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Research Article
23 December 2023

Using a patient-centered value assessment to optimize fair prices for Inflation Reduction Act’s Medicare Drug Price Negotiation Program

Publication: Journal of Managed Care & Specialty Pharmacy
Volume 30, Number 3

Abstract

In the United States, various federal agencies, institutions, and foundations, including the Centers for Medicare & Medicaid Services (CMS), have supported the incorporation of patient perspective in health care decision-making. Despite a series of patient-focused listening sessions planned as part of the Inflation Reduction Act’s Medicare Drug Price Negotiation Program, the details of these sessions in the guidance developed by CMS remain unclear. CMS has not specified how patients’ inputs will be used to determine the maximum fair prices (MFPs) of selected drugs for the first round of the negotiations. In this Viewpoint article, we urge CMS to use patient-centered value assessment methods to optimize MFPs in the Medicare Drug Price Negotiation Program. We focused on a stated preference method, the discrete choice experiment, which has been increasingly used to determine patient preferences and patient’s willingness to pay for drugs. We discussed an example using a discrete choice experiment as a patient-centered method to assess the value of Jardiance and optimize its MFP in the negotiation program.

Plain language summary

A recent law, known as the Inflation Reduction Act, allows the Centers for Medicare & Medicaid Services (CMS) to negotiate the prices of certain expensive drugs. CMS should focus on patients’ needs and want to set up fair prices. We propose using a stated preference method to set up fair prices. To illustrate, we provide an example using a drug called Jardiance.

Implications for managed care pharmacy

This Viewpoint article discusses a patient-centered value assessment using a discrete choice experiment approach to determine patient preferences and willingness to pay for drugs. This approach can be used to optimize fair prices for the Inflation Reduction Act’s Medicare Drug Price Negotiation Program, which is related to managed care pharmacy’s work, including Medicare Part D redesign and rebate provisions. Prioritizing patient-centered decision-making will also boost patient satisfaction and adherence, leading to better health outcomes.
The Inflation Reduction Act (IRA) was signed into law on August 16, 2022. One of the IRA’s key policies is to lower prescription drug costs in Medicare through price negotiation with drug companies.1 Specifically, the act allows the Secretary of the US Department of Health and Human Services to negotiate prices for certain drugs covered under Medicare Part D and Part B. Later, Centers for Medicare & Medicaid Services (CMS) issued the guidance detailing the requirements and parameters of the Medicare Drug Price Negotiation Program for the first round of negotiations that will occur in 2023 and 2024.2 The negotiated prices will become effective in 2026. Recently, CMS has announced the first 10 drugs covered under Medicare Part D selected for the negotiations.2 Primarily, they are high-expenditure, single-source drugs without generic or biosimilar competition. The guidance indicates that CMS plans to engage drug companies and the public throughout the negotiation process.2 For instance, CMS will provide an opportunity for drug companies and the public to submit data and information on the selected drugs. Also, CMS will host a series of patient-focused listening sessions as part of the Medicare Drug Price Negotiation Program.3 CMS will send an initial offer for the maximum fair price (MFP) with a concise justification of each selected drug to the drug company participating in the program.2 The company can accept or provide a counteroffer. If the agreement between CMS and the company is not reached through the initial offer or counteroffer, CMS will conduct up to 3 negotiation meetings with the company. If CMS and the company still do not agree on an MFP, the company may opt out of the Negotiation program and pay an excise tax on drug sales to Medicare or withdraw the drug from the Medicare programs.
To determine the initial offer for the MFP for a selected drug, CMS considers manufacturer-specific data related to the selected drug and evidence about therapeutic alternatives to the drug.3 The manufacturer-submitted data include research and development costs, unit costs of production and distribution, prior federal financial support, pending and approved patient applications, US Food and Drug Administration (FDA) exclusivities, FDA applications and approvals, and market, revenue, and sales data. The evidence about the alternative treatments includes the extent of therapeutic advances and costs, FDA-approved prescribing information, comparative effectiveness of the selected drug, and the extent to which the drug and its therapeutic alternatives address an unmet medical need. However, several experts commented that the IRA price negotiation process lacks clarity about how MFPs are determined.4 They suggested that the calculation of MFPs should focus on measured social value rather than price minimization. Health economists recommended using cost-effectiveness analysis (CEA) with quality-adjusted life-year (QALY) to assess the value of clinical benefits within the context of negotiation5. However, CMS indicated that it would consider cost-effectiveness measures for initial price applicability year 2026 only if these measures do not lower the value of extending the life of an older aged, disabled, or terminally ill individual, as specified in the IRA.5,6 Recently, health economists from the University of Southern California Leonard D. Schaeffer Center for Health Policy & Economics have recommended using generalized risk-adjusted cost-effectiveness (GRACE) methodologies, which allow CEA with QALY to value health gains more when facing poorer quality of life, to determine MFP.4 A guide to extending and implementing GRACE was published in 2022.7 These methodologies and their applications are in their infancy. Also, they are still based on the QALY metric, which remains controversial as some arguments have been made that QALY neither engages patients nor addresses patient preferences8,9. In contrast, patients increasingly play a more critical role in the US health care system. For example, patients are now more knowledgeable about their medical conditions10 and are active in managing their health and health care, resulting in better outcomes and lower costs.10,11 They have been involved in research and are engaged in shared decision-making.12 Additionally, the QALY metric fails to capture various important value elements (eg, the value of hope, innovation, and equity).13 Health economists suggested that patient perspective should be actively incorporated into the value assessment of health care since patients are likely to be asked to take more responsibility for their health care, whether through health plans or other cost-sharing mechanisms.14
Over 2 decades, patient-centeredness has been put forth by the Institute of Medicine for the US health care system.15 Specifically, the system should aim to provide care that is respectful of and responsive to patient preferences, needs, and values, and it should ensure that patient values guide all clinical decisions. Various federal agencies, institutions, and foundations (eg, FDA Patient-Focused Drug Development Program,16 Agency for Healthcare Research and Quality Patient-Centered Outcomes Research Trust Fund,17 Patient-Centered Outcomes Research Institute,18 and PhRMA Foundation19) have spent several million dollars to build capacity and knowledge to support the incorporation of patient perspective in health care decision-making at multiple levels. CMS itself also recommended strategies to engage patients in clinical practice, program development, and community health initiatives.20 For the Medicare Drug Price Negotiation Program, CMS plans to conduct patient-focused listening sessions to allow patients and other interested parties to share patient-focused inputs on therapeutic alternatives and other data regarding selected drugs5. However, the details of these sessions were not available in the Medicare Drug Price Negotiation Program guidance issued on June 30, 2023.5 Also, CMS has not specified how these inputs and data help CMS determine or contribute to MFP. Therefore, we highlight a patient-centered value assessment method and discuss how CMS could use this method to assess the values of clinical benefits and link drug prices to these values.

