Volume l3 - Number I °2EIIU
`VALUE IN HEALTH
`
`Good Research Practices for Measuring Drug Costs in
`Cost Effectiveness Analyses: Issues and Recommendations:
`The ISPOR Drug Cost Task Force Report—Part I
`
`JoeIVV. Hay, PhD,' Jim Smeeding, RPh, MBA,2 NormanV. Carroll, RPh, PhD,J Michael Drummond,PhD,“
`Louis P. Garrison, PhD,5 Edward C. Mansley, PhD,‘S C. Daniel Mullins, PhD,7 Jack M. Mycka. 85,3
`Brian Seal, PhD, RPh, MBA,” Lizheng Shi, PhD, MS“)
`’Department of Clinical Pharmacy. Pharmaceutical Economics 8: Policy. University of Southern California. Los Angeles.CA.USA:1JestaRx
`Group, Dallas.TX, USA; 3School of Pharmacy,Virginia Commonwealth University, Richmond,VA, USA; ‘Centre for Health Economics.
`University onork,York, UK; 5Pharmaceutical Outcomes Research & Poiicy Program, Department of Pharmacy. University of Washington,
`Seattle.WA, USA; ‘Merck & Co.. Inc.. North Wales, PA, USA; 7Pharmaceutics! Health Services Research, University of Maryland School of
`Pharmacy, Baltimore. MD. USA: ”MME LLC. Montclair. NJ. USA; ’Sanofi-Aventis Pharmaceuticals. Bridgewater’. NJ. USA; '“Department of Health
`Systems ManagemenLTuIane University School of Public Health and Tropical Medicine, New Orleans. LA, USA
`
`ABSTRACT
`
`Obiectives: The assignment of prices or costs to pharmaceuticals can be
`Good Research Practices—«Use of Drug Costs for Cost Effectiveness
`Analysis (DCTF) subgroups met to develop core assumptions and an
`crucial to results and conclusions that are derived from pharmacoeco-
`outline before preparing six draft reports. They solicited comments on the
`nomic cost efiectivencss anaiyses (CEAs). Although numerous pharmaco-
`economic practice guidelines are available in the literature and have been
`outline and drafts from a core group of 174 external reviewers and more
`promulgated in many countries, these guidelines are either vague or silent
`broadly from the membership of JSPOR at two iSPOR meetings and via
`the ISPOR web site.
`I
`about how drug costs should be established or measured. This is particu-
`Results: Drug cost measurements should be fully transparent and reflect
`larly problematic in phatmaeocconomic studies performed from the “soci-
`etal” perspective, because typically the measured cost of a brand name
`the net payment most relevant to the user’s perspective. The Task Force
`pharmaceutical is not a true economic cost but also includes transfer
`recommends that for CEAs of brand name drugs performed from a soci-
`ctal perspective, either '1} CEA analysts use a cost that more accurately
`payments from some members of society (patients and third parry payers)
`to other members of society (pharmaceutical manufacturer stockholders)
`reflects true societal drug costs ($3., 20-60% of average sales price), or
`in large part as a reward for biomedical innovation. Moreover, there are
`when that is too unrealistic to be meaningful for decision-makers, 2) refer
`numerous and complex institutional factors that influence how drug costs
`to their analyses as from a ”limited societal perspective." CEAs performed
`from :1 payer perspective should use drug, prices actualiy paid by the
`should be measured from other CEA perspectives, both internationally
`and within the domestic US context. The objective of this report is to
`relevant payer net of ail rebates, copays, or other adjustments. When such
`price adiusrmcnts are confidential, the analyst slanuid apply a typical or
`provide guidance and recommendations on how drug costs should be
`average discount that preserves this confidentiality.
`measured for CEAs performed from a number of key analytic perspectives.
