Conventional Cost-effectiveness Analysis Research Articles

Modeling the Population Equity of Alzheimer Disease Treatments in the US

The arrival of new medications for Alzheimer disease (AD) has prompted efforts to measure their value using conventional cost-effectiveness analyses; however, these analyses focus on how much health improvement new medications generate per dollar spent. As AD disproportionately affects older adults, women, racial and ethnic minority individuals, and individuals with lower socioeconomic and educational levels, it is critical to also examine the health equity outcomes of treatment. To estimate the health equity impact of a hypothetical disease-modifying treatment for early AD in the US and to examine targeted policies to mitigate health care disparities. This economic evaluation, which used a distributional cost-effectiveness analysis, was conducted from June 16, 2022, to January 11, 2024. The study included subgroups defined by race and ethnicity and by social vulnerability quintiles in the US. A hypothetical disease-modifying treatment compared with best supportive care. The main outcomes were population-level quality-adjusted life-years (QALYs), lifetime costs, and net health benefits. The social welfare impact and change in health inequality were estimated using the Atkinson index. The distributional cost-effectiveness analysis simulated 316 037 100 individuals from the US population, including 25 subgroups defined by 5 categories of race and ethnicity and population quintiles of social vulnerability, with the fifth quintile representing the most socially vulnerable group. At an opportunity cost benchmark of $150 000 per QALY, treatment was associated with improved population health, adding 28 197 QALYs per year to the US population. Accounting for health inequality preferences (using an aversion level of 11, based on an Atkinson inequality aversion parameter that can range from 0 to infinity, with higher values assigning greater weight to health gains that accrue to the population with the lowest lifetime quality-adjusted life expectancy), treatment was associated with a 0.009% reduction in existing population health inequalities annually. Scenario analyses examining earlier and expanded treatment access suggested a population health improvement of up to 221 358 QALYs. The findings of this economic evaluation suggest that treatment for AD could improve population health and health equity. Policies to enable earlier diagnosis and treatment initiation, as well as expanded access to treatment, may further improve treatment and health equity impacts.

Can Generalized Cost-Effectiveness Analysis Leverage Meaningful Use of Novel Value Elements in Pharmacoeconomics to Inform Medicare Drug Price Negotiation?

ObjectivesDecision makers considering using cost-effectiveness analysis (CEA) to inform health-technology assessment must contend with documented and controversial shortfalls of CEA, including its assumption of disease severity independence and static pricing. ISPOR has recently introduced novel value elements besides direct healthcare cost and effectiveness for the patient, and these should be captured in CEA. Although novel value elements advance our understanding of “what” should be measured (value of hope, severity of disease, health equity, etc), there is limited direction on “how” to measure them in conventional CEA. Furthermore, with Medicare empowered to set drug prices under the Inflation Reduction Act, it is not clear what role CEA might have on where prices are set, given objections to the quality-adjusted life year in conventional approaches. MethodsWe critically reviewed the evidence for expanding conventional CEA methods to a more generalized approach of generalized CEA (GCEA). ResultsGCEA accounts for methods that address objections to the quality-adjusted life year and incorporate novel value elements. Although GCEA offers advantages, it also requires further research to develop “off-the-shelf” resources to help inform, for example, maximum fair price in the context of Medicare drug price negotiation. ConclusionsShould a shift toward GCEA reveal that the societal value of novel medicines exceeds their market-based costs, which will raise the key question of what market failure Medicare negotiation is meant to solve, if any, and therefore what the appropriate role of such negotiation might be to maximize the value society might garner from the development of novel medicines.

Distributional Cost-Effectiveness of Equity-Enhancing Gene Therapy in Sickle Cell Disease in the United States.

