Estimating the Theoretical Cost Implications of Funding New Drugs Considered Not to Be Cost-Effective

Abstract

This study aims to estimate the theoretical excess expenditure that would be incurred by the Irish state-payer, should drugs be reimbursed at their original asking (“list”) price rather than at a price at which the drug is considered cost-effective. In Ireland, all new drugs are evaluated by the National Centre for Pharmacoeconomics. For this study, drugs that were submitted by pharmaceutical companies from 2012 to 2017 and considered not cost-effective at list price were reviewed. A total of 43 such drugs met our inclusion criteria, and their pharmacoeconomic evaluations were further assessed. The price at which the drug could be considered cost-effective (cost-effective price) at the upper cost-effectiveness threshold used in Ireland (€ 45 000/quality adjusted life-year) was estimated for 18 drugs with an available cost-effectiveness model. Then, for each drug, the list price and cost-effective price (both per unit) were both individually applied to 1 year of national real-world drug utilization data. This allowed the estimation of the expected expenditures under the assumptions of list price paid and cost-effective price paid. The resulting theoretical excess expenditure, the expenditure at list price minus the expenditure at the cost-effective price, was estimated to be €108.2 million. This estimate is theoretical because of the confidentiality of actual drug prices. The estimation is calculated using the list price and likely overestimates the actual excess expenditure, which would reduce to zero if cost-effective prices are agreed. Nevertheless, this estimate illustrates the importance of a process to assess the value of new drugs so that potential excess drug expenditure is identified.