Recently, CVS Health announced a new formulary management option: allowing self-insured employers to remove from their formularies medicines launched at a price greater than $100,000 per quality-adjusted life-year (QALY). The New York State Drug Utilization Review Board has also recently used a cost-effectiveness threshold to justify its mandate for the Medicaid program to receive a steep discount on the price of a cystic fibrosis treatment. If the discount is not obtained, access to the drug will likely be limited. Both CVS and the New York State Board based these decisions on cost-effectiveness estimates from the Institute for Clinical and Economic Review (ICER). Although there is strong support for the movement toward value-based care and prices, the CVS option and New York’s decision for its Medicaid program are too much too soon and could hamper patients’ access to needed medicines, for the reasons described in this post. 

First, cost-effectiveness is an element of value, but it is not synonymous with it. Multiple groups in the US, such as the ICER, the American Society of Clinical Oncology, the National Comprehensive Cancer Network, the Innovation and Value Initiative, and Faster Cures, among others, have proposed value assessment frameworks. None uses cost-effectiveness as the sole measure of value. To fully assess the value of a treatment, stakeholders must account for other considerations important to patients. Examples of these other considerations include: a new therapy’s ability to treat a previously inadequately treated illness; its ability to broaden therapeutic options for diseases with great variability in treatment response; the possibility of cure and the importance of hope related to it; the ease of a regimen when alternative therapies are complex, cumbersome, and time consuming; or, its novel mechanism of action that could lead to markedly improved derivative treatments. Although the National Health Service (NHS) in the United Kingdom bases many of its coverage decisions on the National Institute for Health and Care Excellence’s cost-effectiveness assessments, even it incorporates other considerations, and the strict NHS approach has not garnered real support from stakeholders in the US. 

Second, the CVS program uses a threshold of $100,000 per QALY and likely will use a health system perspective that does not incorporate the economic value of improvements in productivity or reductions in caregiver burden. The scholarly, Second Panel on Cost-Effectiveness in Health and Medicine, which provided the latest broad overview of how these assessments should be performed, has emphasized the importance of considering not just the health system perspective but also the broader societal one, which incorporates these indirect benefits. Moreover, the CVS plan has a single economic threshold ($100,000). In contrast, ICER’s value framework – which has the greatest focus on cost-effectiveness among all the frameworks — has a variable threshold (sometimes $100,000, other times $150,000) based upon the other considerations beyond the cost-effectiveness listed above. Evaluating all therapies for all diseases under all circumstances with a single threshold is an inappropriately blunt approach. CVS mentions that its approach will not apply to medicines deemed “breakthrough therapies” by the Food and Drug Administration (FDA). If CVS believes that the breakthrough designation connotes important non-economic considerations, then why just consider the FDA designation and not the factors above? 

Third, CVS proposes a dichotomous view of a treatment’s value. If the cost-effectiveness assessment is below $100,000 per QALY, then the formulary would include the medicine, and if the assessment exceeds the threshold, it would not. What about medicines with a cost-effectiveness of $105,000 per QALY? Premera Blue Cross uses cost-effectiveness in constructing its formularies but has a more nuanced approach. The company ties formulary tiers, and thus copayments, to cost-effectiveness. Rather than denying patient access, Premera makes a broader set of medicines available but adjusts how much the patient pays for medicines it deems to have lower economic value. 

Fourth, by making a dichotomous formulary access decision based upon a single cost-effectiveness number, CVS presupposes that all patients respond in the same fashion to a therapy. There is substantial literature demonstrating heterogeneity of treatment effect, which means that for the same treatment, some patients benefit far more than the average. The CVS approach ignores this important clinical component. 

Finally, in allowing its clients to use ICER’s cost-effectiveness assessment as the sole source of data to support formulary exclusion, CVS assumes that the field of value frameworks is fully mature, has addressed the many limitations of the QALY, and is ready for prime time, which it is not. Last year in a Health Affairs blog, we identified six key considerations for the improvement of value frameworks, as follows:

1. Value assessments should be separate from assessments of budget impact and affordability.
2. Value assessments should incorporate what is important to patients, even if the end user for a framework is the payer.
3. Value assessments should adopt broad system perspectives in what they assess and how they assess it.
4. Value is dynamic and needs to be considered and captured as such.
5. Value assessments should be transparent and reproducible.
6. A diversity of value assessment approaches that reflect the differing needs of stakeholders should remain; value assessments should reflect user preferences. 

Prices should reflect value, and concerns about health care spending should move us toward incentivizing high-value interventions and dis-incentivizing low-value care. However, the announcement from CVS, perhaps well intentioned, is too much too soon.