Price effectiveness analyses (CEA) purpose to look at how a brand new well being applied sciences affect well being outcomes and prices over a affected person’s lifetime. Whereas extrapolating long-run well being advantages and measuring potential price offsets are vital, one other vital merchandise to estimate is how the price of the brand new well being expertise is prone to evolve over occasions. That is notably related for prescribed drugs.

Whittington et al. (2024) write:

A drug’s web value typically will increase following launch and will later fall as rivals enter the market. Costs often fall extra noticeably after the drug loses exclusivity and generic substitutes change into obtainable. Nonetheless, CEAs up to now have hardly ever accounted for these prospects and as an alternative assume {that a} drug’s value stays fixed over time.

Why is it vital to include dynamic pricing? FDA estimated that generic medicine authorized in 2022 yielded $18.9 billion in complete financial savings in the course of the 12 months after their approvals.

…a CEA evaluating a brand new drug to a reasonable different can overstate the brand new drug’s added price over its life cycle if it assumes that the drug’s introductory value will persist indefinitely. By neglecting to regulate for the “downstream” drop in value, the CEA could incorrectly counsel the brand new drug represents unfavorable worth. Importantly, assumptions about drug value dynamics also needs to apply to comparator therapies in an evaluation. Assuming no change in comparator drug costs can overstate the worth of the brand new drug if the comparator therapy is nearing its lack of market exclusivity. A static drug pricing assumption fails to account for anticipated financial savings from the genericization of the choice therapy…
Nonetheless, 95 p.c of printed CEAs, together with these performed by ICER, assume that drug costs stay fixed of their base case.

The necessity for dynamic pricing is especially vital when evaluating pharmaceutical to non-pharmaceutical well being applied sciences.

…omitting anticipated value declines could make a drug look no extra enticing than an equally efficient non-drug intervention (for instance, surgical procedure) with the identical preliminary value, although value declines following lack of exclusivity imply that the drug (not like the surgical procedure) can be cheaper over the long term.

The commentary continues by including that IRA has make the trajectory of drug pricing extra predictable as a result of (i) value will increase are restricted to inflation and (ii) IRA permits CMS to barter chosen medicine earlier than lack of exclusivity.

To learn the authors suggestions for incorporating dynamic pricing into CEA, you possibly can learn the total article right here.