A Patient-Centered Value Assessment Method: Discrete Choice Experiment

Primarily, the patient-centered value assessment is the value assessment method that meaningfully engages patients throughout the assessment processes. According to the National Health Council and National Pharmaceutical Council, it has several domains (eg, patient partnership, transparency to patients, inclusiveness of patients, diversity of patients, outcomes patients care about, and patient-centered data sources) and aspects (eg, the assessment process, methodology, benefits, costs, evidence, and dissemination and utilization).20,21 These domains and aspects also have their own specific elements that should be included in the patient-centered value assessment methods to reflect the patient-centeredness of the methods. While various patient-centered value assessment methods are available, I focused on a stated preference method, discrete choice experiment (DCE), for multiple reasons. First, DCE is based on random utility theory, a rigorous economic theory that has also been applied in other fields (eg, environment and transportation sciences). Second, the National Health Council’s and National Pharmaceutical Council’s patient-centeredness domains and aspects can be used to design DCE. Third, there is a large body of studies using DCEs to determine patient preferences for different drug attributes, including new value elements (eg, the value of hope) in the United States. Fourth, DCE can derive the relative values of drugs. Last, the FDA has recently used a DCE to assess the benefits and risks of health care technologies (eg, medical devices and drugs) and incorporate them into regulatory decision-making.22 Decision makers may be more familiar with this method.
Essentially, DCE describes multiple choice sets by drug attributes and their levels that are important to patients. Besides clinical literature, these attributes should be obtained from patient-experience data (eg, patient-experience data for several diseases or conditions collected by the FDA as part of the Prescription Drug User Fee Act). DCE uses an efficient design to generate choice sets, including hypothetical drug alternatives described by the selected attributes and levels. Patients are asked to select a preferred alternative from each choice set. DCE applies a random utility theory to determine patient preferences, including preference weights for each attribute level and heterogeneity of preference, from the patients’ responses for each choice set. The difference between the highest and lowest preference weights for the levels of the same attribute describes the conditional relative importance of each attribute. The ratio of the conditional relative importance of one attribute to others reflects the importance of that drug attribute to the patients. Then, the marginal rates of substitution between the preference weights of drug attributes can be estimated.23 If DCE includes a cost attribute and a linear assumption is made for the preference weights across the attribute levels, patients’ willingness to pay (WTP) for individual drug attributes and drugs can be estimated.23 DCE also allows the estimation of CIs to capture the uncertainty or variance of these WTPs. It is noteworthy that the estimated WTPs are the maximum amounts patients are willing to pay for the drug attributes and the drugs (based on the combination of WTP for each attribute). They reflect how much patients relatively value those drugs. Additionally, the heterogeneity of preference can capture different values of the drugs for patients with specific characteristics (eg, older adult, disabled, or terminally ill), who may have different preferences.

