Preparing to launch a late-stage clinical trial for an experimental psoriasis medication, the company approached the National Institute for Health and Clinical Excellence (NICE) with an interesting idea: How could it design the study to gather the data NICE needed to evaluate the cost-effectiveness of the drug?

“We had proof-of-concept data,” says Joseph Jimenez, chief of pharmaceuticals at the Swiss pharma giant, “but we had not yet designed the phase 3 trial. So we asked, ‘What evidence would you need to see when we come with the full clinical package of results to be able to recommend that this be reimbursed on the U.K. market at a particular price, based on the risk/benefit profile?’

“They looked at the benefit of the drug, what it could do for patients, and costs that could be avoided downstream, and NICE was able to come back to us with very valuable and clear information on what they would need to see. And that enabled us to design the phase 3 [trial] in a way that could answer some of those questions.”

Jimenez isn’t about to let all the details out of the bag for the competition to see, but he’s clear that in a world in which third-party payers are taking a hard look at the therapies they’re paying for, the earlier you start making your case for cost-effectiveness, the better chance you’ll have of getting approval for reimbursement.

That view does not stop at the borders of the United Kingdom.

Australia and other countries have signaled their interest in the test pilot study. It also could play a role in the United States, says Jimenez, where there are a variety of public and private payers to court.

And this is one trend, adds Jimenez, that can only swell in significance with time.

“I do believe that this will spread and will benefit pharmaceutical companies, payers, and reimbursement agencies, providing more of a complete package of cost/benefit analyses,” he says.

In the United States, lawmakers are gearing up for a war of words over new legislation that could provide billions of dollars for a new institute devoted to comparative effectiveness studies. And even without such an institute, Medicare has signaled that it wants more data that will help it make value-based reimbursement decisions.

When Norwalk, Conn.-based IMS Health toted up its “Harbingers of Change” report this year, senior analyst Murray Aitken focused on the explosive potential effects of a $16 million National Eye Institute head-to-head study comparing the efficacy of bevacizumab (Avastin) and ranibizumab (Lucentis) in treating wet age-related macular degeneration (AMD).

Genentech developed both drugs, establishing bevacizumab as one of the most effective new cancer therapies to hit the market in years, and then took ranibizumab — a derivative of the drug — through some expensive clinical trials for treating the eye disease. But bevacizumab is still used off-label for wet AMD at a fraction of the cost of ranibizumab. If the new clinical trial —which wraps up in 2010 — proves that bevacizumab is just as effective as ranibizumab, IMS says Genentech can expect changed sales for ranibizumab.

The impact of that would show up swiftly, right on the company’s bottom line.

Ranibizumab is pricey — up to $2,000 per injection, compared with a paltry $45 to $70 per treatment with bevacizumab.

“For developers of technologically advanced but expensive new biotech therapies, this should be seen as a warning shot,” Aitken wrote. “The United States will no longer categorically accept the pricing of these therapies. Given that the United States is disproportionately important for the sales of these specialist therapies, and that the payer environment in all other markets is distinctly tougher, this is not good news for pharmaceutical companies developing such products —especially if less expensive products on the market offer treatment alternatives.”

The U.S. Agency for Healthcare Research and Quality (AHRQ) set out five years ago to start mounting comparative effectiveness studies, acting on a section of the Medicare Modernization Act. The agency also has been studying the metrics used in cost-effectiveness analyses.

“If you look at the literature, there’s a lot of investigator choice,” says AHRQ researcher Bill Lawrence, MD. “Do you use quality adjusted life years [QALYs], and how do you do it? How do you get the costs? We’ve been working on the methods, working to standardize how these things are done, so when you look at analyses in the literature, it’s comparable.”

As a government agency, AHRQ is careful to steer clear of policy disputes, like the one brewing over a national institute for comparative effectiveness studies. But you don’t have to go far to find critics of any proposal that includes making decisions on cost-effectiveness as part of its mandate.

“A national institute ought to be focused on clinical effectiveness,” says Gail Wilensky, PhD, the onetime chief of Medicare and Medicaid, now a senior fellow at Project Hope. CMS, she says, “should do cost-effectiveness analysis along with insurers who can band together, such as Blue Cross and Blue Shield.” But cost-effectiveness, she adds, is too controversial for a new institute to take on.

“I feel that cost-effectiveness information should be used but primarily for reimbursement rather than coverage decisions. I don’t assume that it will be a unitary decision. While private payers may follow the lead of Medicare, they should be able to do otherwise, as they also sometimes do.”

By all means, let a new institute gather data that payers can use for cost-effectiveness analysis, she adds. But let the payers reach their own individual conclusions. And don’t expect uniformity in a field where no one marches in lock-step formation.

“You tend not to see cost-effectiveness at the table in the major initiatives going on,” says Neumann, director of the Center for the Evaluation of Value and Risk in Health at the Institute for Clinical Research and Health Policy Studies, at Tufts Medical Center in Boston. “There’s still skepticism — maybe confusion — whether we could do cost-effectiveness even if we got over the political hurdles.”

Three years ago, Neumann outlined the need for more cost-effectiveness research in his book, Using Cost-Effectiveness Analysis to Improve Health Care. While there’s been no revolution in the field in the United States since then, Neumann says there has been a distinct shift in tone as some cost-effectiveness research begins to stream into the healthcare arena. Part of that information is coming from the cost and value data that the Academy of Managed Care Pharmacy (AMCP) has encouraged health plans to request from drug companies, aka the AMCP Format for Formulary Submissions.

