Advertisement

The impact on cost-effectiveness of accounting for generic drug pricing: Four case studies

  • Joshua T. Cohen
    Correspondence
    Correspondence: Joshua T. Cohen, PhD, Tufts Medical Center, 800 Washington St, #063, Boston, MA 02111, USA.
    Affiliations
    Center for the Evaluation of Value and Risk in Health, Institute for Clinical Research and Health Policy Studies, Tufts Medical Center, Boston, MA, USA
    Search for articles by this author
Published:November 03, 2022DOI:https://doi.org/10.1016/j.jval.2022.09.011

      Highlights

      • Without reimbursement at branded prices, drug manufacturers would not develop many drugs, and those drugs would never become available at generic prices. Therefore, cost-effectiveness analyses should include generic prices because they represent an anticipated consequence of reimbursement at branded prices.
      • Including price declines in an analysis of inclisiran, a new cholesterol treatment, yields more favorable cost-effectiveness ratios. Assuming displacement of inclisiran with a follow-on drug does not substantially alter this result if we assume that it likewise eventually loses exclusivity and declines in price.
      • To ensure realistic value estimates, cost-effectiveness analyses should account for anticipated life cycle price patterns.

      Abstract

      Objectives

      Guidance on the conduct of health technology assessments rarely recommends accounting for anticipated future price declines that can follow loss of marketing exclusivity. This article explores when it is appropriate to account for generic pricing and whether it can influence cost-effectiveness estimates.

      Methods

      This article presents 4 case studies. Case study 1 considers a hypothetical drug used by a first patient cohort at branded prices and by subsequent, “downstream” cohorts at generic prices. Case study 2 explores whether statin assessments should account for generic prices for downstream cohorts that gain access after the initial cohort. Case study 3 uses a simplified spreadsheet model to assess the impact of accounting for generic pricing for inclisiran, used when statins insufficiently reduce cholesterol. Case study 4 amends this model for a hypothetical, advanced, follow-on treatment displacing inclisiran.

      Results

      Assessments should include generic pricing even if the first cohort using a drug pays branded prices and only downstream cohorts pay generic prices (case study 1). Because eventual generic pricing for statins did not depend on decisions for downstream cohorts, assessing reimbursement for those cohorts could safely omit generic pricing (case study 2). For inclisiran (case study 3), including generic pricing notably improved estimated cost-effectiveness. Displacing inclisiran with an advanced therapy (case study 4) modestly affected estimated cost-effectiveness.

      Conclusions

      Although this analysis relies on simplified and hypothetical models, it demonstrates that accounting for generic pricing might substantially reduce estimated cost-effectiveness ratios. Doing so when warranted is crucial to improving health technology assessment validity.

      Keywords

      To read this article in full you will need to make a payment

      Purchase one-time access:

      Academic & Personal: 24 hour online accessCorporate R&D Professionals: 24 hour online access
      One-time access price info
      • For academic or personal research use, select 'Academic and Personal'
      • For corporate R&D use, select 'Corporate R&D Professionals'

      Subscribe:

      Subscribe to Value in Health
      Already a print subscriber? Claim online access
      Already an online subscriber? Sign in
      Institutional Access: Sign in to ScienceDirect