Gene therapy is a potential cure for sickle cell disease (SCD). Conventional cost-effectiveness analysis (CEA) does not capture the effects of treatments on disparities in SCD, but distributional CEA (DCEA) uses equity weights to incorporate these considerations. To compare gene therapy versus standard of care (SOC) in patients with SCD by using conventional CEA and DCEA. Markov model. Claims data and other published sources. Birth cohort of patients with SCD. Lifetime. U.S. health system. Gene therapy at age 12 years versus SOC. Incremental cost-effectiveness ratio (ICER) (in dollars per quality-adjusted life-years [QALYs] gained) and threshold inequality aversion parameter (equity weight). Gene therapy versus SOC for females yielded 25.5 versus 15.7 (males: 24.4 vs. 15.5) discounted lifetime QALYs at costs of $2.8 million and $1.0 million (males: $2.8 million and $1.2 million), respectively, with an ICER of $176 000 per QALY (full SCD population). The inequality aversion parameter would need to be 0.90 for the full SCD population for gene therapy to be preferred per DCEA standards. SOC was favored in 100.0% (females) and 87.1% (males) of 10 000 probabilistic iterations at a willingness-to-pay threshold of $100 000 per QALY. Gene therapy would need to cost less than $1.79 million to meet conventional CEA standards. Benchmark equity weights (as opposed to SCD-specific weights) were used to interpret DCEA results. Gene therapy is cost-ineffective per conventional CEA standards but can be an equitable therapeutic strategy for persons living with SCD in the United States per DCEA standards. Yale Bernard G. Forget Scholars Program and Bunker Endowment.

EE449 Use of Novel and Social Elements of Value in Cost-Effectiveness Analyses

In 2018, an ISPOR Special Task Force argued that conventional cost-effectiveness analyses (CEAs) often fail to account for a full range of considerations pertinent to an intervention’s benefits and costs. The panel published a “value flower”, with each petal representing either a conventional or so-called “novel” value element. We sought to characterize the inclusion of novel and social value elements in CEAs.

The impact of conventional cost-effectiveness analysis on pricing dynamics in the market of new medicines: a proposed countervailing approach

ABSTRACT Background Countries using cost effectiveness ratio as a decision tool for price and reimbursement decisions still witness accelerating price increases. The objective of this paper is to propose a change in the application of the incremental cost effectiveness ratio as a criterion for price policy. Research design We develop a model that sets a price for marginal effectiveness equal to the marginal willingness to pay, but it reimburses average effectiveness according to the size of increased QALY gain. Results This new formula also allows to split the economic value of drug between patients and the industry and creates a reward to invest into QALY gains. We show some empirical data of the new prices derived from the application of the new formula, as well as the implications in terms of the consumer and manufacturer´s surplus based on two potential scenarios of the incentives generated by this new formulation. Discussion We propose that small increases in life expectancy be priced differently from substantial as a way of containing the price dynamics. Conclusions A change in the application of the ICER threshold will help to reduce the price pressure on public budgets.

EE462 Value-Based Pricing for Patent-Protected Medicines: Pricing Anomalies in the "Age of Cures” and Their Implications for Dynamic Efficiency

The application of a conventional cost-effectiveness analysis (C-CEA) for the value-based pricing of new medicines has largely ignored the implications of a fixed patent life or data exclusivity period. We believe that this creates several anomalies: 1) C-CEA will produce a different result than an actual CEA that considers generic or biosimilar entry; 2) the pricing of long-term treatments for chronic conditions and “repeated-dose cures” in a free and flexible pricing environment is likely to result in predictable price increases at the end of the exclusivity period that will upset patients and the public; and 3) “one-time administration cures” have the potential to capture a greater share of the consumer surplus over the product lifetime, which may be efficient per se, but also may inadvertently disadvantage the development of valuable long-term therapies for chronic conditions or repeated-dose cures. Emergence of the Institute for Clinical and Economic Review, which is arguably a form of “privately supplied regulation” of US drug prices and relies on C-CEA, may be producing inadvertent anomalies that distort prices and research and development (R&D) incentives. A demand exists for long-term solutions to these issues that would promote dynamically efficient global R&D. More work is needed on 1) the relationship between surplus reward and the amount and composition of global R&D, because we may be as likely to be encouraging excessive R&D in some areas and undersupplying it in others, and 2) the size of the surplus reward to R&D cost and to return on investment.