“There is not yet enough documented evidence about its impact, but it appears to be influential,” says Neumann of the AMCP initiative. Cost-effectiveness data are “informing decisions about tiering for drugs, informing clinical guidelines at some level, and we do see more of the health plans adopting the AMCP format guidelines. Well-Point is a leader here, saying ‘We’re going to use cost-effectiveness and we’re going to start requiring it.’ That’s new. The field is moving forward, and there are some signs of progress — but there is still controversy.”

Big MCOs “are now in the game,” he adds. There are some groups that know how to do this — evaluating economic studies and receiving AMCP dossiers and looking at them.”

Further complicating the move to cost-effectiveness analysis, though, is the debate about analytical standards.

There has been a growing stack of statements and position papers on the broad use of cost and benefit analysis, Neumann says. But there has also been some pushback on the use of key metrics, like QALYs. In Germany’s draft guidelines, for example, officials have rejected QALYs in favor of alternative “efficiency” measures.

“Take HIV/AIDS as an example,” he says. An efficiency standard would call for treating people with HIV/AIDS with the best, most cost-effective strategy for managing this condition, but would not directly compare a drug for HIV with a drug for, say, depression, using a metric such as QALY. For diabetes, rather than using QALYs, there might be a comparison of alternative strategies on the basis of incremental costs per unit of blood sugar controlled. It’s a technical debate, but it’s an important one.”

And it’s always a very sensitive debate, especially when a variety of payers are expected to reach individual conclusions that could easily upset patient groups.

“It seems to be hard to do cost-effectiveness in a big way without a single-payer system,” says Neumann. “No private plan wants to be the one to deny something ... to say ‘We’re not going to pay for that thing that works but is not cost-effective.’” With NICE, you can have that conversation. There’s a collective buy-in with a single national system. And in the United Kingdom, there’s a tradition of health economists — capable practitioners of this craft — arguing this for many years.”

“When it comes to an organization such as NICE, proof of concept, quality, safety, efficacy, are all absolutely necessary, but not sufficient,” she adds. “We’re also looking for effectiveness comparators; how does this new technology look up against technology already being used?”

And it won’t stop with Novartis’ psoriasis drug. Other developers are talking to NICE about following suit.

It all boils down to whether it’s a good product that works and works well against what’s out there, Longson says. “And then there’s whether the extra value in clinical terms is worth the extra cost that is being presented to you.”

How that works in the United Kingdom, though, isn’t easily translated to the U.S. healthcare system.

“There would be some aspects of the framework you use to establish value that are transferable,” says Longson, “but there are other things that wouldn’t be.” Some aspects of the process can be generalized, but there are issues specific to each country that could influence the cost-effectiveness of a therapy.

For example, she says, “The way that clinical care is delivered has a very big impact on comparative effectiveness. How long people stay in hospital might be very different across countries, and that could have a very big impact.”

From Jimenez’s perspective, this is one trend that rightfully belongs in the hands of the manufacturers.

“I think it’s best left to the drug developers, because the onus is on us to prove to the payers that our drugs are safe, effective, and cost-effective. To the extent payers are conducting comparative effectiveness analyses, there will be questions about the study design. Are those trials truly going to measure safety and effectiveness if they’re not fully developed by entities that have many years of experience designing trials?”

However, she continues, it is crucial to present the right evidence in the right way. That, she says, “is why we think it is important to enter into early dialogue with drug developers about the types of evidence we need, so that they can incorporate this into their development plans.”

The emphasis for Novartis is on intelligent design, says Jimenez. By incorporating the work into a planned study, the advice from NICE was used in a way that makes sense.

“In this case, we were able to [make minor modifications] to the phase 3 trial design in a way that didn’t change the cost but answered questions that NICE had,” says Jimenez. If the changes had added to the amount of time and cost of developing the therapy, then it would not have been nearly as appealing.

It’s not really a surprise that cost-effectiveness studies are controversial in the United States, says Aitken, at IMS. When you analyze the relative costs of a therapy, it inevitably brings up the notion of rationing — a “third rail” issue that government won’t want to touch.

“We don’t want to believe that we have to ration healthcare,” says Aitken. “The reality is that we do ration healthcare but just don’t do it in a very transparent way.

“That third rail issue is very deeply ingrained in the United States. This is a big issue in the United States, and it will take a long time to sort it out.”

But it is happening, and as pharma companies try to get ahead of the issue, they will continue to advance ideas like early dialogue with NICE. Third-party payers also will press forward steadily, seeking more evidence of the actual value of what they are covering.

“It’s going to happen one way or another,” Aitken says. “This pressure between budgets and innovation coming into the market is going to continue. Payers are looking to be more creative in how they can bring evidence to bear on pricing and access levels to members. So, too, pharmaceutical companies are looking to build up ever-greater evidence of the value of their medications. Pharma companies want to be sure they are on the front end of the curve in developing the case for their products — to develop the value proposition based on solid evidence and to be communicating that ever more effectively.

The demonstration of cost-effectiveness, he says, “is still an emerging art form. There are still significant variations and debate about the appropriate way it should be done. And this is going to continue to evolve.”