How Does ICER’s Incremental Cost-Effectiveness Analysis Stack Up to Industry Practice?

By Matthew Sussman, MA


In early February, the Institute for Clinical and Economic Review (ICER) presented proposed updates to its Value Assessment Framework, based largely on stakeholder feedback received during a public comment period in late 2016. These updates focused on four domains of the framework: (1) comparative clinical effectiveness; (2) incremental cost-effectiveness analysis (CE); (3) other benefits or disadvantages; and (4) contextual considerations. While each domain is important, the incremental cost-effectiveness analysis has proved the most controversial. Since the current comment period is almost up, here’s my review of the updates to the CE framework.

How Does Each Proposed Change Stack Up?

Below is a table I’ve put together to summarize ICER’s proposed updates and to indicate my opinion for the final framework release. The updates that don’t need additional revision are labeled with a check (“”), changes that require additional clarification are marked with a question (“?”), and changes that need major revisions are labeled with an “X”.

ICER Value Framework Updates: No Revisions Needed

Three of ICER’s proposed updates adhere to industry “best” practices today. These include:

  • 3.1 Maintain the primary effectiveness measure
    • The primary effectiveness measure will remain quality-adjusted life years (QALYs), leading to an evaluation of incremental costs per QALY gained.
  • 3.5 Include drug prices net of discounts, rebates, and other price concessions
    • ICER proposes to use drug prices net of discounts, rebates, and other price concessions instead of wholesale acquisition costs in its cost-effectiveness and budget impact analyses.
  • 3.7 Do not project price changes due to patent and exclusivity time horizons
    • ICER proposes to no longer include projections for price changes due to patent and exclusivity time horizons in their CE analyses. Scenario analyses may be conducted if a major change to pricing is anticipated within 12 to 24 months.

As noted in Section 3.1, the QALY is an industry-approved measure for capturing both the quantity and quality of life years generated by healthcare interventions1, and therefore is a natural output for this framework. In Section 3.5, using undiscounted wholesale acquisition costs would overestimate real-world acquisition costs, so applying drug prices net of discounts is a worthwhile change. Likewise, there is tremendous long-term uncertainty regarding market and pricing dynamics, so limiting price changes due to patent and exclusivity time horizons is a reasonable approach in Section 3.7.

ICER Value Framework Updates: Additional Clarification Required

There are also three updates to the new framework that need additional consideration and clarification. These include:

  • 3.2 Use a broader range of cost-effectiveness thresholds
    • For several years, ICER used a range of $100,000 to $150,000 per QALY gained. However, further review of the literature coupled with discussions with stakeholders have led ICER to propose a broader range of incremental CE thresholds between $50,000 and $150,000 per QALY gained.
  • 3.3 Include other effectiveness measures
    • As stated in Section 3.1, ICER will evaluate QALYs as the primary effectiveness measure. In addition to QALYs, ICER proposes to base the denominator of the incremental CE ratio on secondary effectiveness measures such as life years and other clinically-relevant consequences (e.g., strokes averted within atrial fibrillation population).
  • 3.6 Conduct scenario analyses from a societal perspective
    • ICER proposes to maintain the health system perspective as the base case, and perform scenario analyses from a societal perspective focusing on work productivity.

Evaluating an economically-justifiable price based on an incremental CE threshold is a decades-old practice for determining society’s willingness to pay for a new intervention. However, Section 3.2 raises the question as to whether ICER’s lower bound of $50,000 per QALY gained is too low. Based on alternative assumptions and calculations, some experts have indicated this to be the case, and instead have proposed using either $100,000 or $150,000 per QALY gained if a single threshold is desired.2

We mostly agree with the inclusion of effectiveness measures complementary to QALYs in Section 3.3, but caution should be used by ICER. Benchmarks in the literature should be a requirement for comparison to ICER’s incremental cost per consequence output. Without proper and relevant benchmarks, the model output will have no direct comparison, thereby limiting its interpretation.

Similarly, we agree that scenario analyses representing the societal perspective should be assessed in Section 3.6. Yet, ICER modeling teams should carefully consider which populations are most impacted by productivity losses. For instance, in their most recent documentation for the osteoporosis topic, the ICER modeling team indicated that productivity losses would be assessed – in this case, among a starting population of 70-year old postmenopausal women – which is counterintuitive among an elderly population.

ICER Value Framework Updates: Revisions Needed

Two of ICER’s proposed updates raised significant questions and will hopefully be revised and clarified in the final framework. These updates include:

  • 3.4 Conduct scenario analyses to assess the impact of lower health utilities
    • ICER proposes to conduct scenario analyses that compare the impact of lower baseline health utilities among patients with chronic and severe conditions to higher baseline health utilities for the general population. The incremental costs per QALY gained will be compared and the relative difference will be evaluated. If the impact of lower utilities on the incremental CE ratio for the chronic and severe population is substantially different, ICER along with key stakeholders will decide which scenario analysis will serve as the base case.
  • 4 Link ‘other benefits or disadvantages and contextual considerations’ to long-term value for money
    • ICER’s proposed approach for estimating the CE threshold attempts to link ‘other benefits or disadvantages and contextual considerations’ – such as unmeasured patient health benefits, relative complexity of the treatment regimen, impact on productivity, among others – to long-term value for money. The approach contains a modified form of multi-criteria decision analysis (MCDA), in which 10 total elements are considered but not quantitatively weighted to yield an average ranking on a scale from 1-5. The average score will, in turn, be used to assign a single incremental CE ratio benchmark from $50,000-$150,000 per QALY.

ICER Value Framework Section 3.4 Concerns:

The rationale behind this update was not clearly stated and raised a few questions that will need to be addressed in the final framework:

  • What is the rationale for this proposed change? Is it that the patient mix will include patients who are newly diagnosed and thus have baseline utilities closer to the general population?
  • What criteria will be used to decide which scenario analysis serves as the base case?
  • Will literature-based benchmarks be factored into the decision?

This proposed change also raises the issue of sub-group analyses, specifically among at-risk groups (e.g., those with greater disease severity and/or varying patient profiles). Instead of deciding on one scenario analysis that serves as the base case, perhaps sub-group analyses should be conducted in which both scenarios are presented.

ICER Value Framework Section 4 Concerns:

As with Section 3.4, I have a few reservations about the new CE threshold estimate proposed in Section 4. ICER indicated that a single incremental CE ratio will be used to determine a value-based price, as well as an overall value rating, for each intervention under study. This means that ICER’s findings could place additional downward pressure on drug prices. The potential impact of this proposed change on pharma stakeholders cannot be overstated or de-emphasized: your products will be judged against the CE ratio benchmark. For a more detailed review of the new CE Threshold, I recommend a quick read of my previous post, ICER’s New Cost-Effectiveness Threshold Raises 5 Major Questions.

Next Steps For ICER’s Value Assessment Framework

ICER has attempted to address hundreds of pages of comments and suggestions in their Value Assessment Framework, and should be lauded for their efforts. However, several proposed revisions to their incremental CE framework require greater clarification and/or adjustment prior to ratification and implementation. We have submitted our concerns, and look forward to seeing them addressed in the revised framework due out April 15th.

1Weinstein MC, Torrance G, McGuire A. QALYs: The basics. Value Health. 2009 Mar;12 Suppl 1:S5-9.

2Neumann PJ, Cohen JT, Weinstein MC. Updating cost-effectiveness – The curious resilience of the $50,000-per-QALY threshold. N Engl J Med. 2014;371(9):796-797.