In this series, Avalere is identifying the top trends in health economics and outcomes research (HEOR) that are shaping the landscape in 2023 and beyond. In this Insight, Avalere experts dive into trend #7: value assessment.

Without a national value assessment agency like the UK or Germany, independent third-party health technology assessment (HTA) organizations in the US inform coverage decisions, formulary placement, and pricing. The most prominent of these HTA organizations is the Institute for Clinical and Economic Review (ICER), a non-profit entity that conducts similar value assessments as those conducted in Europe.

ICER’s framework is influential in plans and policymakers’ understanding of drug value. It measures cost effectiveness using the incremental cost-effectiveness ratio, which is the cost per unit of health benefit gained from one treatment compared to an alternative. ICER uses equal value life year gained (evLYG) as its primary measure of health gain. In its 2020 framework, ICER’s primary health benefit unit was the quality-adjusted life year (QALY), a unit that faced substantial opposition from patient advocates and policymakers, arguing that QALYs have inherent bias due to disparities in care, given that QALYs adjust the value of each life year based on age and disability status; evLYGs do not make this adjustment and are positioned as a better alternative. Using the incremental cost-effectiveness ratio, ICER determines the maximum price at which a drug would be cost-effective given values of $100,000 and $150,000 per evLYG.

The Generalized Risk-Adjusted Cost-Effectiveness (GRACE) framework attempts to capture patient preferences related to severity. Proposed in 2020, GRACE is based on the understanding that health produces happiness with diminishing returns, and that seemingly equivalent improvements in quality of life should hold greater weight for patients with more severe conditions. ICER is the first HTA agency in the world to implement the GRACE framework. The framework is expected to bring significant changes to the scope and outputs of ICER’s assessments, embedding the impact of illness severity on quality of life into value assessment. GRACE aligns with traditional economic thinking on diminishing returns and allows decision thresholds to account for patient-centered considerations like health equity and patient risk aversion in health consumption.

Another indication of the growing influence of patient-centered value can be found in the Inflation Reduction Act (IRA), which gives the Centers for Medicaid and Medicare (CMS) the authority to negotiate lower drug prices for Medicare. The IRA’s introduction of government price negotiation will formalize value assessment during later stages of the product life cycle and require manufacturers to develop an evidence-generation program to support the shifting value requirements over the entirety of the product life cycle. CMS may also use this value assessment to avoid fiscal challenges and navigate investment decisions.

Although stakeholders are primarily focusing on patient perspectives on the value of healthcare services, some are pushing back on established value frameworks. As previously mentioned, some stakeholders are looking to ICER to reduce or remove the use of QALY/evLYG shortfalls as a proxy for disease state severity. Stakeholders were also looking to ICER to incorporate additional quantitative elements of value (e.g., those described in the International Society for Pharmacoeconomics and Outcomes Research’s Value Flower) in its methodologies. However, ICER did not propose these changes. True patient-oriented value assessment requires quantifying and integrating patient-centered outcomes, treatment preferences, and the full spectrum of patient costs into the quantitative methods used to calculate value. While these methods have emerged recently and continue to be refined, they are not being implemented by ICER, the American Society of Clinical Oncology, or ex-US HTAs such as the UK’s National Institute for Health and Care Excellence.

Look for future Avalere Insights and webinars on top trends in HEOR, including policy’s pressure on HEOR and HEOR as a differentiator, and view the related webinar on value assessment for HEOR. To learn more about how Avalere’s evidence and strategy experts can help you stay on top of this evolving landscape and support your HEOR initiatives, connect with us.