`Methods: ISPOR Tasit Force on Good Research Pr:1cticcs~——Use of Drug
`Conclusions: Drug transaction prices not only ration current use of mcdi-
`Costs for Cost Effectiveness Analysis (Drug Cost Task Force lDCTFl) was
`Cation but also ration future biomedical research and development. CEA
`appointed with the advice and consent of the ISPOR Board of Directors.
`researchers should tailor the appropriate measure of drug costs to the
`Members were experienced developers or users of CEA modcis, worked in
`analytic perspective, maintain clarity and transparency on drug cost mea-
`academia,
`industry, and as advisors to governments, and came from
`surcment, and report the sensitivity of CEA resuits to reasonable drug cost
`measurement alternatives.
`scvcrai countries, Because how drug costs should be measured for CEAs
`Keywords: cost effectiveness analysis, drug costs, drug research and devel-
`depend on the perspectives, five Task Force subgroups were create-(i to
`deveIOp drug cost standards from the societal, managed care, US govern-
`opment, healtlrcare market segmentation, healthvcare reimbursement,
`payer perspective.
`‘ menr, industry, and international perspective. The ISPOR Task Force on
`
`Background to the Task Force
`The ISPOR Task Force on Good Research ProcticcswUse of Drug
`Costs for Cost Effectiveness Analysis (DCTF) was recommended
`by the ISPOR Health Science Policy Council on December 13,
`2004 and approved by the ISPOR Board of Directors on May 15,
`2005.}0131 Hay and jim Smceding were appointed as Task Force
`leaders by the ISPOR Board. The core members ofthe Task Force
`who became the leaders of the Task Force subgroups were chosen
`
`Address correspondence to: joel W. Hay, Department of Clinical Phar-
`macy, Pharmaceutical Economics Sc Policy, University of Southern Cali-
`fornia, Cl-ll’ii 140}, 1540 E. Alcoznr Street, Los :‘tngclcs, CA 90089-9004,
`USA, Email jhay@usc.cdu
`10.1 I I if].1.5244733300930661}:
`
`based on the key cost effectiveness analysis (CEA) modeling
`perspectives and their experience as developers or users of CEA
`models for that particular perspective. These individuais were
`recognized as scientific leaders in the field, who worked with that
`perspective in academia, industry, and as advisers to governments,
`and who came from a variety of countries and health—care settings.
`Because how drug costs shouid be measured for CEAs depend on
`the perspectives,
`five Task Force subgroups were created to
`develop drug cost standards from the societal, managed care, US
`government, industry, and international perspective. Therefore,
`this ‘l‘nsk Force Report is given in six parts, Part I:
`issues and
`recommendations; Part
`II: a societal perspective; Part
`III: a
`managed care perspective; Part IV: US government perspective;
`i’art V: industry perspective; and Part VI: international perspee
`rive. The Task i-‘orce Report reflects the authors’ own experiences
`
`© 2009, International Society for Pharmacoeconomics and Outcomes Research (ISPOR)
`
`|U9SJDISIIUIE 3—7
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`DEPOSITION
`EXHIBIT
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`Biogen Exhibit 2206
`Mylan v. Biogen
`IPR 2018-01403
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`Biogen Exhibit 2206
`Mylan v. Biogen
`IPR 2018-01403
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`Hay er of.
`
`companies would quickly discontinue pharmaceutical RSCD. But
`patent protection creates clear political, economic and social
`tensions, because certain drugs could be provided to some
`patients and/or payers at a price that would cover the marginal
`costs of production, but are not high enough to generate optimal
`profits to the innovative manufacrurer. As has been the case of
`AIDS drugs in Africa, patients get sick and die without access to
`existing medications partly to pretect
`the patent monopoly
`reward system to ensure pharmaceuticai innovation for future
`generations.
`It is often in the interest of both the pharmaceutical manu-
`facturer and its consumers to aliow price discrimination among
`different market segments. That is, the pharmaceutical manufac-
`turer, particularly when holding patents on brand name drugs,
`can often make more profits and also make their products more
`accessible to more market segments by charging different prices
`to different consumers, based on the consumers’ different
`demand eiasticities (willingness~to-pay). This strategy is most
`effective when such price discrimination is confidential or parallel
`imports are restricted, because this minimizes the potential for
`supply leakage between market segments.
