More on ICER’s Budget Impact Methodology

Date: August 10, 2017

By Peter Neumann, ScD, Director and Josh Cohen, PhD, Deputy Director & Chief Science Officer

Our newly published commentary in Pharmacoeconomics praises ICER’s revised value framework (and the organization itself) on many grounds, but also criticizes it on various aspects, including the manner in which it includes budget impact as a criterion for assessing drug prices (Neumann and Cohen, in press).

Our purpose here is to further elaborate on this point. With regard to budget impact, ICER has maintained that their “value price” now reflects only cost-effectiveness considerations (which they refer to as “long-term value for money”). We recognize that ICER has made the following public statements:

  • The final ICER value-based price benchmark will be a single price based on the price needed to achieve the weighted incremental cost-effectiveness ratio determined by the appraisal committee at the public hearing. (Slide 17, ICER webinar, Value Framework Update)
  • The purpose of our potential budget impact analyses and any “affordability and access alerts” are not to suggest a budget cap on spending for a particular drug, or for drugs as a category of spending in the US health care system. (Slide 25, ICER webinar, Value Framework Update)
  • The ICER value framework is now structured (and depicted) without a formal integration of long-term value for money and short-term affordability. Instead, the value framework suggests that consideration of these two elements is necessary to inform decisions seeking “sustainable access to high-value care for all patients.” (Overview of ICER Value Framework, Feb 1, 2017, pp. 10-11)
  • Rather than try to estimate real-world uptake, ICER will present information that will allow stakeholders to ascertain the potential budget impact of a new service according to a wide range of assumptions on price and uptake. (Overview of ICER Value Framework, Feb 1, 2017, p. 18)

We believe these are positive steps. However, because it retains a threshold ($915 million) against which total spending on a new drug is to be compared, we believe it would be inaccurate to say that ICER has downplayed or eliminated the budget impact constraint (ICER strongly objects to use of the term, “cap” – see Slide 25, ICER webinar, Value Framework Update).

Consider the following passage from ICER’s revised report:

  • Given this goal, ICER will include as part of its final report an “affordability and access alert” if discussion among stakeholders at the meeting of ICER’s independent appraisal committees suggests that utilization driven by clinical need, at estimated net pricing, would exceed the budget impact threshold without active intervention by insurers and others to limit access to the treatment. (Overview of ICER Value Framework, Final report, 2017, p. 26)

That is, ICER’s new approach includes an “affordability and access alert” if “utilization… would exceed the budget impact threshold” (at utilization levels driven by clinical need). In short, exceeding the $915 million budget threshold is a “red flag”. Since the utilization level assumed is at the level of “clinical need,” the inclusion of such an alert implies the need to lower prices to avoid crossing this threshold.

As we emphasized in our piece, budget impact analyses are important and needed and should be calculated and disseminated, and we applauded ICER for advancing debates about affordability. We continue to believe that retaining the $915 million per drug threshold is the issue, whatever terminology is used. New statements and approaches about how the “red flag” is triggered may soften (or obscure) the matter, but the constraint and its impact remain. And our point is that it doesn’t have to: ICER could simply calculate and disseminate budget impact analyses with different assumptions about price, uptake, and time horizon, so that decision makers can draw their own conclusions, based on their own criteria (i.e., without ICER’s $915 million per drug criterion).

A final point regarding the wording in our original commentary: We stated, “This constraint means that spending on any new drug should not exceed $915 million per year, and, if it does, its ‘short-term affordability’ price should be adjusted downward to compensate.” A better way to have phrased this may have been, “This constraint implies that spending on any new drug should not exceed $915 million per year…” The only other recourse to avoid a budget threshold alert would be to reduce utilization, but that would imply withholding the drug from patients with clinical need.

Again, as we say in our commentary we applaud ICER on many grounds and have offered our views as constructive points to add to its worthy goals.

  1. ICER webinar, Value Framework Update: Available here:
  2. Neumann PJ and Cohen JT. ICER’s Revised Value Assessment Framework for 2017–2019: A Critique. Pharmacoeconomics. In Press. 
  3. Overview of ICER Value Framework: Available here:
  4. Overview of ICER Value Framework: Final report. Available here:

More News Articles