Health Economics for Builders and Backers, May 2026

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.

How is utilization management for oncology products changing over time?

Julia Rucker and colleagues have a new analysis out in JCO Oncology Practice. They found that “oncology UM increased from 14.5% in 2017 to 22.9% in 2024, driven primarily by step therapy growth (4.3%-16.5%)”. Utilization management for oncology products was more common for “cell and gene therapies, biologics, and products with biosimilar or generic competition”. Although utilization management is still less common in oncology than in non-oncology products, it is increasing over time.

For builders and backers: Payer utilization management strategies are becoming increasingly more common, even in oncology. This will likely continue to intensify as therapeutic competition expands. Commercial success may not only depend on clinical differentiation, but also on formulary positioning and treatment sequencing.

If quality-adjusted life years (QALYs) are essentially banned in the US, can cost-effectiveness ever be used more formally in this setting?

The QALY is one of the most commonly used health economic outcomes because it captures both quantity and quality of life in a single measure. However, the QALY has faced growing criticism, including concerns around discriminatory properties in life extension and its inability to capture how people value reductions in risk and disease severity. These concerns have contributed to significant restrictions on the use of QALYs in US policy. Several years ago, Drs. Darius Lakdawalla and Chuck Phelps developed the generalized risk- and severity-adjusted quality-adjusted life year (GRASA-QALY) to address some of these limitations. However, uptake of the GRASA-QALY has been limited partially because implementation is complex and data intensive. A new paper published this month proposes a much more practical and streamlined approach for incorporating GRASA-QALYs into cost-effectiveness analyses which could make risk-adjusted value assessment more feasible in health technology assessment and reimbursement settings.

For builders and backers: As policymakers and health technology assessors continue to debate the limitations of QALYs, alternative outcomes like the GRASA-QALY are gaining traction. Approaches that better capture severity and uncertainty could influence how innovative therapies in rare and severe diseases are valued and reimbursed.

Should biopharmaceutical innovation for rare diseases be valued differently than innovation for highly prevalent conditions?

A recent paper in Pharmacoeconomics examined whether traditional cost-effectiveness thresholds should be adjusted based on disease prevalence rather than applied uniformly across all conditions. Using pulmonary arterial hypertension as a case study, the authors applied a prevalence-adjusted threshold framework and showed that cost-effectiveness thresholds increase as disease prevalence lowers. The authors found that for pulmonary arterial hypertension “the prevalence-adjusted effective threshold was estimated at US$582,270 per QALY (95% CI 581,319–583,163), representing more than a five-fold increase relative to the reference opportunity-cost benchmark of US$104,000 per QALY applied to highly prevalent conditions.”

For builders and backers: The paper adds to a growing debate around whether “one-size-fits-all” cost-effectiveness thresholds undervalue therapies for rare diseases. Prevalence-adjusted frameworks could influence future health technology assessments, reimbursement expectations, and long-term pricing potential for rare diseases.

Can clinical trial failure be insured?

In an episode of Perspectives by the Leerink Center for Pharmacoeconomics, I spoke with former White House Council of Economic Advisers Chair Tomas Philipson about a novel insurance product he designed to protect biotech investors against clinical trial failure. Developed with Lloyd’s of London, the insurance allows investors to recoup a portion of their capital if a trial fails to meet its endpoint, with AI underwriting to assess risk. Philipson suggests that this approach could reshape biotech financing by reducing downside risk and expanding access to funding for innovative but high-risk programs like biotech.

For builders and backers: Endpoint selection and clinical trial design may not only influence regulatory outcomes but could also influence insurability. AI-driven underwriting models may become an external signal of program quality and risk. Clinical trial insurance could be a mechanism to reduce scientific risk which may become increasingly important as pricing risk intensifies.

Is the biopharmaceutical market design changing in the US?