Evaluating Discrete Choice Experiment Willingness to Pay [DCE-WTP] analysis, and Relative Social Willingness to Pay [RS-WTP] analysis in a Health Technology Assessment of a treatment for an ultra-rare childhood disease [CLN2

Background : Conventional cost-effectiveness analysis [CEA] using cost per QALY thresholds may counteract other incentives introduced to foster development of treatments for rare and ultra-rare diseases. Therefore, alternative economic evaluation methods were explored, namely Discrete Choice Experiment Willingness to Pay (DCE-WTP) and Relative Social Willingness to Pay (RS-WTP), to value interventions for an ultra-rare childhood disease, Neuronal Ceroid Lipofuscinosis type 2 (CLN2). Research Design and Methods Treatment for CLN2 was valued from a citizen’s (“social”) perspective using DCE-WTP and RS-WTP in a survey of 4,009 United Kingdom [UK] adults. Three attributes (initial quality of life, treatment effect, and life expectancy) were used in both analyses. For DCE-WTP a cost attribute (marginal income tax increase) was also included. Optimal econometric models were identified. Results DCE-WTP indicated that UK adults are willing to pay incremental increases through taxation for improvements in CLN2 attributes. RS-WTP identified a willingness to allocate >40% of a pre-assigned healthcare budget to prevent child mortality and approximately 15% for improved health status. Conclusions Both techniques illustrated substantive social WTP for CLN2 interventions, despite the small number of children benefitting. This highlights a gap between UK citizens’ willingness to spend on rare disease interventions and current funding policies.

The History and Future of the “ISPOR Value Flower”: Addressing Limitations of Conventional Cost-Effectiveness Analysis

ObjectivesSince its publication as part of the 2018 ISPOR Special Task Force (STF) on US Value Assessments, the “ISPOR value flower,” with its petals highlighting elements that may be overlooked or underappreciated in conventional drug value assessments, has been discussed and debated. We review the history of the value flower, describe recent developments, and consider implications for future value assessments. MethodsWe discuss various antecedents to the value flower, as well as conceptual and empirical articles published in the past 4 years. ResultsSince the publication of the ISPOR STF report, researchers have provided more rigorous theoretical and mathematical foundations for certain novel value elements (eg, severity of illness, value of insurance, value of hope) through “generalized risk-adjusted cost-effectiveness analysis,” which incorporates risk aversion in people’s preferences and uncertainty in treatment outcomes. Empirical estimates are also emerging to support key elements, such as insurance value, real option value, value of hope, and value of knowing. Although health technology assessment bodies have applied or are considering certain elements (eg, severity modifiers to cost-effectiveness thresholds), other elements have yet to gain traction. ConclusionsFive years after the STF began its work, the development of novel value measures continues to evolve. Although it is encouraging to see supporting empirical studies emerging, more are needed. Additional efforts are also needed to illustrate how the estimates can be used in the deliberative processes that are integral to health technology assessments.

A guide to extending and implementing generalized risk-adjusted cost-effectiveness (GRACE)

