A key element in the long-simmering debate on reining in drug prices in the United States is how to ensure that prices are affordable, represent a sufficient reward to industry for the innovation it provides, and reflect the benefit that patients get from the medications they take. Higher prices should mean better health, right?
Bear with me as I take a trip down memory lane. About 20 years ago, my growing family was the inspiration for adding an addition to our home. I was fortunate to have realized some success as a research consultant to the pharmaceutical and biotech industries, so we could make the addition happen without too big a financial dent. The work required a team of architects, designers, and contractors, and all of it was financed by my work on the quality-adjusted life-year (QALY) — more on that in a minute.
The QALY is a measure that attempts to capture the impact of disease — and the possible beneficial effects of treatment — on both the length and quality of life. It is commonly used in cost-effectiveness analysis to estimate the health gains achieved for the additional money spent on a new treatment. That’s the “cost per QALY gained” compared the current standard of care.
It’s what the nonprofit Institute for Clinical and Economic Review, an independent organization I once worked for that evaluates the clinical and economic impact of drugs, devices, and other technologies, uses to suggest fair prices for new treatments.
This approach to valuing health investments started to take off in the mid-1990s. Back then, U.S. insurers were focused on short-term, myopic budgetary tactics. Health plans’ pharmacy directors cared mainly about controlling drug spending year over year, ignoring the potential for a new treatment to reduce hospitalizations or visits to the emergency room, or to improve quality of life.
The biopharma industry fully embraced the QALY, and I do mean fully. The research center where I now work maintains a global database of more than 9,000 published cost-per-QALY studies. Of the approximately 40% of the studies that focus on pharmaceuticals, more than one-third were set in the U.S. and these were overwhelmingly funded by industry. People like me were hired to do this research, which paid for my home addition.
The industry was right to embrace the QALY. Insurers are supposed to cover treatments that improve the health of their beneficiaries, not the drug budget. Imagine refusing to cover a cholesterol-lowering statin that could prevent heart attacks and strokes in the future because drug spending would grow too much in the next year! This was the type of stonewalling insurers were doing 20 years ago, and it was maddening to manufacturers, to doctors, and most of all to the patients who would stand to benefit from these innovations.
Fast forward to the present. The biopharma industry has turned its back on the QALY. Patient groups, often with industry funding, have decried it as a discriminatory tool, saying it values the lives of older, disabled, and severely ill people as inferior to those in better health. The industry itself is getting into the act, integrating attacks on the QALY into glossy summaries of health trends and trying to ensure that any drug price reforms that might one day be enacted stay as far away from the QALY as possible.
These are false narratives. As my colleagues and I have pointed out, QALYs are used in cost-effectiveness analyses to value treatments, not individuals. The intent is to compare the costs and health effects of two or more alternative interventions — it’s not the absolute estimate of quality of life that matters, it’s the improvement in quality of life with one treatment over another.
Say someone with cancer is choosing between two treatments. Both are equally effective at extending life, but one can cause major side effects. If analysts avoid the QALY because they don’t want to be seen as discriminating against cancer patients, they would falsely conclude that these two treatments are equivalent because they aren’t measuring their impact on quality of life, which would be significantly worse for the drug that causes side effects.
Payers and policymakers need to understand if the health care improvements they are buying are worth the investment. Using the QALY metric allows them to compare alternatives on an even playing field — but not when such a tool is the subject of a smear campaign.
The QALY cannot capture all of the nuances and challenges of living with a certain condition. But is that why the pharmaceutical industry’s opinion of it has shifted from useful policy tool to venomous device? Or is it simply no longer a convenient method for justifying ever-increasing prices?
Research efforts are underway to explore important questions about measuring QALYs and improving their estimation. Perhaps instead of turning its back on the QALY, the pharmaceutical industry should collaborate in these efforts. But if it chooses to join the QALY-bashing party, then its time might be better spent contacting medical journals and retracting all of those studies that funded my home improvements.
Dan Ollendorf is the director of value measurement and global health initiatives at the Center for the Evaluation of Value and Risk in Health at Tufts Medical Center, an assistant professor of medicine at Tufts University, former chief scientific officer at the Institute for Clinical and Economic Review, and co-author of “The Right Price: A Value-Based Prescription for Drug Costs” (Oxford University Press, May 2021).