Is the Medication You’re Taking Worth Its Price?

Austin was three years old and Max was a newborn when their mother, Jenn McNary, learned they had a rare genetic condition called Duchenne muscular dystrophy. The doctor painted a grim picture: Her boys would stop walking by age 12 or 13 and, shortly thereafter, they would require nighttime ventilation. They would each need a tracheotomy, a feeding tube, or both by their late teens. Death would come a few years later.

It hasn’t worked out that way, thanks to two new drugs that became available after the boys’ 2002 diagnosis. Exondys 51, a medicine that targets their genetic mutation, slows the disease’s progression, and Emflaza, a corticosteroid, mitigates some of its symptoms. Thanks to these treatments, Austin now attends college and interns at a biotech company. Max attends his local high school in Newton, Massachusetts. Both are able to get around in wheelchairs, and neither needs ventilation. McNary just rented an apartment for her boys because they can function on their own with the help of an aide.

By all accounts, the drugs have been transformative, McNary said. But, she added, her boys “aren’t going to be cured,” and extending and improving their life for an unknown period of time comes at a high price. Emflaza came onto the market in 2017 at an annual cost of $65,000. Exondys 51 appeared in 2016 at $748,500. Neither of the drugs will help the young men walk again and, in the eyes of some U.S. health economists, the drugs are not worth the price.

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That’s why McNary hates the quality-adjusted life year (QALY, pronounced “qua-lee”), an economic calculation that attempts to quantify the value of a medical intervention, based in part on the quality of life it bestows on recipients.

First developed by U.S. economists in the late 1960s and early 1970s, variations of the QALY have been used for years by governments around the world to help determine what treatments citizens can obtain under public health care. In America’s free-market health care system, however, QALY calculations have largely been avoided. As McNary and others like her are finding out, that’s starting to change.

As policymakers and insurance companies scramble to get a handle on skyrocketing health care costs, they are promoting the idea of paying for value. In this view, drugs designated as higher-value should be prioritized over lower-value treatments. But this raises a thorny question: Who gets to define “value”? Health economists and insurance companies who seek to use limited health care dollars judiciously? Or patients, parents, and doctors who want to receive the best health care for their situation?

Because the quality-adjusted life year threatens her sons’ ability to get the medicine they need, McNary is clear about her answer. “To me, the QALY is a measurement that says that keeping my sons alive by providing incremental benefit but not totally curing them is never going to be valuable,” McNary said. “Just mull that around in your head — if you are less than perfect, you are worth less money.”

In QALY math, a year of perfect health is equal to 1; death equates to 0. The value of other health states is derived from surveys of patients, caregivers, or the general public. Paralysis might be valued at .35, for example, and mild Alzheimer’s disease at .52, depending on the survey. Those numbers can then be plugged into a formula that allows the relative cost-effectiveness of treatments to be compared to identify the best buys.

Economists developed the QALY concept more than 40 years ago to address a fundamental question: “Where should we spend whose money to undertake what programs to save which lives with what probability?’ Richard J. Zeckhauser and Donald Shepard asked in a 1976 article describing the basic QALY formula. The next year, as U.S. health care spending topped $120 billion, Harvard health policy professor Milton C. Weinstein and his colleague, cardiologist William B. Stason, sounded an alarm bell. “It is now almost universally believed that the resources available to meet the demands for health care are limited,” they wrote in the New England Journal of Medicine. “We, as a nation, will have to think very carefully about how to allocate the resources we are willing to make available for health care.”

Their article — cited by other authors more than a thousand times in the past four decades — pointed out that resources were already being allocated by millions of individual decisions: hospitals rationing beds where they didn’t have room for all patients, for example, and insurers agreeing to pay for some tests and treatments but not for others. Such decisions, they argued, were often inconsistent with the “societal objective of deriving the maximum health benefits from the dollars spent,” an objective that could be achieved by putting the QALY to work.

In the intervening decades, some countries — the United Kingdom, the Netherlands, and Sweden, for example — have embraced QALY-based evaluations. In the U.K., cost-effectiveness studies are used, in part, to determine which therapies the National Health Service will provide for residents. The publicly-funded health system does not cover Orkambi, the first cystic fibrosis treatment that targets the cause of the disease, for example, because its cost-per-QALY far exceeds the U.K. cost-effectiveness threshold.

In the United States, however, QALY-based assessments have not gained traction until recently. “Perhaps the general reason is that we — as patients — and our providers don’t want to be limited in the treatment options available,” said Louis P. Garrison Jr., an economist in the Pharmaceutical Outcomes Research and Policy Program at the University of Washington.