The generalized risk-adjusted cost-effectiveness (GRACE) model generalizes conventional cost-effectiveness analysis (CEA) by introducing diminishing returns to Health-Related Quality of Life (QoL). This changes CEA practice in three ways: (1) Willingness to pay (WTP) increases exponentially with untreated illness severity or pre-existing permanent disability, and WTP ends up lower for mild diseases but higher for severe diseases compared with conventional CEA; (2) Average treatment effectiveness should be adjusted for uncertainty in outcomes; and (3) The marginal rate of substitution between life expectancy and QoL varies with health state. Implementing GRACE requires new parameters describing risk preferences over QoL, the marginal rate of substitution between life expectancy (LE) and QoL, and the variance and skewness of treatment outcomes distributions. In this paper, we provide: (1) a generalized WTP threshold incorporating the possibility of permanent disability; (2) a simpler method to estimate the tradeoff rate between QoL and LE, eliminating the need to carry out treatment-by-treatment estimates; (3) a more-general method to adjust WTP for illness severity that permits non-constant relative risk-aversion in QoL; (4) a new approach to estimating risk-preferences over QoL, leveraging established empirical methods from “happiness” economics; and (5) a step-by-step guide for practitioners wishing to implement multi-period GRACE analyses.

Multiple effects health economic evaluation of the Ahead of The Game Study for mental health promotion in sporting club communities

BackgroundThis study evaluates the Ahead Of The Game (AOTG) mental health promotion strategy for adolescent males relative to usual practice in team based sporting club community settings, allowing for joint incremental effects across 13 dimensions and 5 domains alongside intervention implementation costs.MethodsAnalysis is undertaken between matched communities with difference in differences analysis of joint multiple pre-post effect changes alongside implementation costs employing radar plots in cost-disutility space. A robust bootstrapping method allowed including all observed change in effect data from 343 AOTG and 273 control arm participants across 13 effect dimensions.ResultsTriangulation across joint evidence shows mean incremental effects favoured AOTG in all dimensions (10/13 significantly at 5% level) and in simple aggregation to each of five pre-specified 5 domains (each significant at < 1% level) and global measures (significant at 0.001% level), while mean AOTG implementation costs were conservatively estimated as $37.47 per participant.ConclusionThe AOTG strategy was found to represent an effective mental health promotion strategy across all domains and globally with associated significant potential for downstream health system cost savings to offset against modest implementation costs. Evaluation methods extend conventional cost-effectiveness analysis to enable robust joint presentation and triangulation under uncertainty of multiple effect dimensions alongside costs.Trial registrationANZCTR, ACTRN12617000709347. Registered 17th May 2017.

PMU46 Impact of Assumptions Used in Cost-Effectiveness Analysis (CEA) on the Outcomes of CEA across Disease Areas

CEA frameworks have been criticized for failing to accurately assess the value of innovative treatments in populations with high unmet need. We examined the impact of conventional CEA assumptions on treatments for diseases with specific attributes. We identified four key CEA assumptions likely to impact cost-effectiveness of treatments across disease areas: fixed discount rates for costs and benefits, inclusion of routine disease management costs of survival, preference for generic utility instruments, and fixed drug pricing following patent expiry. We developed three cohort Markov models to examine the hypothetical impact of these assumptions in disease archetypes characterized by selected attributes: life expectancy (age of onset, mortality), treatment impact on life expectancy, treatment impact on morbidity, and expected treatment duration. Disease archetypes combining different attributes were modeled and a targeted review of submissions to National Institute for Health and Care Excellence (NICE) 2015-2020 conducted to compare hypothetical results to real-world submissions for conditions representative of modeled disease archetypes, including Crohn’s disease, cystic fibrosis, and acute cancer. Models showed conventional assumptions mandating fixed discounting, no generic pricing, and inclusion of disease management costs resulted in incremental cost-effectiveness ratios (ICERs) 25%-75% higher than if assumptions were relaxed in conditions with long time horizons (long life expectancy, high treatment impact on mortality, long treatment duration), but made little difference to ICERs in diseases with short horizons. Use of generic utility instruments increased the ICER for long-term conditions with high treatment benefit on mortality and morbidity, but had little impact on short-term conditions. Review of NICE submissions confirmed and expanded on these findings. Conventional assumptions in CEA frameworks have a large adverse impact on ICERs in diseases with early onset, lifelong treatment, and high treatment benefits on life expectancy and morbidity compared to diseases without these attributes. Funding: Vertex; Support: Complete HealthVizion.

