U.S. drug pricing watchdog gets funding to expand efforts

(Reuters) - A U.S. independent nonprofit organization that evaluates the clinical and cost effectiveness of new medicines said on Tuesday it has received significant new funding that will enable it to greatly expand its work.

The Boston-based Institute for Clinical and Economic Review (ICER) announced a three-year, $13.9 million grant from the Laura and John Arnold Foundation, which follows its initial two-year $5.2 million award from the foundation in 2015.

The new funding comes at a time of increased scrutiny among politicians and insurers over the high cost of new prescription medicines in the United States, especially in comparison with other countries, and steep price hikes of some older generic medicines faced with little competition.

ICER has previously issued reports outlining what it believes to be an appropriate cost for new medicines to treat high cholesterol, lung cancer, hepatitis C and other conditions, typically suggesting a value to patients that is a fraction of prices set by drugmakers.

The new funding will enable ICER to evaluate all newly approved medicines, rather than select high profile drugs.

Pharmacy benefit managers, insurers and government agencies have all used ICER reports in negotiating pricing and preferred formulary placements with manufacturers, ICER President Steven Pearson said in an interview, mentioning Express Scripts, CVS Health, the U.S. Department of Veterans Affairs and others.

Pearson said he had been informed by Express Scripts that it used ICER’s report in aggressively negotiating discounts on prices for new curative hepatitis C drugs with Gilead Sciences.

“Veterans Affairs have used our reports to inform their thinking and price negotiations,” Pearson added.

Drugmakers argue that list prices do not reflect what is actually paid after discounts and rebates, but that has done little to quell criticism over high costs.

Rather than working from list prices as it did initially, ICER now attempts to “come up with a more precise estimate incorporating average net prices, taking rebates into account, to determine what it considers fair value-based pricing,” Pearson said.

Some drugmakers, such as Allergan and AbbVie, have pledged to limit annual price increases on prescription medicines in an effort to head off more drastic government measures to rein in costs.

The infusion of new funds will also enable ICER for the first time to assess price increases for existing medicines.

“We want to come up with an approach at ... determining when price increases are or aren’t justified,” Pearson said.

Reporting by Bill Berkrot, Editing by Rosalba O’Brien