Editor's note: This article was updated on December 11.

Have you heard of the Institute for Clinical and Economic Review (ICER)? If not: pay attention. The nation's self-proclaimed "independent watchdog on drug pricing," which seeks to define the cost-effectiveness of new therapies, has influenced several high-profile biopharma manufacturers' decisions to lower U.S. list prices. They've also informed a growing number of decisions about which treatments payers and PBMs will cover. And, most importantly, ICER has started a national conversation among manufacturers, payers, providers, and patients about how we define and measure treatment value in this country—achieving this without any government or regulatory influence.

4 'elephants in the room' hindering health care's drive toward value

What is ICER?

ICER is a nonprofit research organization wholly focused on lowering drug prices in the United States. It was founded in 2006 by Dr. Steve Pearson, an ethicist from Harvard Medical School, but it started to grow in scope and influence in 2015 after receiving financial backing from billionaire John Arnold. Although today ICER receives membership-based funding from variety of payers and pharmaceutical companies (e.g.,  Harvard Pilgrim Health Care, CVS-Caremark, AstraZeneca, Genentech), the Arnold Foundation, run by John and Laura Arnold, still provides 69% of ICER's funding.

To advance its mission, ICER publishes reports evaluating whether a drug's price aligns with the value it offers to patients. By assessing both clinical and economic evidence, ICER's researchers arrive at a "value-based price benchmark" for each drug—a target price range based on the amount of incremental quality of life or life-extending benefits a typical patient gains from the therapy. This analysis also considers risks and detrimental side effects. Similar to the NHS' National Institute for Health and Care Excellence (NICE) in the U.K., ICER uses a formula based on quality-adjusted life years (QALYs), which generates an estimated dollar benefit for a drug, and then compares this number to the drug's actual list price.

After publishing a draft report, ICER solicits feedback and additional evidence from life science manufacturers, payers, providers, and patients to guide any revisions before publishing its final assessments. ICER does not accept funding to perform reviews of specific drugs or technologies. Rather, research topics and product assessment categories come from public recommendations, market scans, and the organization's collaboration with IPD Analytics (an independent for-profit company that provides insight into intellectual property protections and emerging drug pipelines).

ICER is expanding its influence across the life sciences industry

Until recently, most publicity about ICER originated from the organization directly. Early in its development, ICER established a well-oiled and proactive PR machine. Its reports, analyses, and opinions on value were known to biophama and payers, but few health care leaders outside these circles knew or cared much about them. Today, hardly a week goes by without ICER's latest assessments getting mentioned in a wide variety of health care media and consumer finance channels. As it has published more reports about high-cost, high-impact new therapies, like Novartis' Zolgensma or Johnson & Johnson's Spravato, ICER has quickly become a household name to anyone actively participating in conversations about health care costs and value, including providers, patients, and policymakers.

As a result, payers are increasingly looking at ICER reports to inform drug coverage decisions and formulary designs. CVS Health's commercial plan clients can now use ICER reports to trigger a formal re-review of a drug in a competitive therapy class, potentially excluding certain drugs from their formulary if prices exceed ICER's benchmarks. The Department of Veterans Affairs partnered with ICER for drug-price negotiations in 2017. Unless the regulatory policies guiding drug approval and pricing change substantially in the near future, we expect to see more regional and national payers partnering with ICER in similar ways in 2020 and beyond.

We've moved from an ICER-led monologue to an actual dialogue about value

To date, only a third of ICER's reports find a treatment to be cost effective and fairly priced. At first, most pharmaceutical firms reacted—pumping out statements about their drugs' clinical benefits and financial assistance programs. Some have gone so far as to fund digital campaigns questioning whether ICER's QALY methodology values all patients equally. However, while any ICER report questioning a drug's list price certainly puts pressure on its manufacturers, we've also noticed an uptick in the number of pharmaceutical companies open to working with ICER proactively in order to set more value-aligned prices. For example, Novartis set the price of its lifesaving gene therapy Zolgensma within the benchmark range suggested by ICER. Amgen and Novartis priced their migraine treatment, Aimovig, at $6,900—right in line with ICER's recommendation—even though Wall Street analysts predicted that manufacturers could have priced it between $8,000 -$10,000 a year.