Cost-Effectiveness of 4CMenB Infant Vaccination in England: A Comprehensive Valuation Considering the Broad Impact of Serogroup B Invasive Meningococcal Disease

ObjectivesThis cost-effectiveness analysis (CEA) of 4CMenB infant vaccination in England comprehensively considers the broad burden of serogroup B invasive meningococcal disease (MenB IMD), which has not been considered, or was only partially considered in previous CEAs. MethodsA review of previous MenB vaccination CEAs was conducted to identify aspects considered in the evaluation of costs and health outcomes of the disease burden of MenB IMD. To inform the model structure and comprehensive analysis, the aspects were grouped into 5 categories. A stepwise analysis was conducted to analyze the impact of each category, and the more comprehensive consideration of disease burden, on the incremental cost-effectiveness ratio (ICER). ResultsMenB IMD incidence decreased by 46.0% in infants and children 0-4 years old within 5 years after introduction of the program. Stepwise inclusion of the 5 disease burden categories to a conventional narrow CEA setting reduced the ICER from £360 595 to £18 645—that is, considering the impact of all 5 categories, 4CMenB infant vaccination is cost-effective at a threshold of £20 000 per QALY gained. ConclusionsWhen considering comprehensively the MenB IMD burden, 4CMenB infant vaccination can be cost-effective, a finding contrary to previous CEAs. This analysis allows policy decision-makers globally to infer the impact of current disease burden considerations on the cost-effectiveness and the comprehensive assessment necessary for MenB IMD. Although this comprehensive CEA can help inform decision making today, it may be limited in capturing the full disease burden and complex interactions of health and economics of MenB IMD.

A multi-criteria support for the cost-effectiveness analysis of health interventions/ Uma contribuição multicritério para a análise de custo-efetividade de medicamentos

The use of multi-criteria decision analysis (MCDA) in the economic evaluation of drugs has been widely discussed. Thus, this study aims to propose a way to enhance the cost-effectiveness analysis (CEA) of health interventions using the PROMETHEE II multi-criteria method. In order to accomplish this, PROMETHEE II was applied to the same data used in the CEA of lipegfilgrastim in the Brazilian healthcare system for the reduction of chemotherapy-induced neutropenia. In this application, lipegfilgrastim and its comparators formed a set of alternatives. The cost parameters used to compute the total costs of the treatments along with the effectiveness outcomes formed a set of criteria, showing that a conventional CEA is in an MCDA setting. The CEA demonstrated lipegfilgrastim as a cost-saving strategy over its comparators. PROMETHEE II generated the following outcomes to contribute to the CEA: (1) a ranking of studied interventions; (2) a classification level for each intervention from A (best level) to E (worst level); (3) a positioning scenario showing the dominance relation and distance among the interventions; and (4) a criteria panel classifying each criterion as strong or weak point for each intervention when compared to the others. The MCDA approach presented in this study does not exclude the use of CEA but complements it to support the decision-making process.

Incorporating Affordability Concerns Within Cost-Effectiveness Analysis for Health Technology Assessment

BackgroundRecent policy developments and journal articles have emphasized a divergence: when interventions are found to be cost-effective but unaffordable. This apparent paradox reflects a conventional practice of cost-effectiveness analysis that does not properly evaluate the opportunity costs of an intervention that imposes non-marginal costs on the healthcare system. ObjectiveTaking the perspective of an exogenously resource constrained decision maker, this paper presents a framework by which concerns for affordability can be appropriately incorporated within cost-effectiveness analysis. MethodsA net benefit framework is proposed where health opportunity costs are estimated for each simulation iteration within each time period. The framework is applied to a hypothetical case study based on the recent experience of the English NHS with new hepatitis C drugs. ResultsUnder the proposed framework, but not under conventional cost-effectiveness analysis, estimates of health opportunity costs differ between scenarios involving different profiles of budget impact even when their net present value, or expected value, are the same. ConclusionsThe framework presented here reflects the importance of the scale of budget impacts along with their uncertainty distribution and time profile. In doing so it resolves issues with the conduct of conventional cost-effectiveness analysis where affordability concerns are not explicitly incorporated.

