{"id":11167,"date":"2026-02-02T20:48:11","date_gmt":"2026-02-02T20:48:11","guid":{"rendered":"https:\/\/medical-article.com\/?p=11167"},"modified":"2026-02-02T20:48:11","modified_gmt":"2026-02-02T20:48:11","slug":"how-should-you-price-new-therapies-when-the-standard-of-care-is-not-cost-effective","status":"publish","type":"post","link":"https:\/\/medical-article.com\/?p=11167","title":{"rendered":"How should you price new therapies when the standard of care is not cost effective?"},"content":{"rendered":"

Let\u2019s say that there is a very severe disease\u2014let\u2019s call it horriblitis<\/em>\u2014with
\nsignificant impacts on patient morbidity and mortality.\u00a0 The only available treatment for horriblitis<\/em>
\nis drug called BlackPill.\u00a0 BlackPill improves
\nhealth outcomes by 1 QALY over best supportive care (BSC), but costs $500,000 over
\nthe patient\u2019s lifetime.\u00a0\u00a0 While not cost
\neffective by traditional standards, payers felt that it as unethical to not
\ngive patients with horriblitis BlackPill because of the severity of the
\ndisease.\u00a0 <\/p>\n

Now, a new drug called GreenPill has come to market.\u00a0 GreenPill is twice as effective as BlackPill,
\nproducing 2 QALYs vs. BSC, and only costs $1 more ($501,000 lifetime cost).\u00a0 Should payers cover GreenPill?<\/p>\n

While most HTA bodies and payers would say \u2018yes\u2019, a paper by
\nWalton et al. (2026)<\/a>
\nargues that the answer is \u2018no\u2019.\u00a0 Historically,
\nHTA bodies have operated in an incremental world.\u00a0 Since standard of care is the BlackPill,
\npaying $1 for an extra QALY is a great deal relative to the BlackPill.\u00a0 However, Walton makes the point that
\nBlackPill is not cost effective vs. BSC.\u00a0\u00a0
\nIn fact, GreenPill is not cost-effective vs. BSC ($500,001 extra cost \/
\n2 extra QALYs \u2248$250,000\/QALY).\u00a0 Walton argues that neither BlackPill or
\nGreenPill should be reimbursed.\u00a0 Why?\u00a0 And is this practical?<\/p>\n

The authors claim that incremental cost-effectiveness
\nanalysis rests on the premise that the standard of care (in this case BlackPill)
\nis cost effective.\u00a0 This is not always
\nthe case.\u00a0 To address this issue, the Walton
\nand co-authors propose 3 options: <\/p>\n

Reassess all treatments<\/strong>.\u00a0 The authors argue that in the UK NICE could
\nrepurpose its multiple technology appraisal (MTA) process to periodically
\nre-evaluate all technologies within an indication in a comprehensive guideline
\nand recommend reimbursement accordingly. While possible in theory, this would
\nbe far from practical in reality as many treatments are used without formal HTA
\nevaluation.\u00a0 Reassess all treatments only when new
\ntreatments are introduced<\/strong>.\u00a0 This
\napproach is much more feasible\u2014fewer evaluations to be conducted\u2014but also
\nhighly problematic.\u00a0 First, the
\nevaluation of existing medical innovations would be done in an ad hoc manner
\n(based on whether new treatment is introduced).\u00a0
\nSecond, why would any pharmaceutical firm bring a new product to market with
\nso much uncertainty?Adjust WTP thresholds when current standard
\nof care is cost-ineffective<\/strong>.\u00a0 If the
\nstandard of care was not cost effective, the WTP threshold would be
\nlowered.\u00a0 This is de facto what ICER does
\nwith its \u2018shared savings\u2019 approach.\u00a0 One
\nproblem is that diseases\u2014like our made-up horriblitis<\/em>\u2014that have cost-ineffective
\ntreatments covered are often the most severe diseases.\u00a0 My own research (Shafrin et al. 2025<\/a>) found
\nthat the shared savings approach would target \u201crare, severe, and pediatric
\ndiseases\u201d\u2026however these are exactly the types of diseases we want to create new
\nmedicines for!<\/p>\n

