What Generalized Cost-Effectiveness Analysis (GCEA) Reveals About the Applicability of Foreign Reference Pricing in Medicare Price Negotiation in the US
Author(s)
Richard Xie, PhD1, Peter Rubin, MBA2, Peter Kolchinsky, PhD3, Jeff Sullivan, MS4.
1Senior Health Economist, RA Capital Management, Newton, MA, USA, 2NPLB, Chevy Chase, MD, USA, 3RA Capital Management, Boston, MA, USA, 4EntityRisk, Inc, Dedham, MA, USA.
1Senior Health Economist, RA Capital Management, Newton, MA, USA, 2NPLB, Chevy Chase, MD, USA, 3RA Capital Management, Boston, MA, USA, 4EntityRisk, Inc, Dedham, MA, USA.
OBJECTIVES: International reference pricing (IRP) has been proposed to inform price negotiations in the US. In ex-US settings, traditional cost-effectiveness analyses (TCEAs) are often used to derive value-based prices (VBPs) for innovative therapies. The Generalized CEAs (GCEAs) methodology was proposed as a more comprehensive approach to estimate the societal value of medical innovations. This study compares the VBPs derived from TCEAs and GCEAs to assess the applicability of IRP in US Medicare price negotiations.
METHODS: First, 12 treatments were selected based on their budgetary and policy impacts and availability of TCEA publications from the Tufts CEA Registry (CEAR) or Institute for Clinical and Economic Review’s (ICER) final assessments. The recommended prices for these treatments (and respective indications) were extracted from the Canadian and German health technology agencies (HTA).
Second, TCEA results were replicated based on the original publications, and GCEA adaptations were performed by incorporating six additional novel value elements (e.g., outcome uncertainty) based on the GCEA Best Practice Report. VBPs were derived from both TCEAs and GCEAs.
Third, the resulting societal VBPs estimated from those GCEAs were compared to those from TCEAs. We also computed the differences between a drug’s societal VBP based on GCEAs and HTA-recommended prices from Canada and Germany.
RESULTS: Societal value estimates from GCEAs were, on average, 4.57 times higher than the estimates from TCEAs. The comparison between GCEA societal value estimates and international HTA-recommended prices revealed that international drug prices consistently undervalued medical innovations. On average, Canadian and German recommended prices undervalued treatments by 90% and 94%, respectively.
CONCLUSIONS: These findings showed that HTA-recommend prices from ex-US countries could have significantly underestimated the societal value of innovative therapies. Applying IRP for price negotiation in the US is likely to reduce or delay patient access to innovative therapies. In the long-run, lower prices might also reduce incentives to innovate.
METHODS: First, 12 treatments were selected based on their budgetary and policy impacts and availability of TCEA publications from the Tufts CEA Registry (CEAR) or Institute for Clinical and Economic Review’s (ICER) final assessments. The recommended prices for these treatments (and respective indications) were extracted from the Canadian and German health technology agencies (HTA).
Second, TCEA results were replicated based on the original publications, and GCEA adaptations were performed by incorporating six additional novel value elements (e.g., outcome uncertainty) based on the GCEA Best Practice Report. VBPs were derived from both TCEAs and GCEAs.
Third, the resulting societal VBPs estimated from those GCEAs were compared to those from TCEAs. We also computed the differences between a drug’s societal VBP based on GCEAs and HTA-recommended prices from Canada and Germany.
RESULTS: Societal value estimates from GCEAs were, on average, 4.57 times higher than the estimates from TCEAs. The comparison between GCEA societal value estimates and international HTA-recommended prices revealed that international drug prices consistently undervalued medical innovations. On average, Canadian and German recommended prices undervalued treatments by 90% and 94%, respectively.
CONCLUSIONS: These findings showed that HTA-recommend prices from ex-US countries could have significantly underestimated the societal value of innovative therapies. Applying IRP for price negotiation in the US is likely to reduce or delay patient access to innovative therapies. In the long-run, lower prices might also reduce incentives to innovate.
Conference/Value in Health Info
2025-11, ISPOR Europe 2025, Glasgow, Scotland
Value in Health, Volume 28, Issue S2
Code
HTA363
Topic
Economic Evaluation, Health Policy & Regulatory, Health Technology Assessment
Topic Subcategory
Value Frameworks & Dossier Format
Disease
Cardiovascular Disorders (including MI, Stroke, Circulatory), Oncology, Rare & Orphan Diseases