Novel Approaches to Value Assessment Within the Cost-Effectiveness Framework

Novel Approaches to Value Assessment Within the Cost-Effectiveness Framework

How can we evaluate the cost-effectiveness of health system strengthening? A typology and illustrations

Health interventions often depend on a complex system of human and capital infrastructure that is shared with other interventions, in the form of service delivery platforms, such as healthcare facilities, hospitals, or community services. Most forms of health system strengthening seek to improve the efficiency or effectiveness of such delivery platforms. This paper presents a typology of ways in which health system strengthening can improve the economic efficiency of health services. Three types of health system strengthening are identified and modelled: (1) investment in the efficiency of an existing shared platform that generates positive benefits across a range of existing interventions; (2) relaxing a capacity constraint of an existing shared platform that inhibits the optimization of existing interventions; (3) providing an entirely new shared platform that supports a number of existing or new interventions. Theoretical models are illustrated with examples, and illustrate the importance of considering the portfolio of interventions using a platform, and not just piecemeal individual analysis of those interventions. They show how it is possible to extend principles of conventional cost-effectiveness analysis to identify an optimal balance between investing in health system strengthening and expenditure on specific interventions. The models developed in this paper provide a conceptual framework for evaluating the cost-effectiveness of investments in strengthening healthcare systems and, more broadly, shed light on the role that platforms play in promoting the cost-effectiveness of different interventions.

PHP192 - Drivers of Social Value Exceed Length and Quality of Life: Evidence from Switzerland

In health economics, the valuation of health states is usually based on individual preferences and incremental cost on a per patient basis, excluding potential sources of social value beyond the satisfaction of individual (selfish) preferences. Multi-criteria decision analysis (MCDA) and social cost value analysis (SCVA) have been proposed as alternatives better capturing “other” drivers of value than gains in length and quality of life. Both MCDA and SCVA should be informed by robust empirical evidence on the social preferences of citizens covered by a health scheme. Based on a comprehensive literature review, a Swiss multi-stakeholder consensus (“SwissHTA”), and expert recommendations on valuation principles for ultra-rare disorders, we designed the Social Preferences for Health Care Interventions (“SoPHI”) Study as a discrete choice experiment (DCE) to assess the relative weights of selected attributes of health care interventions, their interaction, and the impact of the level of information on the implications of rarity and cost (potential framing effects). After cognitive and quantitative pretests, the main survey was conducted in Switzerland and enrolled 1,501 respondents, who underwent an initial preference formation phase before participating in the DCE experiment. Attributes tested were health state before and after intervention (separately for length and quality of life), age, prevalence (or “rarity”), and social health insurance premiums as the payment vehicle, which we chose to capture social preferences as “social willingness-to-pay” including risk aversion and caring externalities. The study provides support for the importance of all attributes tested, with change in remaining life expectancy, incremental cost (from a citizens’ perspective), and quality of life improvements being more relevant than prevalence and the age effect observed in the experiment. The SoPHI Study provides empirical support for the contribution to social value by all attributes tested, which contrasts with the assumptions underlying conventional cost effectiveness analyses.

Patient Variability Seldom Assessed in Cost-effectiveness Studies.

