Can Generalized Cost-Effectiveness Analysis Leverage Meaningful Use of Novel Value Elements in Pharmacoeconomics to Inform Medicare Drug Price Negotiation?

•Decision-makers considering using cost-effectiveness analysis to inform health-technology assessment must contend with documented and controversial shortfalls of CEA, including its assumption of disease severity independence and static pricing, and objections to the QALY. •Generalized cost-effectiveness analysis (GCEA) accounts for methods that address objections to the QALY and incorporate novel value elements. •While GCEA offers advantages, it requires further research to develop "off-the-shelf" resources to help inform, for example, maximum fair price in the context of Medicare drug price negotiation. Objectives Decision-makers considering using cost-effectiveness analysis (CEA) to inform health-technology assessment (HTA) must contend with documented and controversial shortfalls of CEA, including its assumption of disease severity independence and static pricing. ISPOR has recently introduced novel value elements besides direct healthcare cost and effectiveness for the patient, and these should be captured in CEA . While novel value elements advance our understanding of "what" should be measured (e.g. value of hope, severity of disease, health equity, etc.), there is limited direction on "how" to measure them in conventional CEA. Furthermore, with Medicare empowered to set drug prices under the Inflation Reduction Act, it is not clear what role CEA might have on where prices are set given objections to the QALY in conventional approaches. Methods We critically reviewed the evidence for expanding conventional CEA methods to a more generalized approach of generalized cost-effectiveness analysis (GCEA). Results GCEA accounts for methods that address objections to the QALY and incorporate novel value elements. While GCEA offers advantages, it also require further research to develop "off-the-shelf" resources to help inform, for example, maximum fair price in the context of Medicare drug price negotiation. Conclusions Should a shift towards GCEA reveal that the societal value of novel medicines exceeds their market-based costs, that will raise the key question of what market failure Medicare negotiation is meant to solve, if any, and therefore what the appropriate role of such negotiation might be to maximize the value society might garner from the development of novel medicines. Decision-makers considering using cost-effectiveness analysis (CEA) to inform health-technology assessment (HTA) must contend with documented and controversial shortfalls of CEA, including its assumption of disease severity independence and static pricing. ISPOR has recently introduced novel value elements besides direct healthcare cost and effectiveness for the patient, and these should be captured in CEA . While novel value elements advance our understanding of "what" should be measured (e.g. value of hope, severity of disease, health equity, etc.), there is limited direction on "how" to measure them in conventional CEA. Furthermore, with Medicare empowered to set drug prices under the Inflation Reduction Act, it is not clear what role CEA might have on where prices are set given objections to the QALY in conventional approaches. We critically reviewed the evidence for expanding conventional CEA methods to a more generalized approach of generalized cost-effectiveness analysis (GCEA). GCEA accounts for methods that address objections to the QALY and incorporate novel value elements. While GCEA offers advantages, it also require further research to develop "off-the-shelf" resources to help inform, for example, maximum fair price in the context of Medicare drug price negotiation. Should a shift towards GCEA reveal that the societal value of novel medicines exceeds their market-based costs, that will raise the key question of what market failure Medicare negotiation is meant to solve, if any, and therefore what the appropriate role of such negotiation might be to maximize the value society might garner from the development of novel medicines.