Americans Should Be Wary of Embracing Socialist-Style Price Controls

As President Trump and Congress consider ways to lower drug costs, they should be wary of cruel and inhumane socialist price controls like the quality-adjusted life years method advocated by a group called ICER. #wiright #wipolitics… Click To Tweet

July 19, 2019

Perspective by Chris Rochester

President Trump has made reducing the price of prescription drugs a cornerstone of his presidency, and that effort continues largely under the radar in Washington. It’s a worthwhile effort, but Trump and Congress should be wary of embracing the type of inhumane, socialist-style price controls adopted in other countries.

The administration’s approach, while vague on details, emphasizes saving money on drug payments made through publicly funded health coverage programs:

  • Medicare Part B, which covers necessary medical services as defined by the federal government, or “Services or supplies that are needed to diagnose or treat your medical condition and that meet accepted standards of medical practice.”
  • Medicare Part D, the federally funded prescription drug plan with the goal of “making prescription drugs available and affordable for Medicare beneficiaries.”
  • And state Medicaid programs.

It’s a worthwhile goal, but exactly how the administration would actually save money on prescription drugs is of concern.

Essentially, ICER’s quality-adjusted life year (QALY) methodology attempts to calculate how much an additional year of life for a sick person seeking treatment is worth to society.

In their pursuit of lower costs, some countries like the United Kingdom and some U.S. states have embraced an unsettling method of evaluating the value of a treatment. The method assigns a dollar value to a patient’s life and compares that “value” to the cost of the drugs to determine whether to pay for a particular treatment. In the United States, this socialist approach to making life-and-death decisions has found an advocate in an organization called the Institute of Clinical and Economic Review (ICER).

So far, many of the Trump administration’s proposed reforms appear to avoid this kind of draconian price control—at least on paper. But the plan in many respects gives federal bureaucrats at the Centers for Medicare & Medicaid Services (CMS) a broad mandate to “develop demonstration projects to test innovative ways to encourage value-based care and lower drug prices” through “better negotiation” with drug companies.

“These models should hold manufacturers accountable for outcomes, align with CMS priorities of value over volume and site-neutral payments, and provide Medicare providers, payers, and states with additional tools to manage spending for high-cost therapies,” the administration’s plan states.

What exactly does all that mean? That appears to be in the hands of unelected bureaucrats at CMS, and it could open the door for ICER to enter the drug pricing conversation at the national level and bring its methodology along with it.

That prospect should concern all Americans.

Essentially, ICER’s quality-adjusted life year (QALY) methodology attempts to calculate how much an additional year of life for a sick person seeking treatment is worth to society. In other words, it’s a cost-versus-benefit analysis of potentially life-saving drugs dependent on whether the cost to cover a certain drug would exceed the value to society of a patient living one more year as determined by the quality-adjusted life year calculation.

As a MacIver policy brief notes, serious questions and grave concerns surround the effectiveness and basic ethics of the QALY approach.

The U.K.’s socialist drug rationing regime also uses the QALY model. Their system has been a constant source of controversy with sometimes tragic results. In 2015 for example, the U.K.’s control mechanism led to the withdrawal of funding for 25 oncology treatments. That likely cut short the lives of 8,000 cancer patients.

Other developed countries in the years since the Great Recession have joined the U.K. in adopting dictatorial price controls with serious ethical problems, but the United States hasn’t been one of them. Yet.

In addition to the Trump administration’s push to lower drug costs, Congress is also taking a role. Sens. Chuck Grassley (R-Iowa) and Ron Wyden (D-Ore.) are considering ways to cap price increases in Medicare Part B to the inflation rate and base payments for new gene therapies on patients’ outcomes.

“Tying payments to how well drugs work, on this scale, would be an enormous policy change,” Axios notes.

It would be an enormous policy change if this robot-like approach overturned America’s tradition of determining therapies based on the decisions of doctors and patients, not bureaucrats and formulas.

It would be enormous if this robot-like approach overturned America’s tradition of determining therapies based on the decisions of doctors and patients, not bureaucrats and formulas.

While the cost of drugs is certainly a concern, free market advocates worry that efforts to control prices based on the outcomes of certain therapies will be based not on free market economics, but on the sort of potentially deadly price controls ICER is pushing. That concern is justified as some states and companies in the United States have already eyed the quality-adjusted life year approach favorably.

For example, New York’s Medicaid program used an ICER review to determine whether the state should pay for Orkambi, a new cystic fibrosis treatment. As of mid-2018, the state was denying access to the treatment because its cost outweighed its social value according to a QALY calculation, at the expense of those who could benefit from the treatment.

According to ICER’s cold calculations, the cost of the drugs didn’t make them worth it. The cost of Orkambi and similar drugs “range from $273,000 to $312,000 annually. ICER said last year that [drug manufacturer] Vertex would have to lower its prices by 71 to 77 percent to align costs with benefits.” Those “benefits” of course are a euphemism for the value of the person’s life, the Boston Globe reported.

More recently, Maine has created a “Prescription Drug Affordability Board” with a mandate “to determine prescription drug spending targets for public entities based on a 10-year rolling average, accounting for inflation with spending reductions.” The program flirts with ICER-style price controls.

Private sector insurers are joining the act, too.

CVS Caremark prescription benefit management company announced last year it will begin using ICER data and a hard $100,000 quality-adjusted life year cap to manage which drugs its plan will cover, also known as its formulary. That means if a drug’s quality-adjusted life year value is less than $100,000, it will not be covered by CVS Caremark’s drug plan.

Managed care advocates celebrated. “…[P]lans are nearing a breaking point for covering the high cost therapies they are covering today without much confidence in the value they provide…I hope to see this concept catch fire within the managed care industry,” wrote managed care industry consultant Russ J. Spjut.

But value, at least in the United States, is in the eye of the patient, not bureaucrats operating on cruel, clinical calculations enforced by a board of self-appointed experts.

If a drug like Orkambi drastically improves a child’s life, or an expensive new cancer treatment extends the life of an older person so they can live a few more years, it would be worth it if they, their families, and their doctors decide it is.

The remaining years of individual patients’ lives can be reduced to a dollar figure under ICER’s quality-adjusted life years calculation. But that figure doesn’t account for the human element—the value of seeing one’s grandchildren born, or the value to a parent of seeing their illness-stricken child live a fuller, more productive life.

They should think twice—once about the dollars and cents, and once more about the people their policies will impact.

Decisions that mean the difference between life and death are far too important to put in the hands of a brutal, remorseless mathematical formula.