`Drug price discrimination is most obvious in comparing
`prices for the same brand name pharmaceuticals in different
`countries (e.g., the price of as hypertension drug in Canada, the
`United States, Mexico, and China}. Although many health-care
`providers can price discriminate across market segments,
`this
`strategy is often challenged politically, because consumers in the
`richer (higher priced) market segments usually resent having to
`pay more for the same pills as consumers in the poorer (lower
`priced} market segments. Unlike hospital or physician services,
`pharmaceuticals are generaiiy available as tangible and tradablc
`products, and when drug price discrepancies become too large
`between different market segments (or countries) there will be
`substantiai arbitrage through legal,
`illegal, or _ grey market
`rte-importation activities.
`Measurement of drug costs depends firstiy on the perspective
`of the analyst. Depending on the country or region, the drug cost
`burden is ultimately shared in varying degrees between govern-
`ment or other third party payers and patients. There are drug
`supply chain intermediaries (e.g., wholesalers, retailers, etc.) who
`receive payments for maintaining inventories, product distribu-
`tion, and dispensing. There can also be demand-side intermedi-
`aries (e.g., pharmaceutical benefits managers, group purchasing
`organizations, etc.) who receive payments for negotiating price
`discounts or rebates and managing drug product lists and for—
`mularies. At with step of these demand and suppiy chains, drug
`acquisition costs may vary in complex and nontransparent ways.
`Given this background, drug valuation (costing) for economic
`evaluation is complicated. The complexity is compounded when
`one considers that each economic evaluation is carried out from
`a specific perSpective (e.g., hospital, government payer [in a large
`or small country], managed care organization, patient, societal,
`etc.) and the various perspectives reflect tangibly different objec-
`tives, impacts, allocation priorities, market power, and demand
`elasticities. At the societal perSpective levei, particularly in coun-
`tries with large domestic innovative pharmaceutical
`industry,
`there is a ciear tension between encouraging pharmaceutical
`innovation with brand name drug prices that are substantially
`higher than marginal drug production costs and encouraging
`less-expensive medications to reduce health-care costs.
`For managed care organizations, or for smaller countries
`without domestic innovative pharmaceutical industries, there is
`little direct incentive to encourage pharmaceutical innovation,
`because such innovation disproportionateiy benefits other con-
`sumers, payers, or countries. In these organizations, it is prefer-
`
`4 d
`
`eveloping drug costs for use in CEA models and publications, but
`is not intended as a comprehensive review of the literature.
`The Task Force held its first meeting at
`the lSPOR 10th
`Annual International Meeting in Washington DC in 2005 and
`held open forums and/or group leader breakfast meetings at the
`ISPOR 8th Annual European Congress in Florence in 2005, at
`the ISPOR 11th Annual International Meeting in Philadelphia in
`2006, and at the 14th Annual Internationai Meeting in Orlando
`in 2009. The Task Force reviewed other lSPOR guidance docu—
`ments that were developed to inform good scientific conduct
`[1-3}. The Task Force subgroups held teleconferences and used
`electronic mail to exchange outlines and ideas during the subse—
`quent months. The ISPOR Task Force on Good Research
`Practices~wUse of Drug Costs for Cost Effectiveness Analysis
`(DCTF) subgroups met
`to develop core assumptions and an
`outline before preparing draft subgroup reports. Several teiecon—
`ferences of the Task Force subgroup leaders were held to diseuss
`the draft reports, incorporate feedback, and make revisions. Each
`part of the Task Force Report was prepared by Task Force
`subgroup cochairs and members and circulated to 174 Task
`Force primary reviewers (who were self—identified from a broad
`range of perspectives). After this review, new drafts was prepared
`by the Task Force subgroups and made accessible for broader
`review by all lSPOR members. Comments for these reports by
`Task Force primary reviewers and ISPOR membership are pub-
`lished at the lSPOR website. All opinions reflect those of the
`authors and not necessarily their affiliations.