      References

      1. Generic competition and drug prices. US Food and Drug Administration.
        • Neumann P.J.
        • Podolsky M.I.
        • Basu A.
        • Ollendorf D.A.
        • Cohen J.T.
        Do cost-effectiveness analyses account for drug genericization? A literature review and assessment of implications.
        Value Health. 2022; 25: 59-68
        • Neumann P.J.
        • Sanders G.D.
        • Russell L.B.
        • Siegel J.E.
        • Ganiats T.G.
        Cost-Effectiveness in Health and Medicine.
        2nd ed. Oxford University Press, Oxford, England2017
      2. Drug pricing and pharmaceutical patenting practices. Congressional Research Service.
        https://sgp.fas.org/crs/misc/R46221.pdf
        Date accessed: August 25, 2021
        • Cohen J.
        What’s holding back market uptake of biosimilars? Forbes.
        • Grabowski H.G.
        • M Kyle K.M.
        Generic competition and market exclusivity periods in pharmaceuticals.
        Manag Decis Econ. 2007; 28: 12
        • Berndt E.R.
        • Nass D.
        • Kleinrock M.
        • Aitken M.
        Decline in economic returns from new drugs raises questions about sustaining innovations.
        Health Aff (Millwood). 2015; 34: 245-252
      3. Research and development in the pharmaceutical industry. Congressional Budget Office.
        (Accessed July, 2021.)
        • Adams C.
        CBO’s simulation model of new drug development. Working paper 2021-09.
        • DiMasi J.
        • Grabowski H.
        • Hansen R.
        Innovation in the pharmaceutical industry: new estimates of R&D costs.
        J Health Econ. 2016; 47: 20-33
        • Morrison A.
        • Glassberg H.
        Determinants of the cost-effectiveness of statins.
        J Manag Care Pharm. 2003; 9: 544-551
        • Prosser L.A.
        • Stinnett A.A.
        • Goldman P.A.
        • et al.
        Cost-effectiveness of cholesterol-lowering therapies according to selected patient characteristics.
        Ann Intern Med. 2000; 132: 769-779
        • Jacobson T.A.
        • Schein J.R.
        • Williamson A.
        • Ballantyne C.M.
        Maximizing the cost-effectiveness of lipid-lowering therapy.
        Arch Intern Med. 1998; 158: 1977-1989
        • Jack A.
        The fall of the world’s best-selling drug. Financial Times.
        • Caffrey M.
        For now, PBMs just say no to high-cost PCSK9 inhibitors.
        Am J Manag Care. 2015; 21Cover-SP457
        • Pagliarulo N.
        Regeneron, Sanofi cut PCSK9 list price, matching earlier move by rival Amgen. Biopharmadive.
        • Tice J.
        • Ollendorf D.
        • Cunningham C.
        • et al.
        PCSK9 inhibitors for treatment of high cholesterol: effectiveness, value, and value-based price benchmarks: final report.
        • Khvorova A.
        Oligonucleotide therapeutics - a new class of cholesterol-lowering drugs.
        N Engl J Med. 2017; 376: 4-7
      4. FDA approves Novartis Leqvio® (inclisiran), first-in-class siRNA to lower cholesterol and keep it low with two doses a year. Novartis.
        • Ray K.K.
        • Wright R.S.
        • Kallend D.
        • et al.
        Two phase 3 trials of inclisiran in patients with elevated LDL cholesterol.
        N Engl J Med. 2020; 382: 1507-1519
        • O’Riordan M.
        Pricey inclisiran is rolling out: a ‘buy-and-bill’ model may smooth its path. tctMD.
        • Beall R.F.
        • Darrow J.J.
        • Kesselheim A.S.
        Patent term restoration for top-selling drugs in the United States.
        Drug Discov Today. 2019; 24: 20-25
        • Dave C.V.
        • Hartzema A.
        • Kesselheim A.S.
        Prices of generic drugs associated with numbers of manufacturers.
        N Engl J Med. 2017; 377: 2597-2598
        • Lo C.
        Challenging the link between pharma innovation and US drug pricing.
        Pharmaceutical Technology, 2017
        • Panzer A.D.
        • Margaretos N.M.
        • Bridger N.
        • Osani M.C.
        • Lai R.C.
        • Chambers J.D.
        Patients’ access to 2018 FDA-approved drugs 1 year post approval.
        Am J Manag Care. 2022; 28: e153-e156
        • Albrecht B.
        • Andersen S.
        • Chauhan K.
        • Graybosch D.
        • Menu P.
        Pursuing breakthroughs in cancer-drug development.
        • Rosenblatt M.
        The real cost of “high-priced” drugs. Harvard Business Review.
        • Chen Y.
        • Kelton C.M.
        • Jing Y.
        • Guo J.J.
        • Li X.
        • Patel N.C.
        Utilization, price, and spending trends for antidepressants in the US Medicaid program.
        Res Soc Admin Pharm. 2008; 4: 244-257
        • Mulcahy A.W.
        • Hlavka J.P.
        • Case S.R.
        Biosimilar cost savings in the United States: initial experience and future potential.
        Rand Health Q. 2018; 7: 3
      5. Why the world is saving too much money for its own good. The Economist.