CVS Launching Program To Exclude New Drugs Deemed Not Cost Effective

Program would use cost per QALY determinations by the Institute for Clinical and Economic Review.

Pharmacy benefit manager CVS Health Corp. is introducing a new prescription drug cost management program to payers that would exclude from coverage certain new treatments that do not meet cost effectiveness benchmarks used by the Institute for Clinical and Economic Review.

The program is aimed at moderating list prices at launch, which is an area that has not been addressed in a broad way by US policies, according to the PBM. CVS announced plans for the program in a white paper on lowering drug costs released Aug. 7.

“Launch prices have been steadily rising for years and are completely up to the discretion of the manufacturer,” CVS says. However, “quantitative methods, such as the concept of quality-adjusted life years (QALY), can help us compare the cost and effectiveness of medications.”

In Europe, “most medications are priced initially to produce effectiveness rated at $50,000 per QALY,” based on government-sponsored evaluations, the PBM noted.

But because the US government has no official role in price negotiation, launch prices in this country “continue to go up, into the hundreds of thousands of dollars each year, pushing costs per QALY into the $300,000-$500,000 range — costs the U.S. health care system simply cannot absorb.”

To address the issue, CVS’ program “allows clients to exclude any drug launched at a price of greater than $100,000 per QALY from their plan. The QALY ratio is determined based on publicly available analyses from the Institute for Clinical and Economic Review (ICER), an organization skilled in the development of comparative effectiveness analyses.”

ICER Chief Operating Officer Sarah Emond told the Pink Sheet there is no formal arrangement between ICER and CVS but added: “We are encouraged by the many different ways public and private payers are adopting our reports, as well as how manufacturers are increasingly using our evidence reviews to help inform their own internal thinking about value and pricing.” 

'Breakthrough' Drugs Would Be Exempt

The program will not apply to drugs designated by FDA as “breakthrough” therapies. It will focus on “expensive, ‘me-too’ medications that are not cost effective," the PBM explained.

It’s unclear how many drugs could be subject to the program and CVS declined to provide further details about its approach. One key factor will be the way CVS defines "me-too" drugs.

Drugs can receive breakthrough therapy status from FDA by showing preliminary evidence of improvement over available therapy in a clinically significant endpoint for a serious condition. An agent does not have to be first in class for the agency to designate it as a breakthrough.

The CVS program might serve mainly to influence sponsors' pricing decisions before launch. “We believe as more PBM clients adopt such programs, manufacturers will begin to moderate launch prices,” CVS pointed out. “No one but manufacturers have, until now, had any control over the launch price of newly patented drugs.”