International reference pricing—tying US drug prices to those in other developed countries—has been proposed as a viable strategy for lowering US spending on prescription drugs. This concept was included in the Department of Health and Human Services’ International Pricing Index for physician-administered drugs offered under Medicare Part B1 and in Speaker Nancy Pelosi’s drug pricing bill (HR3) for physician-administered and orally administered drugs offered under Medicare or private insurance plans. Although the reach of these proposals vary, both propose to index US drug prices to those paid by France and other international peers of similar economic development (paying 120% to 126% of international prices, depending on the proposal). Savings from such proposals are estimated to be large,2 given the extent of US overpayment for prescriptions relative to international peers.
In contrast to the “what the market will bear” US approach, international peers generally use cost-effectiveness analysis to determine a drug’s fair price. This may include use of indication-based pricing or exclusion of some products from formularies when agreements cannot be reached between manufacturers and health systems. We discuss some practical challenges to international reference pricing using France’s drug approval and pricing system and novel cholesterol-lowering drugs (PCSK9 inhibitors) as a case study.
In July and August 2015, the US Food and Drug Administration respectively approved the PCSK9 inhibitors alirocumab and evolocumab for management of high low-density lipoprotein cholesterol for patients presenting with noncontrolled, atherosclerotic cardiovascular disease or familial hypercholesterolemia. At the time of US launch, the Institute for Clinical and Economic Review (ICER), a US-based, nonpartisan research organization that provides independent cost-effectiveness evaluations for new health care products, found that PCSK9 inhibitors were not cost-effective at their initial prices ( ~ $14 000/y) and that prices should be reduced by approximately 60% to be cost-effective at common thresholds.3 Indeed, PCSK9 inhibitor uptake has been slow in the US, with formulary coverage and prior authorization requirements resulting in uptake below 50% among those with prescriptions.4,5 Although prices have been reduced in recent years, prior authorization and high out-of-pocket costs continue to limit uptake.4,5
Similar to the US, France’s National Security Agency of Medicines and Health Products approved evolocumab and alirocumab in July and September of 2015, respectively. However, before its price and reimbursement level are determined, a newly approved drug in France must also receive an evaluation of its effectiveness, side effects, and importance relative to other in-class medications by the Transparency Commission in the National Health Authority. During this process, the Commission will assign each drug a service medical rendu (SMR), a metric used to determine the level of reimbursement by the French public health insurance program (the Assurance Maladie) for a given indication. SMR assignments include “important,” “moderate,” “weak,” and “insufficient,” resulting in reimbursement at 65%, 30%, 15%, and 0% of the drug’s price, respectively. The Transparency Commission also rates the drug’s therapeutic value relative to existing therapies from major improvement (ASMR I) to no therapeutic progress (ASMR V). Both evolocumab and alirocumab were assigned an ASMR of IV or V (depending on drug indication), indicating minor to no therapeutic improvement. Furthermore, the Transparency Commission authorized an “important” SMR rating for only the most severe cases of clinical atherosclerotic disease, primary hyperlipidemia or dyslipidemia, and familial hypercholesterolemia for both drugs.
Next, the Economic Committee of Medical Products uses the ASMR, the price of related medications, expected sales volume, and the drug’s indication to negotiate a fair price with the manufacturer. These negotiations must additionally satisfy an agreement between the Economic Committee of Medical Products and LEEM (the body representing >95% of pharmaceutical companies in France), which mandates the price of innovative pharmaceuticals not be inferior to the minimum price offered by 4 other key European markets (Germany, Spain, the United Kingdom, and Italy), known as the European Price Guarantee. This negotiation results in a price assignment, which can be decided by the Economic Committee of Medical Products unilaterally if not reached with the pharmaceutical company. This price and the corresponding reimbursement rate are ultimately approved by the French Ministry of Health.
These reviews can result in substantial delays between initial drug approval and product availability to patients. For example, despite similar initial approval dates, US patients could purchase these drugs approximately 2 years sooner than French patients. Such delays are common, averaging 200 to 250 days for branded drugs and longer for expensive specialty drugs. Because utilization is restricted to the most severe cases of high low-density lipoprotein cholesterol even after a maximum dose of a statin, uptake in France remains low. However, uptake for approved indications is not limited, and out-of-pocket costs may only be burdensome for those without supplemental health insurance (<6% of the French population).
Assuming the US decided to index the price of evolocumab and alirocumab to France’s price, challenges quickly emerge. First, delays in establishing prices in indexed countries could limit the timeliness of information for US payers. In addition, the European Price Guarantee could lead to unforeseeable fluctuations in price, not only in France but also for several other reference countries. Importantly, a concurrent increase in price among 5 international comparators could have an inflationary effect on prices in the US. Furthermore, France’s indication-specific reimbursement schedule and differences in the relative value assignment allow for higher prices for alirocumab than evolocumab ($9406-$9876/y and $7120-$7476/y, respectively). In the US, these products are generally used interchangeably, making the differences in reimbursement arbitrary.
Although the goals of reducing US drug prices to those of our international peers are laudable, there are limitations to importing prices from other countries removed from their legal and political contexts. We recommend the US invest in our own value-based price assessments.6 This investment could include greater engagement with or expansion of nonpartisan, nongovernmental organizations, such as ICER, or through academic-government partnerships (eg, creating Centers of Excellence for cost-effectiveness evaluations), as 2 possible avenues. Importantly, cost-effectiveness evaluations are starting to influence pricing and coverage decisions in the US. For example, Amgen lowered evolocumab’s price below $6000 per year (within the range recommended by ICER), with Sanofi and Regeneron following in February 2019, hoping to improve uptake and access to these products.7 As the world’s largest purchaser of prescription drugs, the US could be successful in lowering prices directly, learning from other countries and balancing our goals for early access to innovative treatments at reasonable prices.
Open Access: This is an open access article distributed under the terms of the CC-BY License.
Corresponding Author: Stacie B. Dusetzina, PhD, Department of Health Policy, Vanderbilt University School of Medicine, 2525 West End Ave, Ste 1203, Nashville, TN 37203 (email@example.com).
Conflict of Interest Disclosures: Dr Dusetzina is a member of the ICER Midwest Comparative Effectiveness Public Advisory Council and receives an honorarium and travel expenses related to in-person meeting attendance. She also served on the National Academy of Sciences, Engineering, and Medicine Committee Ensuring Patient Access to Affordable Drug Therapies. She receives funding for related work by the Commonwealth Fund, the Leukemia and Lymphoma Society, and Arnold Ventures. Mr Gavulic and Dr Pelletier-Fleury have no conflicts of interest to report.
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Gavulic KA, Pelletier-Fleury N, Dusetzina SB. Peer Comparisons for Drug Price Setting: Why International Reference Pricing May Not Provide Optimal Prices. JAMA Health Forum. 2020;1(2):e200105. doi:10.1001/jamahealthforum.2020.0105