The Swedish drug reimbursement agency (TLV) will accept a (much) higher cost per QALY for certain drugs
A higher cost per QALY will be accepted for drugs targeting severe conditions with very low patient numbers. Meanwhile, mandated price discounts may be applied to drugs with very high sales.
Back in September 2024, I wrote a post outlining that TLV (the agency deciding on the reimbursement of prescription drugs in the Swedish healthcare system) will consider using varying cost-effectiveness thresholds based on patient volumes and sales. The full report from TLV has been published and is now available here (in Swedish).
The background to the proposal is a government ambition to facilitate a higher and quicker access to drugs targeting severe and very rare diseases. While it should be remembered most reimbursement applications for orphan drugs are approved by TLV, there are orphan drugs with negative reimbursement decisions. In some cases, producers may also withhold from applying for reimbursement given that they anticipate a negative decision from TLV due to having a too high price (and an associated too high cost per QALY).
The economic rationale for treating orphan drugs differently
A simple solution for orphan drug producers to make sure to get a positive reimbursement decision would of course be to set a lower price that would imply that they could reach TLV’s cost-effectiveness target. However, the economic argument for (all else equal) higher prices for orphan drugs is that pharmaceutical R&D involves a lot of fixed costs, and with low patient volumes, orphan drugs need to be priced much higher per patient to be able to make sense financially for producers. Thus, the argument is, if the same cost-effectiveness threshold is used for orphan drugs there will not be much investments and innovation in this space.
A counter-argument to the need for higher prices and cost-effectiveness thresholds for orphan drugs is that there are already many other financial advantages associated with orphan drug R&D investments (e.g., various tax benefits). These policies have also contributed to a surge in orphan drug development during the last 20-30 years. So, in many ways, the orphan drug category seems to be doing very well. Still, TLV now seems set on creating a specific pathway for orphan drugs allowing a higher cost per QALY.
TLV to accept a higher cost per QALY for (ultra) orphan drugs
Currently, drugs that are considered to target a very severe condition can typically be priced up to a cost per QALY of 1 million Swedish kronor (approx. 87,000 Euro per QALY). TLV’s new criteria for a drug to be considered for a higher acceptable cost per QALY are:
The drug targets a condition with very few patients in terms of prevalence and incidence
The drug targets a condition with a very high severity
The drug has clear patient benefits in terms of living longer (survival gains) and/or better (QoL gains)
In addition, TLV will consider the uncertainty around the clinical efficacy/effectiveness and allow the highest “premium” on the acceptable cost per QALY for drugs with low uncertainty. Varying the threshold with respect to uncertainty around the evidence is an excellent idea and something TLV should extend to all reimbursement assessments (i.e., all else equal paying more for drugs with less uncertainty). The details on the requirements are spelled out in some detail in the TLV report, although there are still question marks around how some of these factors will be operationalized.
The exact increase in the acceptable cost per QALY for drugs meeting all requirements will be developed over time, but in a seminar presenting the new policy TLV indicated that it may go as high as accepting a cost per QALY of 5 million Swedish kronor (approx. 435,000 Euro per QALY).
Implications for spending
The new policy is expected to lead to an increase in the number of orphan drugs getting a positive reimbursement decisions, and could also lead to generally higher prices in the orphan drug category in Sweden (less incentives for producers to offer discounts or lower “list prices”). To try to counter this increase in drug spending, TLV has also stated that they will start to consider a system with mandated price discounts for drugs with very large patient volumes and sales (e.g., Eliquis and the like).
It is still unclear how TLV plans to implement such a change. In the report it is mentioned that in many other countries this is based on agreements on “hidden discounts” based on sales volume (e.g., mandated x% of discount for sales above a certain threshold, etc.). If this is going to be able to work in a Swedish context, the regions will have to be more keen and willing to enter into (“three-party”) negotiations with producers. As a common critique currently is that regions are quite unwilling to enter into price negotiations to discuss various discounts with pharma companies.
Which drug will be the first to be considered for the higher threshold values?