Overview of Challenges With Using Cost-Effectiveness Analysis for Evaluating Medications

Countries such as Australia with universal healthcare perform cost-effectiveness evaluations of new prescription medications. In the United States, there is no assessment of cost-effectiveness analysis at the national level with the notable exception of the Advisory Committee on Immunization Practices that evaluates vaccines. The purpose of this paper is to provide an overview of the challenges of using cost-effectiveness for evaluating medications with an emphasis on the United States health care system. Cost-effectiveness analysis involves the value of a health outcome expressed in terms of cost relative to natural units or relative to utility measurements such as quality-adjusted life-years. Besides the assumptions underlying all cost-effectiveness analysis, there are challenges in appropriately assessing the cost and utility parameters. A major concern limiting the use of cost-utility analysis is that people with worse health due to age, disability, or co-morbidities always have lower utility values than an otherwise healthy patient with the same disease since the utility variable is calculated by the product of life-years and health utility weight. This had led to calls for revisions of cost-utility analyses, but characterizing the utility value is only one of several challenges with performing economic evaluations of medications in the absence of a single-payer system in the United States. Multiple criteria decision analysis is currently being used by the Food and Drug Administration (FDA) to provide information beyond modifications to the cost-effectiveness metric by taking into account multiple criteria and perspectives but controlling drug costs requires system-wide changes.