In this series, Avalere is identifying the top trends in health economics and outcomes research (HEOR) that are significantly shaping the landscape in 2023 and beyond. In this Insight, Avalere experts dive into Trend #9: Policy’s Pressure on HEOR.

In recent years, state and federal lawmakers have been increasingly focused on pricing and cost of health technologies, with particular focus on cost containment measures. The Inflation Reduction Act (IRA) includes several significant drug pricing provisions that will be managed at the federal level and are designed to limit the growth of pharmaceutical spending in the Medicare program. These policies include inflation-based rebates, removal of the average manufacturer price cap, and the launch of a Medicare drug price negotiation program. In tandem with these federal efforts, several states have enacted prescription drug affordability review boards (PDABs), some of which have the authority to set upper payment limits. PDABs are charged with lowering state prescription drug expenditures and patient costs. These policy evolutions are increasing the need for health technology manufacturers to develop robust evidence packages to establish and support product value throughout the life cycle.

Evidence Generation Strategies Must Be Responsive to Policy Uncertainty

Many elements of IRA implementation have not been fully defined. Manufacturers must develop evidence generation plans in the face of significant uncertainty. A systematic, proactive approach anchored in a sound understanding of the important economic drivers across key stakeholders is critical, as is consideration of how policy developments may impact stakeholder incentives. The IRA is fostering stakeholder interest in value late in the product life cycle and shifting therapeutic area dynamics. In preparation for negotiation, manufacturers must develop strategies to address stakeholder demand for real world evidence, particularly in priority subpopulations and comparative data addressing performance relative to clinically comparable therapeutic alternatives. Further, increased liability for Part D plans as a result of Part D redesign will require evidence that supports reduced spending in medical and/or pharmacy benefits compared to competitor therapies and emphasizes clinical benefit as a result of increased access due to advantageous product coverage..

Manufacturers must evaluate how well their current evidence base is positioned to address these new and diverse evidentiary needs and evaluate the potential risks, benefits, and costs associated with addressing any gaps.

Comparator Selection is Critical to Achieve Positive Appraisal Outcomes

The launch of the Medicare negotiation program and implementation of Part D redesign will require greater investments in clinical comparative effectiveness research and thoughtful consideration of the selection of comparators when undertaking these studies. It is critical that life science companies understand the demands of both Medicare negotiation and Part D redesign as they consider their selection of therapeutic alternatives.

Under the Medicare negotiation program, CMS may select therapeutic alternatives that are “in-class” or “out-of-class” based on clinical guidelines and real-world prescribing dynamics. Manufacturers should understand how the value proposition of the selected drug varies across this set of potential alternatives, as this will play a critical role in the determination of the maximum fair price (MFP).

The potential impacts of Part D negotiation will be determined by the interaction of MFP with Part D plan coverage and utilization management.  Part D plans’ formulary reviews are determined using the US Pharmacopeia (USP) Medicare Model Guidelines, which may be broader than the therapeutic alternatives set used by CMS in the negotiation evidence appraisal process. The clinical and economic differentiation of competitors relative to the negotiated drug and its MFP will determine coverage in the USP class. Given these interactions across different policies, it is critical that manufacturers consider the full suite of IRA-related programs and shifting stakeholder dynamics when selecting comparators for clinical comparative effectiveness research and value narrative development.

Look for future Avalere Insights and webinars on top trends in HEOR, including novel elements of value, and view the related webinar on Policy’s Pressure on HEOR. To discuss how Avalere can support your HEOR initiatives or to receive regular Avalere updates, connect with us.