Cost-effectiveness analysis (CEA) estimates can vary substantially across patient subgroups when patient characteristics influence preferences, outcome risks, treatment effectiveness, life expectancy, or associated costs. However, no systematic review has reported the frequency of subgroup analysis in CEA, what type of heterogeneity they address, and how often heterogeneity influences whether cost-effectiveness ratios exceed or fall below conventional thresholds. We reviewed the CEA literature cataloged in the Tufts Medical Center CEA Registry, a repository describing cost-utility analyses published through 2016. After randomly selecting 200 of 642 articles published in 2014, we ascertained whether each study reported subgroup results and collected data on the defining characteristics of these subgroups. We identified whether any of the CEA subgroup results crossed conventional cost-effectiveness benchmarks (e.g., $100,000 per QALY) and compared characteristics of studies with and without subgroup-specific findings. Thirty-eight studies (19%) reported patient subgroup results. Articles reporting subgroup analyses were more likely to be US-based, government funded (v. drug industry- or nonprofit foundation-funded) studies, with a focus on primary or secondary (v. tertiary) prevention (P < 0.05 for comparisons). One or more patient characteristics were used to stratify CEA results 68 times within the 38 studies, with most stratifications using one characteristic (n = 47), most commonly age (n = 35). Among the 23 stratifications reported alongside average ratios in US studies, 13 produced subgroup ratios that crossed a conventional CEA ratio benchmark. Most CEAs do not report any subgroup results, and those that do most often stratify only by patient age. Over half of the subgroup analyses reported could lead to different value-based decision making for at least some patients.

Public Values for Health States Versus Societal Valuations of Health Improvements: A Critique of Dan Hausman’s ‘Valuing Health’

Daniel Hausman’s book ‘Valuing Health’ is a valuable contribution to our understanding of QALYs and DALYs and to moving health economics to adopting a broader perspective than that taken in conventional cost-effectiveness analysis. Hausman’s attempt at constructing a public value table for health states without having recourse to data from population preferences studies is also a fascinating read. But I have serious concerns about his resulting table. Hausman’s views on which dimensions of health a benevolent liberal state should care about are essentially not different from what has long been emphasized in health economists’ work on valuations of health outcomes. His table would have been helpful as a sketch if it was the first attempt in health economics to quantify numerically the societal value of different types and degrees of health improvement. But research in the field has gone far beyond that. Multi-attribute utility instruments with much more accurate health classification systems than Hausman’s sketch are now at hand. Available also are models of societal valuations of QALYs that (i) are broadly consistent with general population values, (ii) incorporate wider concerns than Hausman’s table does and (iii) do not have the questionable numerical properties that characterize Hausman’s sketch.

The value of innovation under value-based pricing

ObjectiveThe role of cost-effectiveness analysis (CEA) in incentivizing innovation is controversial. Critics of CEA argue that its use for pricing purposes disregards the ‘value of innovation’ reflected in new drug development, whereas supporters of CEA highlight that the value of innovation is already accounted for. Our objective in this article is to outline the limitations of the conventional CEA approach, while proposing an alternative method of evaluation that captures the value of innovation more accurately.MethodThe adoption of a new drug benefits present and future patients (with cost implications) for as long as the drug is part of clinical practice. Incidence patients and off-patent prices are identified as two key missing features preventing the conventional CEA approach from capturing 1) benefit to future patients and 2) future savings from off-patent prices. The proposed CEA approach incorporates these two features to derive the total lifetime value of an innovative drug (i.e., the value of innovation).ResultsThe conventional CEA approach tends to underestimate the value of innovative drugs by disregarding the benefit to future patients and savings from off-patent prices. As a result, innovative drugs are underpriced, only allowing manufacturers to capture approximately 15% of the total value of innovation during the patent protection period. In addition to including the incidence population and off-patent price, the alternative approach proposes pricing new drugs by first negotiating the share of value of innovation to be appropriated by the manufacturer (>15%?) and payer (<85%?), in order to then identify the drug price that satisfies this condition.ConclusionWe argue for a modification to the conventional CEA approach that integrates the total lifetime value of innovative drugs into CEA, by taking into account off-patent pricing and future patients. The proposed approach derives a price that allows manufacturers to capture an agreed share of this value, thereby incentivizing innovation, while supporting health-care systems to pursue dynamic allocative efficiency. However, the long-term sustainability of health-care systems must be assessed before this proposal is adopted by policy makers.