Regulatory Focus™ > News Articles > IOM Workshop Report Calls for FDA to Assess Products Based on Cost Effectiveness

IOM Workshop Report Calls for FDA to Assess Products Based on Cost Effectiveness

Posted 11 February 2013 | By Alexander Gaffney, RAC

Even casual observers of US healthcare policy are aware of a common refrain: Costs are too high, unsustainable and a poor indicator for the quality US patients ought to be receiving. While the reasons for the high costs of healthcare are frequently and loudly debated, a new report out from the US Institute of Medicine (IOM), a venerable think tank of sorts that advises US agencies on matters of health, argues that at least some of those costs are the result of inefficient regulatory processes.


The IOM's report, part of a workshop on the cost of care, specifically looks at the requisition of "affordable, high-quality cancer care," the costs for which have been rapidly escalating in recent years. A recent article in Xconomy (Timmerman, 11 February) provides a rundown of some of the costliest: $11,000 a month for Sanofi and Regeneron Pharmaceuticals' Zaltrap (ziv-afilbercept) for colorectal cancer; $7,450 a month for Medivation and Astellas Pharma's Xtandi (enzalutamide) for prostate cancer; $9,950 a month for Onyx Pharmaceuticals' Kyprolis (carfilzomib) for relapsed multiple myeloma; $9,600 a month for Ariad Pharmaceuticals' Iclusig (ponatinib) for chronic myeloid leukemia.

The list goes on.

And even if a patient isn't directly responsible for those costs-and many aren't, either because of insurance, charity care or patient assistance plans run by the companies themselves-someone ultimately pays the bill, either directly (direct premiums) or indirectly (increased premiums on the entire insurance pool).

By the IOM report's logic, controlling the costs of providing care to patients should be effective in reducing-or slowing the increase in-the overall costs to the healthcare system.

But how to accomplish that? Largely by borrowing a model now frequently used in other countries: health technology assessments.

Such assessments, largely modeled off comparative effectiveness research (CER), work to combine evidence about a drug's safety and effectiveness with elements of health economics, with the end goal of determining its value to both patients and society.

While this sort of thinking is widely accepted outside the US, where single-payer systems are considerably more prevalent, the US government is legally barred from instituting similar cost control measures. The Centers for Medicare and Medicaid Services (CMS), the agency that administers Medicare and oversees Medicaid, is legally prohibited from considering cost when making a reimbursement decision or from negotiating with drug companies about the prices it is charged.

"Due to a lack of price controls and negotiations, drugs can cost twice as much or more in the United States than they do in the United Kingdom and European nations, which set price limits via cost-effectiveness cut-offs," one of the IOM report participants noted. Many state governments also have laws on the books preventing insurance companies from denying cancer treatment coverage, "regardless of the cost," they added.

And though the recently-passed Patient Protection and Affordable Care Act (PPACA) contained provisions intended to increase comparative research (The Independent Payment Advisory Board, or IPAB), this, too, is prevented from making any recommendation to ration, implement cost sharing or make changes in reimbursement. It will be up to providers to read between the lines of its research.

Cost Effectiveness: A Matter of Opinion and Culture

But what is to be done in light of these restrictions? IOM's workshop participants seemed to indicate that they would like to see more inter-agency cooperation among regulatory officials, including those of the US Food and Drug Administration (FDA).

FDA currently does not assess a product's cost when assessing a treatment, which some workshop participants implied was similar to a second safety consideration for products-the financial safety of the healthcare system and on patient's financial health.

"The FDA is not charged with determining the value of a specific intervention," added another participant. This, they said, could be problematic, as the few barriers to cost can leave patients facing sky-high costs in the meantime.

Having these agencies work more "synergistically will be needed to deliver affordable, high-quality cancer care," the report notes.

But instituting a cost effectiveness regime and ridding the system of some of the lowest-value treatment exposes a number of troubling questions, also identified by IOM workshop participants. What constitutes value, they asked? Is it value to an individual patient, for whom an extra few months of life is invaluable, or is it society, for which a $50,000 price tag might be untenable in light of other more pressing needs? Even lesser considerations, such as whether a treatment will cause hair loss or not, can be valued differently by patients.

To summate those feelings in a phrase: It's about culture.

"That culture change will require greater consideration of costs when making health care decisions, and balancing the needs of individual patients, physicians, insurers, and pharmaceutical companies with the need to improve health care and lower societal costs of such care," IOM wrote. Some of that may come from better communication and education, both for patients and providers.

The report notes that should the culture change to be more cost-conscious and value-driven, it will become easier to make the case for eliminating low- or no-value treatments, perhaps by tying those value considerations more closely with initial regulatory decision-making.

One participant suggested that the US might benefit if FDA instituted a "more rigorous approval process for new technologies," citing the example of costly proton therapy machines supplanting less expensive but no less effective alternatives. The device industry was highlighted as one source of considerable waste in this regard.

"Equipment manufacturers need to have their skin into the game and be part of it and demonstrate the value of their machines with clinical trials," one participant said. "Once that value is demonstrated, insurers have to be willing to pay for the innovation demonstrated in the clinic."

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