`
`Introduction
`
`The primary purpose of economic evaluation (specifically, CEA
`as recommended in numerous international payer guidelines [4])
`in health care is to provide valid and reliable information to
`health-care policymakers and decision-makers regarding the rela-
`tive value of alternative health—care interventions. The key ratio-
`nale supporting these economic evaluations is that the market for
`health-care interventions is so severely distorted by insurance
`coverage, third—party payments, information failure, times, sub—
`sidies, and numerous competition barriers that prices do not
`serve the normal economic function of guiding efficient resource
`allocation. Unlike a competitive market, in health care, Adam
`Smith’s “invisible hand” of price signals is so severely withered
`and atrophied that it must be replaced by the virtual reality glove
`of the economic analyst to ensure that scare resources are allo-
`cated appropriately [5].
`Although there are many areas of health care where prices are
`distorted, perhaps no area is subject to more complexity, confu-
`sion, imprecision, misunderstanding, or conflicting methods than
`that of what price measurements to use for the cost of pharma—
`ceuticals in economic evaluations [6]. The fundamental reason
`for this is that pharmaceuticals are launched into the market only
`after lengthy governmental review of safety and efficacy (e.g., the
`US Food and Drug Administration or the European Medicines
`Agency). Prescription drugs are only sold by licensed medical
`professionals under strict reguiations regarding allowable usage
`indications, patient populations, and appropriate marketing.
`Pharmaceutical research, development, and innovation are
`rewarded and encouraged primarily through patents, giving the
`innovative manufacturer
`(the patent holder)
`a
`time-limited
`monopoly over drug pricing for the patented drug. Because
`patents
`reward
`innovation
`by
`transferring brandwspecific
`monopoly profits (the excess of drug price over drug marginal
`cost) from consumers to innovator pharmaceutical producers,
`they distort competitive drug prices with the specific intent of
`encouraging future drug RSCD. Without patent protection, drug
`
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`lSPOR Drug Cost Task Force Report Overview
`
`able to take maximum advantage of one’s local monopsony
`market power to drive drug prices as low as possible for both
`payment and evaluation purposes. Because such organizations or
`countries cannot impact REED innovation substantially, it is in
`their interest to “free-ride” on larger payers and countries whose
`drug payments do have a significant impact on drug manufac-
`turer profits and RSCD incentives.
`Frank Ramsey showed in 1927 that a monopolist facing
`segmented markets (e.g., consumers with high income/high insur-
`ance coverage vs.
`low incomel'iow insurance coverage] would
`achieve both higher profits and higher social Welfare by setting
`prices in each market segment
`inversely proportional
`to the
`market segment elasticity of demand [7,8]. it is beneficial to both
`pharmaceutical producers and many consumers to engage in
`market segmentation; but because it is diificult to prevent leakage
`from lower-priced markets to higher-priced markets, the phar—
`maceutical
`industry engages in extraordinarily complex and
`often secretive negotiations with different customers with the
`explicit purpose of preventing richer market segments from
`knowing the actual transaction prices in the more demand-elastic
`market segments.
`For example, in the United States, the Medicaid program is
`required by law to receive the lowest manufacturer price avail—
`able to private and certain public purchasers for single source
`drugs. Nevertheless,
`this transaction price is fully disguised
`through secret volume rebates paid from the pharmaceutical
`manufacturers to the state Medicaid programs. Thus, even
`though they are all directly involved in the purchase and sales of
`Medicaid drugs, Medicaid patients,
`retail pharmacists, drug
`wholesalers, and other intermediaries have no idea what the real
`transaction prices are for the Medicaid drug purchases.
