Study: Medicare Drug Spending Lacks Understanding of Cost-effectiveness

Implementation of value-based approaches requires measurement of value, authors said.

A substantial proportion of 2016 Medicare Part D spending was for drugs with no or low-quality cost-effectiveness analyses, according to a recently published study.

In this cross-sectional study of 250 drugs with the greatest Medicare Part D spending in 2016, cost-effectiveness analyses were unavailable for 46%, with these drugs representing 33.0% of Medicare Part D spending. For the 54% of drugs with available cost-effectiveness studies, many of the studies did not meet minimum quality standards.

The lack of quality analyses may present a challenge in efforts to develop policies addressing drug spending in terms of value, study authors pointed out.

These 250 drugs total $122.8 billion in spending in 2016 (84.1% of total spending). Of these 250 drugs, 91 (36.4%) had a generic equivalent and 159 (63.6%) retained some patent exclusivity. There were 280 unique cost-effectiveness analyses for these drugs, representing data on 135 (54.0%) of the 250 drugs included and 67.0% of Part D spending on the top 250 drugs. A large proportion of the studies (250 [89.3%]) did not meet the minimum quality requirements.

Improving the value of spending on prescription drugs may be considered an element of US health policy reforms in the future, and efforts for value-based reforms may be hampered by a lack of cost-effectiveness data, the authors said.

“Much Medicare Part D spending goes to drugs with poor quality cost-effectiveness data, or no cost-effectiveness data at all,” lead author Rebecca L. Tisdale, MD, said in an email. “We used a liberal approach to inclusion of cost-effectiveness studies, so this likely represents an upper limit for cost-effectiveness data availability for these drugs; if, for example, we had limited the studies included to only those looking at the most common indication for a given drug, the availability of these data would be even lower.”

Tisdale is with Stanford Health Policy, Centers for Health Policy/Primary Care and Outcomes Research, Department of Medicine, Stanford University School of Medicine and the Freeman Spogli Institute for International Studies in Stanford, Calif.

Cost-effectiveness studies,Tisdale said, provide a common language and framework to think about the value of a drug. “Since by definition these studies involve comparing some treatment option to another, they help clinicians and policymakers to understand tradeoffs in value between different potential medications or other treatments,” she said.

She said the results of this study could be extrapolated to spending outside of Medicare. “It’s likely that much of many other payers’ drug spending goes to the same drugs as Medicare Part D’s spending. Hence, the lack of value data for these drugs is relevant to many different insurers.”