The Zero-Price Conundrum: Exploration of Scenarios Where a Clinically Effective New Drug Might Not Be Cost-Effective at Zero Price

• Published in: Value in health Vol. 26; no. 3; pp. 384 - 391
• Main Authors: Mladsi, Deirdre, Barnett, Christine L., Mader, Gregory, Russell-Smith, T. Alexander, Unuigbe, Aig, Bell, Tim
• Format: Journal Article
• Language: English
• Published: United States Elsevier Inc 01.03.2023
• Subjects: Cost-Benefit Analysis; Cost-Effectiveness Analysis; drug pricing; Health Care Costs; Humans; value attribution; zero price; drug pricing; zero price; value attribution
• DOI: 10.1016/j.jval.2023.01.004
• ISSN: 1098-3015

The zero-price conundrum occurs when a clinically effective drug can justify no greater than a price of zero based on cost-effectiveness criteria from a health system perspective. This is relevant for health systems that require evidence of cost-effectiveness, in addition to safety and efficacy for drug approval and other analyses that may shape drug coverage policies, such as budget impact and comparative effectiveness. This study aimed to clarify and explore the zero-price conundrum to provide a resource in the development of practical and methodological solutions. We specified equations representing previously identified zero-price scenarios and used them to elucidate factors contributing to the zero-price conundrum and explore relationships between them. We present real-world considerations and discuss solutions from the literature. The analyses demonstrated that a primary cause of the zero-price problem for a new drug that increases quality-adjusted survival pertains to healthcare costs beyond the influence of the new drug, specifically, disease background costs, costs of existing drugs used in a combination regimen, and costs of future health interventions patients may become eligible to receive. Pragmatic solutions have been to exclude such costs from cost-effectiveness analyses. Proposed modifications to cost-effectiveness analysis include assessing each drug in a combination regimen based on its relative contribution to improved health. The zero-price dilemma may arise more frequently as the number of drugs in high-cost disease areas continues to grow. As cost-effectiveness methods evolve, there is the opportunity to develop robust solutions that can be applied consistently. •Drugs that increase quality-adjusted survival might not be cost-effective even at a price of zero because of costs beyond the influence of the drug.•The zero-price conundrum is relevant for healthcare systems that require evidence of cost-effectiveness at a given price, in addition to evidence of safety and efficacy for drug approval, and other analyses that may shape drug coverage policies, such as budget impact and comparative effectiveness.•Some proposed modifications to cost-effectiveness analysis include excluding disease background costs and assessing each drug in a combination regimen based on its relative contribution to improved health.