`Similar secretive price discounting mechanisms, often trig-
`gered by volume targets, formulary placement and multidrug
`purchasing from the same manufacturers, as well as rebates for
`formulary placement, make it extremely difficult to know what
`any given government or third-party payer actually pays for
`specific pharmaceutical products. Moreover, there is no require»
`ment
`to make such information publicly known. Generally
`speaking, those organizations with the greatest market power
`(e.g., single—payer government health-care systems) and those
`with the highest demand elasticity will capture greater discounts
`from publicly quoted or published prices, while those with the
`least market power and lowest demand elasticity will achieve
`smaller discounts and pay close to full price.
`It should be kept in mind that the traditional method for
`rewarding pharmaceutical R8cD through patent protection and
`monopoly prices for new drugs is the result of historical prece-
`dent and institutional
`inertia. it is an imperfect system for
`rewarding biomedical
`innovation;
`often
`allocating scarce
`resources towards “me-too" patentable new molecules rather
`than towards genuine innovations, although leaving critically
`important innovations {c.g., low-dose aspirin for heart disease or
`generic antibiotics for ulcers) to languish for years without being
`widely researched or adopted due to inability to obtain patent
`protection and to profit from valuable innovations [9].
`Moreover, it is vitally important to provide adequate incen—
`tives for biomedical
`research in general and pharmaceutical
`RESCD in particular. There is consensus among health economists
`that the societal returns to biomedical RSCD are on the order of
`10—100 to 1 [10,11]. Cutler or a]. have recentiy estimated that
`within the US population, average life year gains from £987 to
`2000 were approximately 3 to 2 years and the average quality-
`adjusted life year (QALY) gains were 3 to 4 years |l2|. Valuing
`these QALY gains at a societal willingness to pay of $150,000,
`and assuming that 2 in 3 of these gains are due to medical care
`
`5
`
`innovations [13],
`improvements, mostly due to biomedical
`implies that medical care gains added $90 trillion, or approxi-
`mately $2.7 trillion annually to the societal wealth of the US
`population during this time period. The global value of biomedi-
`cal innovation wouid be several times larger than these estimates.
`Several alternatives to the patent system have been proposed
`to reward biomedical RBCD [6—8,14]. These include user licenses,
`government patent buyouts, rewards or tax-funded pharmaceu-
`tical R861). Whether such alternative mechanisms can be imple-
`mented to incentivize pharmaceutical RSCD without requiring a
`monopoly pricing structure for brand name pharmaceuticals, it
`would be feasible to use marginal cost (or generic) drug prices in
`economic evaluations of pharmaceutical interventions, particu—
`larly when done from a societal perspective. In fact, given that
`the monopoly profits awarded to drug manufacturer patent-
`holders is not a true cost, but rather a transfer payment from one
`member of society to another [15], there is a strong argument to
`exclude these profits from drug costs when conducting economic
`evaluations from a societal perspective.
`In fact, one can demonstrate that government buyouts of
`drug patents with all drugs being sold at generic pricing levels
`could achieve a much better outcome for government programs,
`private consumers, and third party payers without damaging the
`incentives for pharmaceutical RaCD. Currently, the brand name
`pharmaceutical spending on R&D is about $60 billion [16]. US
`federal drug spending is $81 billion {17]. Each year, the US
`federal government could buy out all drug patents (by fully
`subsidizing the private costs of pharmaceutical RSCD) and still
`save money because it would be able to purchase all drugs at
`generic prices. US consumers would additionally benefit by more
`than $100 biiiion per year if all drugs were generic.
`Beyond these theoretical concerns,
`there are institutional
`complexities and opaque payment structures in every country
`and health-care financing system that make drug cost measure—
`ment difficult even when the analytic perspective is straight-
`forward and clear. For example,
`in the US managed care
`environment, a particular medication could experience a dozen
`or more different transaction prices depending on where it is in
`the supply chain from manufacturer, to wholesaler, to retailer, to
`patient, and where it
`is in the payment/reimbursement chain
`from manufacturer to managed care organization, to pharma-
`ceutical benefits manager, to patient, to rebate coupon. Aithough
`this report is not an exhaustive compilation of all of the com-
`plexities and variations in drug transaction costs, it does give
`examples from many of the typical scenarios that CEA analysts
`will encounter around the globe. More importantly, it provides
`guidance and recommendations based on the authors‘ and
`reviewers’ experience and understanding of what works best.
