The U.S. shouldn’t use the ‘QALY’ in drug cost-effectiveness reviews

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This op-ed by William Smith appeared in STAT News on February 22, 2019.

What’s a year of life worth?

That question is at the heart of a metric called the quality-adjusted life year that is increasingly being used to make decisions about paying for new drugs.

If I was asked that question about one of my children, my answer would be “limitless,” and no one could persuade me otherwise. But others are putting a discrete price tag on it.

Answering how much a quality-adjusted life year (QALY) is worth isn’t a theoretical or philosophical exercise. A number of European health care systems use so-called cost-effectiveness reviews that depend on QALYs to make decisions about which drugs to cover. Since these countries have single-payer systems, these decisions have serious consequences for the patients who might benefit from a new drug. A negative review could literally represent a death sentence.

The QALY methodology places a price tag on the value of living a full year of life in perfect health. Drugs that do not offer a full year of life, or that offer less-than-full quality of life, are rated lower on the QALY scale and may not qualify for reimbursement.

Needless to say, the QALY standard has its critics. I am one of them. As I wrote in a report I created on behalf of Pioneer Institute, I believe there are serious questions that policymakers should ask about the QALY methodology and its impact on patients.

The greatest flaw by far in the QALY methodology is the subjective threshold value attached to a year of perfect health. In the United States, the Institute for Clinical and Economic Review, which conducts drug cost-effectiveness analyses, values one QALY at $50,000 to $150,000. Some European countries use similar arbitrary thresholds.

While some health economists try to justify these values through laborious studies that compare the costs of various medical services, the threshold amount is, at its root, random. In short, the entire superstructure of the QALY methodology is built upon philosophical sand: subjective value judgments.

There are other reasons for people to worry about the use of quality-adjusted life years. A cancer drug that provides “only” eight additional months of life won’t achieve a maximum QALY score. Yet to someone with a cancer treated by that drug who may be facing certain death, a drug that delivers an extra eight months of life should get the highest possible rating. The use of QALYs in the United Kingdom’s National Health Service so limited Britons’ access to new cancer therapies that Parliament ignored the QALY methodology entirely and created a “Cancer Drugs Fund” that would pay for new cancer drugs regardless of their QALY ratings.

QALYs also disadvantage the disabled, who cannot achieve maximum QALY scores because they will never achieve the highest “quality of life.” As the famous advocate for the disabled, former California congressman Tony Coelho, has written: “Because people with disabilities, seniors, and patients with chronic conditions may experience a potential for health that is less than their ‘healthier’ counterparts, treatment that extends or improves their lives may result in fewer QALYs than a treatment developed for a non-disabled or younger population where the treatment is able to return the patient to so-called perfect health.”

One of the most troubling aspects of the QALY system is its potential to quell research into rare disease therapies. In recent years, biopharmaceutical laboratories have been churning out amazing new therapies for rare diseases. In 2017, the FDA approved 80 new indications for so-called orphan diseases, each of which affects fewer than 200,000 people nationwide. In 1983, the year the Orphan Drug Act was enacted, only two such drugs were approved.

The quality-adjusted life year methodology is particularly ill-suited to assess the value of rare disease drugs. New therapies for rare diseases are, for obvious reasons, approved with fewer subjects in clinical trials and predicting the longevity of patients in these trials is difficult. And since these drugs will ultimately have fewer customers, their prices tend to be higher. The QALY threshold represents an arbitrary straightjacket when applied to these unique therapies. There are millions of people waiting for cures whose health and quality of life could be gravely threatened by the use of QALYs. Without access to life-saving treatments, these patients may lose hope that they will ever be able to effectively manage their condition.

Because of controversy surrounding QALYs, Congress banned their use in cost-effectiveness reviews in the Medicare program. Yet the Institute for Clinical and Economic Review continues to market QALYs as a useful tool for Medicaid, commercial health plans, and pharmacy benefit managers. For policymakers who wish to make thoughtful decisions about the use of QALYs, Pioneer Institute has produced a list of questions to be considered before adopting this methodology.

The United States is the premier destination for non-Americans who find themselves with challenging illnesses. U.S. policymakers should not import drug decision policies from nations that are not similarly visited.


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