You know back in the olden days when a foot of measurement was actually the measure of your own foot? So, I might measure something and it’s, like, 19 feet. And then you measure the same exact thing and it’s 38 feet because you have tiny feet. This is the analogy that kept running through my mind as I was talking with Anna Kaltenboeck in this health care podcast about QALYs to measure the value of drugs. In this metaphor, QALYs are the ruler so that 1 foot of drug value is the same for everybody and all drugs. It’s very civilized as a concept if you think about it.
QALY stands for quality-adjusted life year. The goal of a QALY is to figure out how much any given drug is worth to a society so that we, as a society, have a benchmark to evaluate the price of pharmaceutical products. QALYs are an apples to apples or a foot to foot way to compare the value of drugs for we the people. I mean, is this drug amazing and we should all pay a lot for it? Or is the drug more expensive than the current standard of treatment and it doesn’t confer any added benefit to patients? It’d be good to know that as a patient and as a payer and, frankly, as a pharma company.
QALYs offer a framework for levelheaded discussions. It’s complicated. I’m gonna take the risk of oversimplifying, but here’s how I’d explain the three parts in a QALY measurement, which combines measure pharmaceutical value.
The first part is, if relevant, how much additional survival can be expected with this drug? So, if it’s an oncology drug, for example, how much longer will the patient live? The second part of a QALY is, how does the drug make the patient feel? So, in an ideal world, survival is long and the patient feels super great. So, some economists and scientists get together and they do some math and they come up with the sum of these first two factors. Then the third part of a QALY calculation is the cold hard cash. How much is society willing to pay for this improvement in survival, in quality of life? This last part will depend based on the society (ie, the country) and also the condition. We’re willing to pay a lot for a drug that helps blind people see. We might be not so willing to pay a whole lot for a drug that lowers blood pressure marginally, for example.
My guest in this health care podcast is Anna Kaltenboeck. She is a health economist and program director for the Drug Pricing Lab at Memorial Sloan Kettering. She knows a lot about QALYs.
One last thing: ICER is the Institute for Clinical and Economic Review. It is an independent and nonprofit organization who creates a lot of these QALY assessments. Whether they succeed or not is something that is sometimes questioned, but the team over at ICER prides themselves in not working for Pharma and not working for payers in an effort to be as impartial as possible.
You can learn more at drugpricinglab.org.
Anna Kaltenboeck is the senior health economist and program director for the Center for Health Policy and Outcomes and the Drug Pricing Lab at Memorial Sloan Kettering Cancer Center (MSKCC). She focuses on the development and application of reimbursement methods for prescription drugs that reduce distortionary incentives in the supply chain and encourage pricing of treatments based on their value. Her work centers on developing an unbiased evidence base that characterizes the effect of federal policies on coverage and reimbursement decisions for branded specialty drugs and cell and gene therapies and identifying opportunities for policy changes that encourage affordability and access while maintaining incentives for innovation. Her current research interests include global comparisons of reimbursement policy and supply chain regulation, game theory in innovation decisions, and the effect of market concentration on pricing decisions.
Ms. Kaltenboeck’s research and policy work is informed by her experience as a consultant for pharmaceutical clients. Prior to joining MSKCC, Ms. Kaltenboeck spent 10 years working for Analysis Group and IMS Consulting Group, where she conducted health economics and outcomes research and developed pricing and market access strategies for pharmaceutical and diagnostic products.
She has published numerous articles in peer-reviewed journals and other press, including JAMA and Morning Consult, and speaks frequently on the topics of value-based pricing, economics of the supply chain, and reimbursement models. Ms. Kaltenboeck holds bachelor’s and master’s degrees in economics from Tufts University.
3:56 What is a QALY?
05:28 “You don’t get marks; it’s the treatment that gets the marks.”
09:13 What is willingness to pay?
10:52 “What we pay for drugs should be reflected in societal preference.”
12:29 Does Pharma fear the QALY?
15:38 “At the end of the day, the ideal here is simply to be able to quantify ‘This is what we’re going to pay for this additional benefit that we’re going to provide for patients.’”
17:09 “When you meet that price, patients should be getting access to that product.”
19:27 What are the significant advances being seen with QALYs and drug development?
21:23 “The challenge is when the price is so much higher than those benchmarks.”
22:27 How do we use the QALY as a tool?
25:56 Where does value-based pricing fall in the world of QALYs?