`
`Purposes of the Report
`
`The purposes of this Task Force Report are: 1} to develop a
`coherent set of guidelines for those developing or reviewing drug
`cost measurements in CEAs; and 2) to develop a format for good
`research practices in drug cost measurement that is useful for
`decision-makers from various perspectives. The intended audi—
`ence is research anaiysts who perform CEA analyses for health-
`care decisionunakers as well as health-care decision-makers who
`are responsible for local or national formularies. Others who
`may find this document useful
`include members of the press,
`patient advocacy groups, health-care professionals, drug and
`other technoiogy manufacturers, and those developing guidelines
`for their settings. The panel
`recognizes that the methods int
`measuring and reporting drug costs continue to develop. This
`
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`

`Hay at al.
`
`prices in either the base case or sensitivity analyses of phar—
`macoeconomic models. It is aiso appropriate to inciude
`longer—term trends in applicable drug prices {net of general
`inflation) for chronic disease medications.
`ISPOR should publish a website where current DCTF rec-
`ommendations for drug costing are updated as important
`new information becomes available.
`
`6.
`
`7. Population-based estimates of drug costs should incorpo—
`rate predicted adherence and persistence with drug therapy.
`8. When done from a patient/consumer perspective, the total
`net out-of-pocket payments for medications should be used
`as the drug cost measurement.
`Implications of extreme
`changes in marginal or average drug costs on patient drug
`utilization (e.g., completion of deductible expense limits,
`reaching maximum coverage benefits, Medicare-type cover-
`age “doughnut holes,” etc.) should be fully evaluated and
`expiained.
`9. For international comparisons, drug units should be stan-
`dardized in terms of volumel'weight of active ingredient,
`regardless of package and dosing frequency or strength
`variations across countries.
`
`10. Drug costs should be measured in focal currency per unit of
`active ingredient and should be converted to other curren-
`cies using Purchasing Power Parity indexes or a currency
`exchange rate relevant to the decision-maker.
`11. When using drug prices from different years, the consumer
`price index (preferably the medical care component price
`index or the pharmaceutical component price index) for the
`local currency should be applied before the currency
`conversion.
`
`Acknowledgments
`
`\Ve acknowledge the valuable assistance of Daniel Kim, Dorothy
`Noviius, and the ISPOR staff.
`
`Source of financiai support: None.
`
`References
`
`[u
`
`LII
`
`l Mauskopf ]r\, Sullivan SD, Annemans L, et al. Principles of good
`practice for budget
`impact analysis: report of the ISPOR task
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`Health 2007;10:336—47.
`Wcinstciu MC, O’Brien B, Hornbergcr }, ct al. Principles of good
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`on
`good
`research
`practices—modeling studies. Value Health 2003;69—3 7.
`3 Ramsey S, Wilikc R, Briggs A, ct al. Good research practices for
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`Task Force report. Value Health 2005;32521—33.
`4 ISPOR. Pharmacocconomic guidelines around the world. Avail-
`able item: http:.n'.lw\vw.ispor.orgI'PEguidclincsiindcx.asp [Accessed
`February 21, 2009].
`Hay]. Application of cost effectiveness and cost benefit analysis
`to pharmaceuticals. 1n: Santoro M, Corrie T, eds. The Grand
`Bargain: Ethics and the Pharmaceutical
`Industry in the let
`century. New York NY: Cambridge University Press, 2006.
`6 Hoyle M. Future drug prices and cost-effectiveness analyses.
`Pharmacocconomics 2008;26:589—602.
`7 Ramsey FP. A contribution to the theory of taxation. Econ j
`1927;37:47—61.
`S Danzon
`P. Neglected
`2007;449:176—9.