In fact, QALY-based cost-effectiveness reviews are so controversial that the federal government has repeatedly quashed their use. In 1992, the Department of Health and Human Services rejected Oregon’s attempt to use QALY-based cost-effectiveness assessments to determine what services its Medicaid program would cover. In 2010, as part of the Patient Protection and Affordable Care Act, Congress prohibited the use of QALYs by the Medicare program. It also banned the federal Patient-Centered Outcomes Research Institute from using QALY thresholds in its assessments of comparative treatments.

A QALY Primer

A QALY reflects quality of life and length of life. A year in “perfect health” is worth 1 QALY, death is worth 0 QALYs, and other health states fall between 0 and 1. The amount that a drug lengthens or improves the quality of life is calculated as “QALYs gained.” The cost of getting a certain level of health improvement is the “cost per QALY gained,” shown here for several interventions targeting asthma.

But more than half of U.S. residents are covered by private insurance companies, which are not prohibited from using QALY-based assessments to decide which medicines they will cover for their members. Traditionally, however, private insurers have generally not used QALYs explicitly in their decisions about what tests and treatments they will pay for, according to a recent report by the National Council on Disability. Instead, when major U.S. insurers decide to limit access to a given medication, they usually cite insufficient data to justify its use in a given situation.

Indeed, until recently, U.S. insurers did not have a source for QALY-based cost-effectiveness reports. That began to change in 2014, when the Institute for Clinical and Economic Review, a nonprofit research organization based in Boston, turned its attention to high-cost drugs. Founded in 2006 as a research project based at Harvard Medical School, ICER initially issued reports on broad topics such as obesity management and palliative care. But when Sovaldi, a drug for deadly hepatitis C, came on the market at the then-shocking price of $84,000 for a 12-week course of treatment, ICER kicked into action. Despite the high price, its assessment found that Sovaldi is cost-effective for some patients. Insurers took notice.

Since then, the organization has been churning out several drug-assessment reports each year. Each report includes its opinion of how much the drug is worth; drugs priced higher than that are deemed not cost-effective. ICER has no authority over anyone, but its reports have become popular reading for U.S. insurers. “If there is a drug of note being approved by the FDA, there’s also likely going to be an ICER assessment of that drug that can factor into their decision-making,” said David Whitrap, the research organization’s vice president of communications and outreach.

U.S. health care spending has risen dramatically since Weinstein and Stason expressed concern in the mid-1970s. In 2016, the U.S. spent nearly 18 percent of its gross domestic product on health care, far outstripping the average of 11 percent for 10 other high-income nations. High prices for prescription drugs is one reason. “We’re seeing price tags now of $1 million, $2 million,” said Seema Verma, administrator for the federal Centers for Medicare and Medicaid Services, at a conference recently. “That’s completely unsustainable for the system.”

That’s why Peter Neumann, director of the Center for the Evaluation of Value and Risk in Health at Tufts Medical Center, said cost-effectiveness analyses are needed more than ever. But there are many reasons for the resistance, Neumann and his co-authors wrote in the Journal of the American Medical Association, including “an inclination on the part of many individuals in the United States to minimize the underlying problem of resource scarcity and the consequent need to explicitly ration care.”

Further, Ari Ne’eman, a disability rights activist and consultant to Partnership to Improve Patient Care, a coalition of advocacy groups, said the idea that two health conditions can be numerically compared to one another is simply wrong. “Proponents of the QALY will say it is this mathematically perfect measure that gives us a superpower ability to compare depression drugs to cystic fibrosis drugs to cancer drugs — even though all of those drugs do different things — because it lets you translate them back to this common measure,” he said. “Our concern is that when you engage in that process of translation, you lose some significant nuance in terms of the amount of benefit that’s being delivered.”

The Partnership argues the QALY calculation is flawed because it assumes quality of life can be captured by a certain number, despite the fact that different surveys arrive at different numbers. For example, a 2006 quality-of-life survey in the U.S. assigns blindness/low vision as .69 on the 0-to-1 scale, while a 2011 survey in the U.K. gives blindness/low vision a score of .78.

Beyond the methodological issues, Ne’eman said, “there are all kinds of ethical problems with it.” People with disabilities and chronic medical conditions may value a treatment that offers an incremental improvement in the quality or length of their lives, even though the “QALYs gained” are less than those for a treatment that prevents the loss of perfect health.

Former U.S. Representative Tony Coelho, a Democrat from California and a primary author of the Americans with Disabilities Act, is the Partnership’s chairman. “I worry that more focus is being given to what is most cost-effective for the ‘average patient’ than creating a system that works for each individual patient,” he wrote in 2018. “The medication I take for epilepsy isn’t ‘high value’ for every patient. But it’s the only one that works for me.”

