no value is demonstrated, the drug’s price is capped at what is being charged for comparable drugs.
Translating this to the U.S. situation, an IQWiG-like entity could enable the federal government to negotiate “ceiling prices” for newly approved drugs that would apply to Medicare and Medicaid, and could extend beyond that to the commercial sector. Specifically, Biden’s campaign website had mentioned Medicare pricing and reimbursement of new specialty biologics with no competition as an area which could be subject to value assessment conducted by an independent review board.
Ideally, from the Biden Administration perspective, setting up a health technology assessment entity would be conjoined with a roll-back of the statutory prohibition on direct government price negotiation in Medicare Part D.
Some analysts have said that because the Institute for Clinical and Economic Review (ICER) has already gained traction among payers it could function as the national, publicly funded health technology assessment body. This may turn out to be the case for the purpose of intra-class ranking of products. However, to arrive at pricing and reimbursement recommendations ICER’s methodology is vastly different from IQWiG’s. ICER uses a similar method to the one adopted by the U.K.’s NICE: Cost-per-QALY (thresholds) and inter-class assessments, both of which IQWiG has eschewed. IQWiG conducts comparative effectiveness reviews without using QALYs or cost-effectiveness thresholds.*
Politically, establishing an IQWiG-like entity and eliminating the statutory prohibition on direct government negotiation of Medicare drug prices would be a difficult undertaking to pull off. Moreover, even if the Biden Administration is successful, there’s no guarantee such an entity would be a going concern in the long run. If the history of AHRQ is any indicator, periodic attempts by future Administrations or the legislative branch to put a health technology assessment entity on the chopping block may wind up undermining its continuity and therefore viability.