Using the Patient-Centered Value to Optimize MFP: A Case Study of Jardiance

CMS proposed the methods for developing an initial offer for the MFP for a selected drug.5 Essentially, CMS will (1) identify therapeutic alternatives for the selected drug, (2) use the prices of the therapeutic alternatives to determine a starting point for the initial offer, (3) adjust the initial offer based on the evaluation of the clinical benefit of the selected drug (including compared with its therapeutic alternatives), and (4) further adjust the offer price based on manufacturer-specific data to determine the initial offer price. To evaluate the clinical benefit of the selected drug, CMS will use evidence from various sources, including literature reviews and real-world data, and may consult with clinicians, patients or patient organizations, academic experts, and the FDA. Additionally, CMS will engage patients in this evaluation through patient-focused listening sessions, likely using a qualitative approach.5 We suggest CMS use the patient-centered values or patients’ WTP derived from DCE studies to supplement these sessions. It was proved to be practical for using patient preferences alongside health technology assessment in various countries (eg, Belgium, Canada, Germany, and the United Kingdom).24,25 For example, the National Institute for Health and Care Excellence in the United Kingdom allows the submission of the results of patient preference studies.24 The National Institute for Health and Care Excellence found the quantitative patient preference data valuable, especially for those drug attributes that might not be captured adequately by the QALY metric.
To elaborate on our suggestion, we chose Jardiance (empagliflozin) as a case study. Jardiance is among the 10 drugs selected for the negotiation for initial price applicability year 2026. It is a sodium-glucose cotransporter 2 (SGLT2) inhibitor prescribed to improve blood glucose levels in patients with type 2 diabetes (T2D). Jardiance also offers other advantages, including the risk reduction of major adverse cardiovascular events (MACEs) in patients with cardiovascular disease. We published a DCE study that determined patient preferences for SGLT2 inhibitors and glucagon-like peptide-1 receptor agonists (GLP-1RAs).26 This study identified 6 attributes, including the chance of reaching target hemoglobin A1c (A1c) in 6 months, the percentage reduction in the risk of MACEs, the chance of gastrointestinal side effects, the chance of genital infection, the route and frequency of administration, and the patient’s out-of-pocket cost, that are significantly important to patients with T2D. The overall study showed that the conditional relative importance of the out-of-pocket cost was the highest (2.2), followed by the chance of reaching target A1c (1.4), the route and frequency of administration (0.8), the risk reduction of MACEs (0.7), the risk of gastrointestinal side effects (0.6), and the risk of genital infection (0.4). However, the study also observed heterogeneity of preference. It was possible that patient preferences varied by age. For patients aged 65 years or older, the conditional relative importance of the out-of-pocket cost was the highest (3.3), followed by the chance of reaching target A1c (1.7), the route and frequency of administration (1.2), the risk of genital infection (0.9), the risk reduction of MACEs (0.7), and the risk of gastrointestinal side effects (0.6). Specifically, the risk of genital infection became more important than the risk reduction of MACEs and the risk of gastrointestinal side effects.
CMS can use the study results as a source of evidence for assessing and comparing the clinical benefits of Jardiance and its therapeutic alternatives. For instance, besides the impact on A1c, CMS should consider the route and frequency of administration, the risk reduction of MACEs, the risk of gastrointestinal side effects, and the risk of genital infection when evaluating the benefits and risks of Jardiance and comparing it to other SGLT2 inhibitors and GLP-1RAs since they are important to patients. Also, CMS could use the conditional relative importance to weigh these attributes of Jardiance and its therapeutic alternatives when comparing them. Without these results, CMS may undervalue the route and frequency of administration and the risk of genital infection and overvalue the risk reduction of MACEs during the negotiation since it is widely known, leading to a presumption, that SGLT2 inhibitors and GLP-1RAs add the cardiovascular benefits for T2D patients. Since older adults (eg, Medicare beneficiaries) put high weights on the route and frequency of administration and the risk of genital infection, these attributes may eventually affect their compliance, which could be a hidden cost in the health care system.
