Good Research Practices for Measuring Drug Costs in Cost Effectiveness Analyses: Issues and Recommendations

Published Jan 2010


Hay JW, Smeeding J, Carroll NV, et al. Good Research Practices for Measuring Drug Costs in Cost Effectiveness Analyses: Issues and Recommendations: The ISPOR Drug Cost Task Force Report-Part I. Value Health 2010;13:3-7.


Objectives: The assignment of prices or costs to pharmaceuticals can be crucial to results and conclusions that are derived from pharmacoeconomic cost effectiveness analyses (CEAs). Although numerous pharmacoeconomic practice guidelines are available in the literature and have been promulgated in many countries, these guidelines are either vague or silent about how drug costs should be established or measured. This is particularly problematic in pharmacoeconomic studies performed from the “societal” perspective, because typically the measured cost of a brand name pharmaceutical is not a true economic cost but also includes transfer payments from some members of society (patients and third party payers) to other members of society (pharmaceutical manufacturer stockholders) in large part as a reward for biomedical innovation. Moreover, there are numerous and complex institutional factors that influence how drug costs should be measured from other CEA perspectives, both internationally and within the domestic US context. The objective of this report is to provide guidance and recommendations on how drug costs should be measured for CEAs performed from a number of key analytic perspectives. Methods: ISPOR Task Force on Good Research Practices—Use of Drug Costs for Cost Effectiveness Analysis (Drug Cost Task Force [DCTF]) was appointed with the advice and consent of the ISPOR Board of Directors. Members were experienced developers or users of CEA models, worked in academia, industry, and as advisors to governments, and came from several countries. Because how drug costs should 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. The ISPOR Task Force on Good Research Practices—Use of Drug Costs for Cost Effectiveness Analysis (DCTF) subgroups met to develop core assumptions and an outline before preparing six draft reports. They solicited comments on the outline and drafts from a core group of 174 external reviewers and more broadly from the membership of ISPOR at two ISPOR meetings and via the ISPOR web site. Results: Drug cost measurements should be fully transparent and reflect the net payment most relevant to the user’s perspective. The Task Force recommends that for CEAs of brand name drugs performed from a societal perspective, either 1) CEA analysts use a cost that more accurately reflects true societal drug costs (e.g., 20–60% of average sales price), or when that is too unrealistic to be meaningful for decision-makers, 2) refer to their analyses as from a “limited societal perspective.” 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 typical or average discount that preserves this confidentiality. Conclusions: Drug transaction prices not only ration current use of medication but also ration future biomedical research and development. CEA researchers should tailor the appropriate measure of drug costs to the analytic perspective, maintain clarity and transparency on drug cost measurement, and report the sensitivity of CEA results to reasonable drug cost measurement alternatives.

Keywords: cost effectiveness analysis, drug costs, drug research and development, health-care market segmentation, health-care reimbursement, payer perspective.

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