That’s why, Ne’eman said, cost-effectiveness analyses must consider the fact that not all patients respond the same way to a drug. Some patients need drugs that aren’t deemed cost-effective for the general population. It’s important to account for that, he said. “Otherwise we’re giving insurers a tool to deny care to people who need it.”

When an insurer decides to cover a specific drug, that decision affects everybody who pays into the insurance pool. Michael Sherman, chief medical officer for the insurer Harvard Pilgrim Health Care, uses the example of a gene therapy that costs $1 million to treat a child who will die without it. Under the ACA, families will hit their out-of-pocket maximum at about $16,000, and many health plans have out-of-pocket maximums far below that. “The rest of that million dollars is going to be paid by everyone else — that’s the way it works in insurance,” he said. When insurers see that kind of unanticipated budget impact, they raise premiums or out-of-pocket cost-sharing for everyone.

Like other proponents of the QALY, Neumann sees it as an imperfect but useful tool. “Any single number is never going to capture everything,” he said.

“The problem is, if you’re not going to use QALYs, what are you going to use?”

That’s an urgent question, particularly now when there is a huge pipeline for rare-disease therapies, often called orphan drugs. By 2024, orphan drug sales are expected to reach $242 billion.

In the U.S., a rare disease is defined as one that affects fewer than 200,000 people. While these conditions are individually rare, in the aggregate, an estimated 25 to 30 million Americans — that’s about one in 10 — live with a rare disease. Most rare diseases affect children, and many are fatal or disabling.

Historically, drugmakers spent little effort developing treatments for rare diseases, but that changed with the passage of the Orphan Drug Act of 1983, which provides tax credits and a seven-year marketing exclusivity to companies that develop rare-disease treatments. Hundreds of such treatments have won FDA approval in recent years, with more than 560 medicines in the works.

Those treatments are generally expensive. On average, the per-patient cost for orphan drugs in the U.S. is almost 4.5 times more than for non-orphan drugs.

In the two decades ending in 2017, the average annual cost for orphan drugs was $123,543, based on the price at the time the drug launched, compared to $4,961 for traditional drugs. For Duchenne alone, more than 30 orphan therapies are in development. None of them are going to cure patients, McNary said. But she hopes new treatments, generally used in combination, will help her sons live longer, healthier lives — and completely change the disease trajectory for younger patients whose disease has not yet progressed as far.

The barrier she worries about is cost-effectiveness analysis. In August, the Institute for Clinical and Economic Review published its assessment of treatments for Duchenne, which affects about 400 to 600 boys born in the U.S. each year. Emflaza, the corticosteroid, appears to be as good as or better than prednisone, another corticosteroid approved to treat the disease, but it would need a price cut of at least 73 percent to be considered cost-effective.

Exondys 51 — approved by the FDA for about 13 percent of the Duchenne population — got a worse review. In the clinical trials used to seek FDA approval, no clinical benefit, including motor function improvement, was demonstrated. (The FDA approved the drug because some of the patients treated with Exondys 51 had a slight increase in dystrophin levels in skeletal muscle.) In light of that, Exondys 51 was not deemed cost-effective at any price.

But Jenn McNary said the drug works for her sons. Austin, who was not eligible for the Exondys 51 clinical trial, stopped walking at age 10. Max got in the trial and started taking the drug at age 9. “They have the same mutation, they have been raised by the same mother, so one would expect they would progress similarly,” she said. “But Max walked until he was 17.”

Austin was already in a wheelchair when, at age 15, he started taking Exondys 51. He regained some upper-body strength that changed his life, according to his mother. “He’s able to use a urinal on his own, which makes is possible for him to have a job and to go to college without an aide,” she said.

The Medicaid program in Massachusetts, where the McNarys live, won’t pay for Max’s Duchenne therapies. For the time-being, the drugmakers are giving him the drugs free through a patient-assistance program. Austin, because he’s enrolled in college, is eligible for student coverage through Blue Cross Blue Shield of Massachusetts. The insurer, by policy, does not cover Exondys 51 for patients who can no longer walk. His mother appeals the insurance denial. Every six months, she sends a video of Austin in action, along with a letter from his doctor — and so far, his medicines have been covered.

The payers made their coverage policies before the quality-adjusted life year analysis was published. Now, insurers who have been covering the Duchenne treatments have an independent analysis with which to rethink that decision.

For now, there is one thing that QALY supporters and critics agree on. “Very promising drugs are coming, and they’re going to be very expensive,” said Neumann, the health economist at Tufts. Increasingly, the QALY appears poised to influence how American health care money is spent.

Lola Butcher is a health care business and policy writer based in Missouri.