Health Policy$ense

The Value of Value Frameworks

A 50th Anniversary Symposium Panel

“Value” is more than a buzzword. In response to rising costs, payers, physicians, and patients have turned to value assessment frameworks to inform treatment plans and design sustainable budgets. However, the usefulness and potential of these tools remain murky. LDI’s 50th anniversary symposium convened a panel to elucidate key questions for the future of value frameworks—what does value mean to different stakeholders in the health care system? How should payers, doctors, and patients appraise the value of the care they receive? What does the future hold for value frameworks in the United States?


Photos: Hoag Levins
Jalpa Doshi, Michael Aberman, Mark Pauly, and Samuel Nussbaum discuss value frameworks at LDI's 50th Anniversary Symposium.

Jalpa Doshi, Professor of Medicine at the Perelman School of Medicine, kicked of the discussion with an overview of value frameworks. Early movers in the space include the American Society of Clinical Oncology (ASCO) Value Framework, National Comprehensive Cancer Network (NCCN) Evidence Blocks, the American College of Cardiology/American Heart Association (ACC-AHA) task force, and the Institute for Clinical and Economic Review (ICER) Value Assessment Framework. Each framework has its own mission: ASCO and NCCN’s tools are designed for shared medical decision-making. ICER helps insurers negotiate drug prices and develop sustainable drug formularies. Furthermore, the methodologies are varied: ICER mainly uses cost per quality-adjusted life year (QALY), while ASCO provides a net health benefit score that includes overall survival alongside symptom and side effect palliation.

The panel agreed that simple economics falls short when it comes to prescription drugs. Mark Pauly, Professor of Health Care Management at Wharton, provided a classical economic view of value: payers should cover a treatment if the benefit, measured as willingness to pay (WTP), is greater than the cost. Benefits can include cost offsets, such as statins that reduce the risk of hospitalization, or predetermined ethical preferences, such as a willingness to pay for any drug that provides a year of life for under $100,000. When it comes to prescription drugs, determining benefits is especially delicate.

Samuel Nussbaum, Strategic Consultant with EBG Advisors and former CMO of WellPoint/Anthem, noted cost offsets and cost per QALY approaches miss a great deal of benefit: QALYs don’t measure caregiver burden and workforce participation. Michael Aberman, CEO of Quentis Therapeutics, added that the focus on new, blockbuster drugs obscures long-term value propositions. High drug prices for less-effective drugs spur follow on development of breakthrough drugs, as was the case for Sovaldi. Furthermore, the net benefit for some drugs are only realized over a lifetime. More intangibly, society appreciates the assurance of having effective treatments for conditions that affect small subpopulations, such as ALS. Leaving aside the benefits, drug prices themselves opaque. The true price paid by insurers and patients is rarely the list price, which obscures the value of drugs for patients.

A common assumption that undergirds interest in value frameworks is that drug prices are far too high in the United States, and value-based pricing will automatically rein in costs. Drug are the fastest growing component of medical spending. Nussbaum discussed his first-hand experience at WellPoint/Anthem, where drugs account for nearly 25% of costs. For public payers, drug costs divert spending from social determinants of health, such as education. Value frameworks, so the thinking goes, will lower prices and, on net, provide more care to patients. 

Doshi asked the panel to challenge this assumption. If value frameworks add in externalities beyond cost per QALY, they may further justify high drug prices. Aberman observed that just as drug manufactures could use value frameworks with holistic methodologies to justify high prices, pharmacy benefit managers and payers may exploit frameworks with a narrow cost per QALY focus to deny drugs to patients. Value frameworks cannot resolve the underlying tension between price, innovation, and access, and they cannot substitute for frank discussion what value means to patients.

The panel agreed that society at large needs an “adult, transparent, and public” discussion of how drugs ought to be priced, because quantitative value assessments must follow from known public preferences. As Mark Pauly put it, if state legislators instruct Medicaid to cover all drugs under $100,000 per QALY, and a new drug valued at $70,000 per QALY will decimate the state budget because of high utilization, legislators must go their constituents and say, “you told us you were willing to pay $100,000 per QALY, so how many football tickets are you willing to give up to make that available? Or, is your actual value per QALY lower?”

Even as value frameworks proliferate, balancing innovation and access will ultimately require bold leadership from executives and legislators alongside sustained, transparent engagement with patients and families. Aberman suggested that legislators should consider public funding for the manufacture of off patent generics, which would make room for further innovation. Nussbaum suggested wider adoption of outcomes-based contracts with payers and licensing the use of drugs within a population for a pre-determined price. Pauly argued health plans should be upfront about the cost per QALY at which they cover drugs and allow consumers to shop accordingly. All agreed that, going forward, value assessment frameworks can play a vital role in shared decision making and budget planning, but not without continuous, public, and honest engagement with the thorny questions at hand.

Aaron Glickman is a policy analyst at LDI.