Does Cost-Effectiveness Analysis Overvalue Potential Cures? Exploring Alternative Methods for Applying a “Shared Savings” Approach to Cost Offsets [Editor's Choice]



To evaluate alternative methods to calculate and/or attribute economic surplus in the cost-effectiveness analysis of single or short-term therapies.


We performed a systematic literature review of articles describing alternative methods for cost-effectiveness analysis of potentially curative therapies whose assessment using traditional methods may suggest unaffordable valuations owing to the magnitude of estimated long-term quality-adjusted life-year (QALY) gains or cost offsets. Through internal deliberation and discussion with staff at the Health Technology Assessment bodies in England and Canada, we developed the following 3 alternative methods for further evaluation: (1) capping annual costs in the comparator arm at $150 000 per year; (2) “sharing” the economic surplus with the health sector by apportioning only 50% of cost offsets or 50% of cost offsets and QALY gains to the value of the therapy; and (3) crediting the therapy with only 12 years of the average annual cost offsets or cost offsets and QALY gains over the lifetime horizon. The impact of each alternative method was evaluated by applying it in an economic model of 3 hypothetical condition-treatment scenarios meant to reflect a diversity of chronicity and background healthcare costs.


The alternative with greatest impact on threshold price for the fatal pediatric condition spinal muscular atrophy type 1 was the 12-year cutoff scenario. For a hypothetical one-time treatment for hemophilia A, capping cost offsets at $150 000 per year had the greatest impact. For chimeric antigen receptor T-cell treatment of non-Hodgkin’s lymphoma, capping cost offsets or using 12-year threshold had little impact, whereas 50% sharing of surplus including QALY gains and cost offsets greatly reduced threshold pricing.


Health Technology Assessment bodies and policy makers will wrestle with how to evaluate single or short-term potentially curative therapies and establish pricing and payment mechanisms to ensure sustainability. Scenario analyses using alternative methods for calculating and apportioning economic surplus can provide starkly different assessment results. These methods may stimulate important societal dialogue on fair pricing for these novel treatments.


Richard H. Chapman Varun M. Kumar Melanie D. Whittington Steven D. Pearson

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