Health Economics for Builders and Backers

What’s New and What Matters this Month

This is our monthly briefing on some of the new developments in health economics that may be relevant for biopharmaceutical companies and investors. We highlight what’s new this month and break down what matters for company builders and backers.

Do drug prices or rebates influence whether a health plan will restrict coverage? A study by Beinfeld et al. looked at nearly 7,000 coverage decisions to see what drug characteristics impacted the odds of having a coverage restriction. Nearly half of all the coverage decisions they looked at included at least one restriction. Drugs in more competitive classes were more likely to face a restriction. Oncology drugs and drugs with orphan drug status were less likely to face a restriction. Net prices seemed to influence coverage restrictions more than rebate size. Higher net prices may be associated with a higher likelihood of coverage restriction.

For builders and backers: Coverage restrictions are widespread. There may be more friction in competitive classes, and the net price (more so than the rebate size) may meaningfully influence whether a health plan will implement a coverage restriction.

How long does it take for health plan coverage policies to update following FDA label changes? A study by Enright et al. examined 79 label expansions and 8 label contractions within US commercial health plans. The median time between the label revision and the health plan coverage policy update was 30 weeks. Oncology drugs and self-administered drugs were associated with faster response times between the label change and the coverage policy update. Also, label revisions that involved a contraction (i.e., narrowing of the population) were associated with faster response times than label expansions (i.e., expanding the population).

For builders and backers: FDA labeling is only one aspect of market access. Although most health plans will update their coverage policies, it is not instantaneous and the timeliness of response may vary.  

Which ex-US countries use cost-effectiveness thresholds to inform their decision making? A report by Charles River Associates looked at 36 countries (the U.S. was not one of them) to see how common it was for a country to use cost-effectiveness thresholds. Of the 36 countries examined, 22% had an explicit threshold, 42% had an implied threshold, and the remaining 36% had “no identifiable cost-effectiveness threshold”. Of the 23 countries examined that had either an explicit or implicit cost-effectiveness threshold, the average was £33,400 (range from around £16,000 to £50,000).

For builders and backers: Lower cost-effectiveness thresholds can mean a lower willingness to pay for a drug. If ex-US countries become a reference point for US drug pricing, the practices of ex-US countries increase in relevance when considering a global launch strategy.

Which ex-US countries in the MFN drug pricing basket use cost-effectiveness analysis? Further detailed in a paper by Seo et al., 7 of the 8 ex-US countries specified in the Medicaid GENEROUS Model incorporate some degree of cost-effectiveness analysis within their health technology assessment processes.

For builders and backers: Ex-US countries often use health technology assessment and cost-effectiveness analysis. If ex-US countries become a reference point for US drug pricing, considering the health economic proposition for biopharmaceutical products increases in relevance when considering a global launch strategy.    

How might health plans cover specialty drugs in 2026? I sat down with Dr. James Chambers to hear his predictions for what specialty drug coverage might look like this year. Based on the data he tracks in the SPEC database, he suggested that there could be an increased use of utilization management for oncology, that the majority of newly approved therapies may include some form of utilization management that may be aligned with the population studied in the clinical trials, and that biosimilars may be preferred more quickly.

For builders and backers: The population specified in clinical trials is not only important for regulatory approval, but also for payer negotiations and coverage decisions.

What is a value-informed price for a novel therapeutic used for the primary prevention of cardiovascular disease? We released a report this month that showed that novel therapeutics for primary prevention of cardiovascular disease that can reduce major adverse cardiovascular events by 20-30% in a high-risk population could produce a value-informed price in the range of $3,600-$29,000 per year per person.

For builders and backers: When building health economic models, a lower discount rate, a longer time horizon, inclusion of non-health outcomes, and the use of a GRASA-QALY likely attribute more value to a novel therapeutic used for primary prevention. Check out pages 10 and 11 of this report for a glossary of health economic terms like “discount rate”, “time horizon”, “perspective”, and “GRASA-QALY”.

Could injectable PCSK9 inhibitors be cost-effective for primary prevention? At current net prices, it seems like they could be. Another report we released this month provides cost-effectiveness estimates at different levels of baseline risk, different net price estimates, different levels of treatment effectiveness, and for different cost-effectiveness frameworks.

For builders and backers: Our findings do not suggest the price that the market will support, which may be higher or lower than our estimates. Those decisions will also need to consider budget impacts, the competitive landscape, the inventor versus societal share of surplus, and many other things that a market-based pricing approach can uniquely consider.