Why Getting Value Right in Health Care Matters

The most common answer to a question about the price of a new medicine or technology is, “the value it provides more than offsets the cost.”

While often accurate, this oversimplifies a highly complex system that few currently understand. Value in health care isn’t the same as value in any other sector. To get it right, we need to first acknowledge that it’s not a one-size-fits-all proposition. Getting value right requires a long-term, not a short-term view. It also requires an understanding of the direct and in-direct costs that define that value. In this regard, value is a stream of health and societal benefits derived from a health care treatment over the patient’s lifetime compared to the price of providing it. This is particularly relevant as new gene therapies come to market.

Recently, big news was made over the Food and Drug Administration’s approval of a new cell-based gene therapy drug manufactured by Novartis. The drug, a first-of-its-kind, combats leukemia through a bolstering of the immune system. The initial estimated cost: $475,000, a figure referred to as a “whopping price tag” in the headline of one article. The use of the adjective “whopping” here illustrates perfectly what I mean by the cost-value problem.

No one argues that a half-a-million-dollar price tag is not high, but measured against the value of what the treatment potentially provides—for the patient, emancipation from a fatal disease; for payers, a reduction in extended treatment costs; for society, an increase in productivity; and for the manufacturers, compensation for research and development of a narrowly targeted product—the price tag takes on new meaning. Of course, there will always be disagreement over the right way to measure cost-value, but without open stakeholder discussion, we risk the slow breakdown of health care broadly.

Fortunately, the drive to create a value assessment framework is happening in earnest. At Duke University’s Margolis Center for Health Policy, Director Mark B. McClellan is creating an “Evidence Hub” that will bring together “expertise, best practices, and multiple data sources” to “address key policy questions related to health care delivery, with particular attention to payment reform.” The end goal for McClellan and his team: understanding how to “pay for care in a way that encourages this shift to high-value, innovative care and how to empower patients and consumers to help lead it.”

Even more heartening, in a recent paper published in The Journal of The International Society for Pharmacoeconomics and Outcomes Research, a team of researchers, including McClellan, outlined 10 guiding principles to improve the next generation of value assessments, the first such attempt from a multi-stakeholder perspective. Historically challenging factors like transparency and the inclusion of patient perspectives, to the need for established methodologies on which to base value assessments, to—crucially—the importance of constructing value assessment frameworks that can adapt to shifts in science, evidence, values and the health care system more broadly, are assessed. What results is, as it were, a useful opening statement in the value assessment conversation—and one that should be followed-up.

One way to do this is by acting on the authors’ concluding “next steps,” which, I think, behoove us to treat as a communal homework assignment.

  • First, more research needs to be done to understand how different stakeholders understand and operationalize value. Specifically, we need to “identify convergences and differences with stakeholder groups, such as patient groups affected by different diseases.”
  • Second, the 10 principles should be refined until they best approximate the diversity of perspectives throughout the industry. As the authors point out, “there are considerable convergences between our proposed principles and those recently published by industry and patient groups.”
  • Third, consensus must be gained on value assessment methodological and procedural standards, i.e. “whether cost-utility analysis, multicriteria decision analysis, or some revision or combination of these approaches might be the best methodological foundation for value assessment.”
  • Fourth, we need to think long-term. This means establishing a multi-stakeholder consensus on how a value assessment framework would actually be implemented. As an example, new gene therapies – one-time treatments – will revolutionize how we treat patients. The system needs to be ready to embrace them.
  • Finally, as the authors note, “investments in value assessment will be worthwhile only if it benefits the health care system.” This means asking questions like, “Do intended users adopt the framework(s)?” or does the framework “result in agreed-upon measures, such as reduction in overall cost or improvements in health outcomes?”

By now, it should be obvious that the inherent murkiness of the cost-value debate in health care is not quite as it seemed. Yes, there are major communication challenges on the horizon. And, yes, sadly things may get more complicated before they are simplified. But the sooner we gain even a modicum of consensus on these issues, particularly when it comes to revolutionary medicine like gene therapy, the sooner we can more fully concentrate on the one value metric that unites us all: helping people get better and live more productive lives.

Dr. Kenneth Thorpe is professor of health policy at Emory University and chairman of the Partnership to Fight Chronic Disease.

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