For manufacturers of GreenPill, receiving $501,000 for their treatment may be a good return on investment. However, if GreenPill was compared to BSC, they would only get $300,000 (assuming a $150,000\/QALY threshold).\u00a0 That is a 40% price cut.\u00a0 This likely would mean that pharmaceutical companies would be less likely to develop drugs for disease where the current standard of care is cost ineffective.\u00a0 <\/p>\n

Implementing the regime proposed by Walton and co-authors would
\nbe highly problematic for society.\u00a0 If GreenPill
\nwere never developed, patients would be stuck with the less good BlackPill
\ntechnology (1 QALY gain only) or be relegated to have BSC. Moreover, the analysis
\ndoes not take into account dynamic pricing; it is likely that BlackPill (and
\neventually GreenPill) will become generic drugs and deliver low-cost health benefits
\nfor many years to come.\u00a0 <\/p>\n

While my scenario is hypothetical, this may soon be coming to the UK. The 2025 NHS 10-Year Plan<\/a> grants new NICE statutory powers to withdraw access to cost-ineffective therapies. It\u2019s not clear for which types of therapies (and when) this would be applied. <\/p>\n

I do agree that re-evaluating BlackPill after the initial evaluations is helpful when new information comes to light (e.g., the drug is more\/less effective or more\/less safe based on real world data).\u00a0 This new evidence could serve to increase or decrease the drug\u2019s price.\u00a0 <\/p>\n

If no new information is available,\u00a0 however, and BlackPill was determined to merit
\ncoverage\u2013perhaps due to significant unmet need, diseases severity, etc.\u2014it does
\nnot make sense to relitigate this.\u00a0 If
\nBlackPill was determined to not merit reimbursement, then it is true that GreenPill
\nwould need to have a larger health benefit to be considered cost
\neffective.\u00a0 <\/p>\n

The key question HTA bodies aim to look at is: would
\nreimbursing GreenPill make the world better?\u00a0
\nBecause you can pay only $1 for 1 extra QALY, the answer is certainly
\nyes.\u00a0 Asking whether patients with horribilitis
\n<\/em>deserve to receive any treatment (say with BlackPill) is also a valid
\nquestion, but one that has previously been answers (during the BlackPill review\u2014either
\npositively or negatively). While HTA bodies performing MTA could reduce cost,
\nit would put a significant impediment to innovation as it would lead to significant
\npricing uncertainty and would\u2014de facto\u2014result in HTA decisions being changed
\nwithout new evidence.\u00a0 <\/p>\n

In short, I view the Walton et al. approach as highly
\nproblematic.\u00a0 What do you think?<\/p>","protected":false},"excerpt":{"rendered":"

Let\u2019s say that there is a very severe disease\u2014let\u2019s call it horriblitis\u2014with significant impacts on patient morbidity and mortality.\u00a0 The only available treatment for horriblitis is drug called BlackPill.\u00a0 BlackPill improves health outcomes by 1 QALY over best supportive care (BSC), but costs $500,000 over the patient\u2019s lifetime.\u00a0\u00a0 While not cost effective by traditional standards,…<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-11167","post","type-post","status-publish","format-standard","hentry","category-articles"],"_links":{"self":[{"href":"https:\/\/medical-article.com\/index.php?rest_route=\/wp\/v2\/posts\/11167"}],"collection":[{"href":"https:\/\/medical-article.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/medical-article.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/medical-article.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11167"}],"version-history":[{"count":0,"href":"https:\/\/medical-article.com\/index.php?rest_route=\/wp\/v2\/posts\/11167\/revisions"}],"wp:attachment":[{"href":"https:\/\/medical-article.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11167"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/medical-article.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11167"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/medical-article.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11167"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}