This published study did not show patients’ WTPs for individual attributes and drugs. However, if CMS decides to negotiate the price of Jardiance based on individual attributes (eg, the chance of reaching target A1c and the risk reduction of MACEs), it can calculate patients’ WTPs to assess the values of these attributes and use them to adjust the initial offer for the MFP or the other rounds of negotiation. For instance, the patients’ WTP for a 1% chance of reaching target A1c in 6 months was estimated at approximately $8 per month. If Jardiance and therapeutic alternatives provide a 34% and 30% chance of reaching target A1c in 6 months, respectively, the adjustment of the initial offer for the MFP for Jardiance should not be higher than $32 (ie, [34-30]*$8) per month (Figure 1). Also, CMS can calculate the patients’ WTPs for SGLT2 inhibitors and GLP-1RAs based on the patient preferences for all attributes besides the cost attribute. CMS can use the relative values and the ranking of these values to adjust the initial offer for the MFP of Jardiance. For instance, if the initial offer for the MFP is set from the prices of the therapeutic alternatives of Jardiance at $468 per month and the relative values of patients’ WTPs for Jardiance derived from the DCE study (eg, $450) and the therapeutic alternatives (eg, $445) are 1.01 ($450/$445), the adjusted price of Jardiance should not be higher than $473 (1.01*$468) per month or approximately the same as the prices of the therapeutic alternatives (Figure 2). Additionally, CMS can use these results to argue that the adjusted price for Jardiance should remain in the same rank, compared with the price ranks of the therapeutic alternatives, to reflect its relative value based on patient preferences.
FIGURE 1 The Adjustment of the MFP for Jardiance by Chance of Reaching Target A1c in 6 Months
FIGURE 2 The Relative Value and Price Ranking of Jardiance
Besides patient preferences, DCE can be used to determine other stakeholder (eg, caregiver and health care provider) preferences and capture other value elements (eg, equity) that are important to patients and the US health care system. The FDA is conducting a more extensive study to examine patient and health care provider preferences for T2D prescription drugs.27 Also, we are investigating how to incorporate equity attributes into a preference-based value assessment of SGLT2 inhibitors and GLP-1RAs. These studies will be helpful for the Medicare Drug Price Negotiation Program in the future.
We also acknowledge that implementing our proposed approach is not without challenges. For example, a challenge lies in combining differences in the preference ranking of various stakeholders into a simple metric that can facilitate MFP decisions. Also, apart from our suggested approach, evidence to adjust MFPs can come from diverse sources, such as risk and benefit evidence from clinical guidelines, meta-analysis or systematic review, FDA guideline, or real-world evidence studies, etc. Combining various sources of evidence into a single metric to inform MFP can be a challenge.

Conclusions

We urge CMS to use patient-centered value assessment methods to optimize MFP in the Medicare Drug Price Negotiation Program. We have recommended patient-centeredness throughout the US health care system for many years. We must “walk the talk.” Patients’ voices need to be heard in a meaningful way!

References

1.
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Information & Authors

Information

Published In

cover image Journal of Managed Care & Specialty Pharmacy
Journal of Managed Care & Specialty Pharmacy
Volume 30Number 3March 2024
Pages: 241 - 246
PubMed: 38140902

History

Published online: 23 December 2023
Published in print: March 2024

Authors

Affiliations

Nabin Poudel, PhD
University of Maryland School of Pharmacy, Baltimore, MD.
Surachat Ngorsuraches, PhD* [email protected]
Harrison College of Pharmacy, Auburn University, AL.

Notes

*
AUTHOR CORRESPONDENCE: Surachat Ngorsuraches, 1.334.844.8357; [email protected], @RxSurachat

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