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Concerns Around Budget Impact Thresholds: Not All Drugs Are the Same
Michael Ciarametaro1, Susan Abedi2, Adam Sohn2
1National Pharmaceutical Council, Washington, DC, USA.
Summary
Fixed product-level spending caps may decrease market efficiency. These caps, independent of drug value, could lead to reallocating significant new drug spending, potentially hindering cost-effectiveness.
Area of Science:
- Health Economics
- Pharmaceutical Policy
Background:
- Budget thresholds are emerging in the US for drug assessments.
- These thresholds trigger budgetary actions when exceeded.
Purpose of the Study:
- To evaluate the advisability of fixed product-level spending caps for biopharmaceuticals.
- To determine if these caps enhance or diminish market efficiency.
Main Methods:
- Systematic examination of 5-year postlaunch revenue for US drugs (2003-2014).
- Forecasting fifth-year revenue using historical data and exponential smoothing.
- Comparing forecasted revenue against a hypothetical $904 million spending cap.
Main Results:
- A $904 million cap necessitates reallocating approximately one-third of new drug spending.
- This reallocation may shift funds to less cost-effective goods and services.
- Significant operational challenges exist in implementing such caps.
Conclusions:
- Fixed product-level spending caps may reduce market efficiency.
- Caps are independent of drug value, posing a significant drawback.
- Operational challenges further complicate the implementation of spending caps.
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