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Last week’s announcement by CVS Health, which operates one of the country’s largest pharmacy benefit managers, is a harbinger of what may lie ahead for drug pricing and access in the United States.

In what it called an effort to nudge drug makers to reduce launch prices to a reasonable level, CVS said it would allow its Caremark clients — health plans, self-funded employer groups, and the like — to exclude drugs from their formularies (essentially a list of covered drugs) that don’t meet a benchmark of $100,000 per quality-adjusted life year in analyses by the independent Institute for Clinical and Economic Review (ICER). The initial focus will be on so-called me-too drugs, those where therapeutic alternatives exist, and exclude those the Food and Drug Administration deems as breakthrough drugs.


From the employer’s or insurer’s perspective, an ICER analysis indicating that a drug does not meet the quality-adjusted life year benchmark provides a transparent rationale for why certain products aren’t covered by the plan. From the patient’s perspective, it means that the drugs on the formulary are covered by their benefit, while they can get access to a drug that isn’t on the formulary only if they pay for it or go through an appeals and grievance process.

Many countries in Europe and beyond have a governmental or quasi-governmental organization that evaluates the cost-effectiveness of new drugs and medical devices. Their benchmarks for cost-effectiveness aren’t set in stone, ranging from $50,000 per quality-adjusted life year to $150,000 or more, but they do give guidance about how much these products should cost.

No comparable organization exists in the United States. ICER, which is funded by nonprofit organizations as well as by manufacturer and government grants, has aimed to fill this void for the last decade. It brings together publicly available, peer-reviewed reports with manufacturer-provided data that includes the perspectives of patients, clinicians, payers, the government, and other stakeholders to generate analyses that can inform policy.


Some drug companies have aligned with ICER assessments. For example, a plan by Sanofi and Regeneron to make specialty cholesterol-lowering medication Praluent (alirocumab) more affordable was based on an ICER analysis. Other companies have criticized ICER findings they didn’t agree with.

Regardless, the announcement by CVS suggests that ICER and its cost-effectiveness analyses are gaining traction among decision-makers when it comes time to set drug coverage policies. Earlier this year, research by Precision for Value, the organization I work for, indicated that 80 percent of payers use value assessments such as ICER’s in supporting these decisions, a fairly sizable increase from two years ago.

The CVS approach could influence how companies initially price new drugs, and perhaps even where they decide to invest their research and development dollars. Manufacturers need to keep in mind what the environment looks like at all times. A company may be pursuing what it sees as a new molecular entity, but must understand how payers will ultimately view that product in light of existing or other soon-to-be-marketed therapies. If it’s deemed to be more of a me-too product rather than a unique entity, and priced too high, it could fail to hit the ICER benchmark.

Although some therapeutic alternatives are necessary — some patients may respond to product A while others respond to product B — many are not. The CVS approach could give drug companies an extra nudge to consider alternative pricing strategies.

Whether it’s last week’s announcement by CVS or an earlier one by Express Scripts of its 2019 formulary exclusions, drug makers need to come to terms with a health care marketplace that increasingly ties access to competitive cost-effectiveness. In this environment, companies that incorporate evidence focused on value early in their development cycle will likely be best positioned for success.

Ami Gopalan, Pharm.D., is vice president and director of payer access solutions at Precision for Value.

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