In a recent commentary, I explored how the Inflation Reduction Act and Most Favored Nation proposals could reshape incentives across the pharmaceutical ecosystem. Historically, the biopharmaceutical market design in the US paired a finite period of market-based pricing for innovators with incentives for rapid generic entry after patent expiration. This structure established by Hatch-Waxman rewarded innovation upfront yet drove long-term affordability through market competition. My piece suggests that government price intervention during the branded period may not only reduce incentives for novel drug development but could also weaken incentives for generic and biosimilar manufacturers to enter the market. If branded revenues fall substantially before loss of exclusivity, the attractiveness of being a first generic entrant may diminish, which could slow the multi-entrant competition that has produced substantial price drops after patent expiry.

For builders and backers: Policies like the Inflation Reduction Act and Most Favored Nation may not only impact revenue assumptions but could also change the long-term innovation incentives under the surface. This reinforces the importance of lifecycle planning, indication sequencing, and clinical and economic evidence to support pricing.

Will adding 600 generic drugs to TrumpRx do anything to drug pricing?

In a recent report, I discussed the Trump administration’s decision to add more than 600 generic drugs to TrumpRx through partnerships with Amazon Pharmacy, GoodRx, and the Mark Cuban Cost Plus Drug Company. While the move does not directly lower prices overnight, it could intensify competition in the generic market by increasing price transparency and steering more patients toward low-cost cash-pay options which could drive greater volume discounts and lower prices over time. Although the model has some limitations and challenges because the prices exist outside of insurance, I think the decision to add generic drugs is a good one. 

For builders and backers: Price transparency and consumer-facing competition may shape drug pricing dynamics, particularly with generic drugs. For investors and biopharma leaders, the existence of TrumpRx suggests political and market interest in direct-to-consumer pharmacy models and alternative distribution channels.

Are we pricing drugs right?

In this episode of Perspectives by the Leerink Center for Pharmacoeconomics, I spoke with Dr. Peter Neumann about how health systems evaluate the value of innovative medicines and the growing global debate around drug pricing. We discussed the role of cost-effectiveness analysis and health technology assessment in pricing decisions, as well as Peter’s recent work showing that many Most Favored Nation reference countries are becoming more restrictive over time in their pricing relative to GDP per capita. If the expectation with Most Favored Nation policies is that drug prices go down in the US and drug prices go up in Most Favored Nation reference countries to achieve price convergence, the trend observed in Peter’s recent work challenges if prices going up in Most Favored Nation reference countries is a realistic assumption.

For builders and backers: As global payers place greater emphasis on value-based assessment, evidence requirements for pricing and reimbursement are becoming more important. Evidence on the clinical benefit is important, but so is evidence on economic value.

What have US payers been willing to pay for approved disease-modifying therapies for primary progressive multiple sclerosis?

I released a report this month that examined how the market has historically valued innovation in primary progressive multiple sclerosis by analyzing the total health system costs associated with an approved therapy relative to its health outcomes gained. Using a health economic modeling framework, the analysis estimated that payers have reimbursed primary progressive multiple sclerosis therapies around $600,000 per healthy year gained. I then applied those historical market rewards to estimate value-anchored price ranges for future entrants assuming the same health economic modeling framework. Under this framework, a therapy slowing progression by 25–30% could support annual pricing in the range of approximately $52,000 to $84,000.

For builders and backers: The report provides a differentiated framework for evaluating pricing potential for development-stage therapies that goes beyond traditional list or net price benchmarking. The report reinforces how clinical differentiation and economic value will shape commercial success and how the market might reward innovation in areas of high unmet need.

What have US payers been willing to pay for novel antipsychotics for schizophrenia?

I released another report this month that examined how the market has historically valued novel antipsychotics for schizophrenia. My analysis estimated that payers are reimbursing a novel antipsychotic at approximately $92,000 to $111,000 per healthy year gained. Applying those historical market rewards prospectively, the report estimated that a novel therapy with efficacy comparable to existing antipsychotics but without treatment-emergent adverse events could support a value-anchored net price of roughly $11,500 to $15,900 annually, with additional value associated with lower relapse rates and improved quality of life as compared to second-generation antipsychotics.

For builders and backers: Safety, tolerability, relapse reduction, and quality-of-life improvements can translate into measurable economic value in schizophrenia. For biotech companies and investors, this provides a differentiated framework for assessing pricing potential, competitive positioning, and commercial opportunity for next-generation therapies.