ICER has also shown a willingness to evolve its own methodology in response to cross-industry feedback and criticism. It recently announced that its 2020 Value Framework will incorporate real-world evidence, create processes for re-evaluating evidence, and develop a new methodology to evaluate transformative (likely high-cost, curative) therapies. In addition, ICER is modifying its processes for soliciting evidence to be more formal and transparent in response to the complaint that many manufacturers don't know how their data are incorporated into ICER's value models.

More recently, ICER showed a willingness to revisit published reports in light of new evidence, stakeholder criticism, and more nuanced understanding of a drug or disease. For example, ICER pulled its original report on AbbVie's Rinvoq only one week after publishing it, acknowledging that some of its assumptions about patients' treatment costs were flawed.

So rather than picking sides in an "ICER vs. Pharma" battle, we must recognize that ICER's evolution is both shaping and being shaped by the life sciences industry. As its frameworks and opinions gain more traction in industry circles, the conversations are likely to draw in more payers, providers, patient advocacy groups, and policymakers. Manufacturers' increasing willingness to cooperate with ICER to set more value-aligned prices, and ICER's willingness to incorporate cross-stakeholder criticisms into each revision of its value framework will continue to shape cross-industry conversations about how we define and measure value.   

A potential next step for ICER: Help match right treatment to right patient

Currently, ICER's value-based price benchmarks are determined for patient populations at large. Its assessments rarely look at relative value or cost-effectiveness of treatment impact on patient subpopulations outside of narrowly defined clinical indicators (e.g., LDL levels.) At this point, ICER does not emphasize how certain subsets of patients (e.g., those with co-morbidities or certain demographic characteristics) may benefit disproportionately from different therapies. Granted, most manufacturer-led clinical trials offer limited insight into potentially meaningful demographic differences, but it is an area of growing public interest. Regardless of current data limitations, it's not surprising that many patient organizations are pushing back against ICER's reports. For example, Alliance for Aging Research argues that ICER reports could lead to discrimination against sick and older patients by denying them access to medications.

Other questions will shape ICER's future impact on the health care industry, including:

• If the United States adopts a single-payer system, or even a public option, is it more likely to rely on an independent third party to conduct cost effectiveness analysis? If so, might ICER serve that role?
• How will ICER's value assessment methodologies adapt to increasingly personalized therapies (e.g., precision medicine, CAR-T, gene/cell therapy) with high individual benefit but limited evidence of population-wide impact?
• How will ICER's drug price assessments change as more alternative payment models (e.g., "Netflix" subscription models or mortgage-like pricing) take hold?

ICER is not the only one weighing in on conversations about medical product value.

ICER is just one example of a health technology assessment organization (HTA)—for-profit and nonprofit organizations that evaluate a drug, device, or diagnostic's clinical and financial evidence, conduct a cost and benefit analysis, and opine on the value of clinical technologies.

Advisory Board has identified 13 other U.S. HTAs in addition to ICER, all of which are starting to influence payer, provider, and manufacturer conversations about medical product value. Some of these mark a new generation of HTAs which are incorporating a more expansive set of clinical and financial inputs, enabling flexible weighting of cost drivers, and integrating their models into purchaser workflows.

Prepare for the rising influence of US Health Technology Assessments

If you are a life sciences medical, HEOR, or market access leader, this report will tell you which HTAs should be on your priority watchlist, and it offers guidance as to how your organization can best engage. If you're interested in learning more about our HTA research or participating in our ongoing cross-industry research on value, let us know by taking this survey, or emailing us directly at divackp@advisory.com.