`9 Hay ], Y1: W. Drug patents and prices, can we achieve better
`outcomes? ln: Triplctt ], cd. Measuring the Prices of Medical
`Treatments. Washington, DC: Brookings Press, 1999.
`
`diseases:
`
`at what
`
`price? Nature
`
`6 r
`
`eport highlights areas of consensus as well as areas where con—
`tinued methodological development is needed.
`The Good Research Practices for Measuring Drug Costs in
`Cost Effectiveness Analyses Report is published in six parts based
`on analytic perspective. The next five articles in this issue of
`Value in Health report the issues and recommendations for phar—
`maceutical pricing from the different perspectives, including: 1)
`Societal [18]; 2) Managed care [19]; 3) Medicare, Medicaid, and
`other US Government Payers [20}; 4) Industry [21]; 5) EurOpean
`countries and other international country perspectives [22].
`These perspective-specific analyses are presented to provide guid-
`ance and recommendations on how to obtain and use appro-
`priate drug cost measurements when conducting economic
`evaluations of health-care interventiOns for different health-care
`decision-maker audiences.
`
`is over—
`task force report
`this initial
`We recognize that
`represented by topics relating to US payment and reimbursement
`issues. This happened despite strong efforts by the task force to
`recruit ISPOR members from all countries and regions and is not
`meant to give offense to anyone. The task force members serve as
`volunteers, and because of a large number of drug payment
`policy issues coming forward in the US context recently, there
`were more people motivated to address these topics. We certainly
`hope and expect that this is just the first chapter of an ongoing
`effort to assess drug cost evaluation issues globally and that
`future reports of the DCTF will be comprehensively representa»
`tive of global drug evaluation concerns, whether they be different
`countries,
`regions, stakeholder perspectives, methodological
`approaches, or other issues. We certainly encourage any reader
`who sees gaps that need to be addressed to join the DCTF and
`add their perspective in future reports.
`
`General Recommendations
`
`Although most of the Task Force’s recommendations are specific
`to each of the analytic perspectives that we focused on, there are
`some general recommendations that we believe apply to drug
`cosr measurement in any cost effectiveness analysis setting or
`application.
`
`1. More clarification of the "societai perspective” is needed.
`‘
`For CEAS of brand name drugs performed from a societal
`perspective, either CEA analysts:
`il use a cost that more
`accurately reflects true societal drug costs (e.g., 20-60% of
`average sales price), or whether that is unrealistic and not
`meaningful for decision-makers; or ii) refer to their analyses
`as conducted front a "limited societal perspective.”
`2. Drug cost values and measurements shouEd be tranSparent
`and made available to any reader or user of a CEA, with the
`data sources and rationale fully documented.
`3. One-way andlor threshold CEA sensitivity analyses should
`demonstrate how much higher/lower drug costs would have
`to be to alter pharmacoecononiic model conclusions.
`4. CEAs performed from a payer perspective should use drug
`prices actually paid by the relevant payer net of all rebates,
`copays, or other adjustments. When such price adjustments
`are confidential, the analyst should apply a generic average
`discount that preserves this confidentiality. As a corollary of
`this, when done from a government perspective, drug costs
`should be net of any sales tax, value—added tax, or other
`taxes that are direct revenue offsets to the payer. Program
`eligibility and coverage issues should be cleariy stated or
`referenced.
`
`5. For drugs that are off-patent or likely to be ofpratent in the
`near future, it is appropriate to consider multisource drug
`
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`J'SPOR Drug Cost Task Force Report Overview
`
`the value in health care? Value Health
`
`10 Hay J. Where's
`2006:9514}.
`11 Hay J. Prices and innovation in pharmaceuticals and biotechnol-
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`ln: Farquhar I, Summers K, Sorkin A, eds. Research in
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`tion: impacts on Health, Life Quality, and Regulamry Research.
`Bingiey, UK: Emerald Group Publishing; 2003:81—99.
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