High Hopes for CVS’ Use of ICER Drug Pricing

CVS Caremark’s recent announcement that their organization would begin to use the Institute for Clinical and Economic Review’s (ICER) value-based drug pricing information as part of their drug coverage offering for clients—explained in their recently released whitepaper—seems to have left the managed care world quite excited about the prospects. With this new approach, CVS Caremark will allow clients to optionally exclude drugs that exceed a $100,000 per QALY from coverage on their plan. They report in the whitepaper that they are implementing this change because the health care system simply cannot absorb some of the treatment costs we are seeing that can approach $500,000 per QALY.

As I have read through the whitepaper, one line has lodged itself in my mind. It reads, “We believe as more PBM clients adopt such programs, manufacturers will begin to moderate launch prices.” I think this has stuck with me because I wholeheartedly agree and am quite happy that a major player in the industry has taken this step. Although no other health system in the world is perfect, I believe reviewing the coverage of drugs within the context of their overall economic value is a strength other health systems have shown to be effective. We have seen manufacturers either initially price their drugs, or modify the price after launch, in order to meet cost effectiveness threshold in order to gain coverage in other countries. Having a major player within the United States make a move like this allows the small to moderate players to make similar decisions without fear that they are moving against the market.

As I have opportunities to meet with drug manufacturers, I think the field representatives have really caught on to the idea that plans are nearing a breaking point for covering the high cost therapies they are covering today without much confidence in the value they provide. I am however not always sure that this message is getting translated or heard correctly by the leadership within the drug manufactures’ organizations. I do believe though that the message will be heard loud and clear once plans decline coverage of the manufacturers’ products that do not offer enough value at the current price point. When a drug is unable to meet launch projections because the number of plans that refuse to cover the drug with an unreasonably high cost to value ratio, manufacturer executives will get the message quickly.

As I have stated before, I believe in making sure manufacturers are awarded for their research and development. Without the ability to turn a profit, we would not continue to see innovation and potentially life changing drug therapies coming to market. We must balance this award though with the limited resources available to health plans in order to make sure health coverage for the majority of American’s can continue for years to come. Using a standard cost effectiveness measure, coupled with a predetermined cutoff threshold for coverage, seems to me to be a fair and honest way to balance these competing interests. I hope to see this concept catch fire within the managed care industry in order to encourage an opening of a dialogue between plans and manufacturers leading to mutually beneficial drug pricing and availability.

There has been public criticism of this CVS decision mostly from manufacturers and patient advocacy groups. I think anyone who has worked in the industry for any length of time expected to hear this kind of criticism as soon as we heard the CVS announcement. In the case of self-interest, most manufacturers tend to be critical of restrictions on their drugs. Patient advocacy groups by their inherent nature of advocating for their population are going to oppose any restriction that would affect those they represent. While I respect the reasons manufacturers and advocacy groups would take this stance, I feel it would be more productive for them to work with all involved parties to come to mutually agreeable solutions. Unless we all work together to find solutions for the rising costs of drug coverage, there may come a breaking point in the payers’ ability to provide comprehensive coverage which could be devastating for all involved.

Only time will tell the effectiveness of this change by CVS Caremark within the American health system. I am optimistic however that this will be looked at as a positive turning point for patients, payers, and manufacturers. I believe this can be a time where we all come together to protect the interests of all parties and ensure the long-term stability of drug coverage and development.

Russ J Spjut, PharmD, is owner of Formulary Intel Consulting. He is a residency trained pharmacist in managed care with experience in both commercial and Medicare Part D PBM operations. He has been involved in formulary management, P&T committee presentations, clinical program development, formulary strategy, clinical analysis, client management, and review of coverage determination requests for a major health care management company.

For articles by First Report Managed Care, click here

To view the First Report Managed Care print issue, click here