New framework proposed for valuing medicines’ broader societal impact

A new paper, titled Valuing the Societal Impact of Medicines and Other Health Technologies: A User Guide to Current Best Practices introduces generalized cost-effectiveness analysis (GCEA) to address limitations in traditional drug valuation methods.

The paper, published in Forum for Health Economics and Policy, argues that outdated methods for evaluating the cost-effectiveness of medicines may limit access to life-saving drugs. Authored by a team of 12 leading health economists, the paper critiques current cost-effectiveness analysis (CEA) methods and introduces an alternative called GCEA. This model accounts for a wider range of societal benefits that conventional methods overlook, potentially allowing policymakers to make more informed decisions about drug value and affordability.

The traditional CEA model has been widely used by organizations such as the Institute for Clinical and Economic Review (ICER) in the US and has influenced health systems worldwide. However, as the authors explain, it is limited by a narrow focus that often overlooks factors such as caregiver impact, productivity, and long-term health improvements that benefit society. "The stakes are incredibly high for improving how the value of medicines is assessed," said co-author Lou Garrison, who explained that conventional models might lead to patients facing higher costs or being denied access to effective treatments if their calculated cost-effectiveness is deemed insufficient.

The authors developed a framework for GCEA, which builds on the Second Panel on Cost-Effectiveness’s “impact inventory” and ISPOR—The Professional Society for Health Economics and Outcomes Research (ISPOR) “value flower” and integrates 15 broader value elements across four categories, with each category capturing vital aspects of a medicine’s societal impact:

• Uncertainty – considers patient risk preferences.
• Dynamics – assesses real-world treatment value over time, including trends like genericization.
• Beneficiary impact – accounts for benefits to caregivers and values considerations of equity in health outcomes.
• Additional value components – measures broader effects such as community spillovers and productivity losses.

These elements, represented in the GCEA “value flower,” aim to provide a comprehensive approach for health technology assessment. Peter Rubin, Executive Director of No Patient Left Behind, which sponsored the research, noted,

“Undervaluing medicines has real consequences for patients today and in the future. It affects every one of us. The research is clear: it's possible to quantify the real-world impacts that medicines have on patients, their support networks, and society overall.”

With Medicare now negotiating drug prices for certain medicines, the issue of how to assess drug value has taken on new urgency. Groups including ICER have advocated for traditional CEA, similar to European models, which can lead to price controls and restricted patient access. However, proponents of GCEA argue that conventional models overlook critical economic dynamics and undermine incentives for innovation.

Dana Goldman, a co-author of the GCEA study, emphasizes the need for fairer value assessments:

“Preserving affordable innovation is crucial not only for ensuring patients have access to life-saving treatments today but also for paving the way for future breakthroughs… It’s not like we have firefighters charge a family a copay before providing help, so why do we think it’s ok to charge a copay for insulin or chemo? Patients paid for their care through premiums. The mere 8% of total healthcare costs that branded drugs represent are readily affordable to all of us through premiums and are what drive the continuous cycle of future medical advancements.”

Peter Kolchinsky, founder of No Patient Left Behind, added:

“There is a role for government price setting in ensuring that all drugs go generic without undue delay, as intended by the patent system, but… overriding market prices with price controls on novel products snuffs out investor interest in funding their invention.”

The study pushes for advancements in value assessment practices to better capture the real-world impact of medicines. Although GCEA requires more complex data, the authors argue it provides a fuller picture of medicines' societal value, including how treatments for one condition can fuel research into future cures. Conventional CEA, by ignoring these "spillover" effects, consistently undervalues innovation and discourages investment in the next generation of therapies. To address this, the paper presents a user guide for implementing GCEA, aiming to foster value assessments that support both affordable innovation and patient access. As the authors note,

“If innovation is discouraged because CEAs undervalue it, there won’t be anything to re-evaluate.”