A few years ago, I finally found a medication that offered genuine relief to a persistent health problem. The copay was rather more than the usual amount, but it was clearly worth it. Then two years ago, my new insurance told me they wouldn’t pay for it, and forced me onto a much less effective generic. Last year, when selecting a new insurance provider, I chose one that had the effective medicine on its formulary. Except it doesn’t really. To get it, I would have to pay a small fortune every month.
This experience is about to become a lot more common for patients across the country. Thanks to a change in the rule surrounding Medicare Part B, health insurance companies will have even more justification for dumping expensive medicines in favor of cheaper, but perhaps less effective, alternatives. The trouble is that the way the rule is written is an end-run around the law that was written to stop that happening.
At issue is the power of a creation of the Obamacare law called the Independent Payment Advisory Board (IPAB). This body was set up to determine which treatment options were most cost-effective, in order to persuade doctors to prescribe the cheaper blue pill instead of the more expensive red pill (in President Obama’s phrase). In order to do so, it has turned to a private nonprofit group for advice.
That group is the Institute for Clinical Economics and Review (ICER.) This group conducts cost-benefits analyses of medication to assess how cost-effective they are. In doing so, it uses a controversial methodology called Quality Adjusted Life Years (QALY) that say that if you are old, infirm, or sick, a year’s extra life will have a lower quality, so it should not be counted as equivalent to value of life of a healthy person. It’s a technique the United Nations uses to discount the extended lifespan of Americans, arguing that the last years of life aren’t equivalent to those of a young person in a poorer country.
Obviously, the use of QALYs has a significant effect on any judgment of whether or not a medicine is cost-effective. We see it in the decisions of the UK’s Orwellian-named agency the National Institute on Health and Care Excellence (NICE), which decides whether or not drugs should be used by the country’s socialized National Health Service. NICE restricts access to drugs that are commonly available to patients elsewhere in the European Union. For example, French and Spanish breast cancer sufferers are 50 percent more likely to be given the drug Herceptin than British patients.
ICER, as it happens, is directly modeled on NICE. Its structure and process are similar and its President enjoyed a senior position there. Despite being a nonprofit, under the new rules its analyses will play a formal part in the decisions of the Centers for Medicare and Medicaid Services (CMS). As well as assessing cost-effectiveness, the body uses QALYs to recommend price caps on drugs. Where Medicare leads, other insurance providers follow.
Yet if prices are capped or the use of drugs vetoed because of expense, pharmaceutical innovation, a field in which America leads the world, will suffer. Research into new medicines will effectively be capped as well, as drug manufacturers stop R&D of products for which they cannot cover the costs.
This was all codified in the Affordable Care Act, which states, “The Patient-Centered Outcomes Research Institute [PCORI] … shall not develop or employ a dollars-per-quality adjusted life year … as a threshold to establish what type of health care is cost effective or recommended.” It is PCORI that is supposed to give IPAB its advice, but because it cannot use QALYs, IPAB has turned to ICER for advice instead.
ICER’s approach is raising eyebrows. Milena Izmirlieva, head of the Life Sciences research team at the analytical consultancy IHS, wrote on the company’s blog, “[T]he activities of ICER should be carefully monitored because they have the potential to change the market access environment… ICER’s reports – no matter whether they lack methodological rigour [sic] or not – may be used as ammunition by health insurers in their attempt to secure price discounts.”
That’s the nub of the problem. Pharmaceutical firms want to bring products to market, but insurers want to restrict the price they pay, so instead of allowing the market to work, they have turned to using regulation. ICER is primarily funded by insurance companies, but its flawed methodology will now have a place in the regulatory system, and that’s despite the law that was written to prevent this happening.
Moreover, the distinction between red and blue pills is itself problematic. Many patients respond better to the red pill than the blue pill, even when they are suffering from the same ailment. By giving IPAB the power essentially to mandate one pill over the other, that body will cause increased pain and suffering in many.
Congress really should have learned its lesson by now. Whatever the law says, when it delegates power to the executive, the executive will find a way to do what it wants. When it does so because of the influence of special interests, then the rule of law loses meaning. In the end, we all pay for that, and not just in the higher price of medicine.