The New Alphabet Soup of Market Access and Reimbursement: Part 2

22Let’s welcome back, Jamie Banks, PhD! As a “refresher” (for those who DID NOT read the last issue, ‘eh hem!’), Jamie is part of our team here at McCormick LifeScience Consultants as a health care consultant and strategist with experience in health economics, outcomes research, health policy, value assessment, trial design, technology valuation, and communications/publications.

Questions? Need help? Email her!

Jamie. . . take it away!

In Part 2 of this series, we will turn our attention from the vocabulary of PROs (Part 1, September 2012) to “HEOR” (hint: not Winnie-the-Pooh’s companion). By the end, you will at least be familiar with CEA, CUA, ICER, ICUR, LYG, and QALY.

The Broad Take

HEOR – in other words, Health Economics and Outcomes Research – is used to assess the value for money of competing medical interventions. It includes methods to evaluate:

” . . . the clinical, economic, and humanistic aspects of pharmaceutical products, services, and programs, as well as other health care interventions to provide health care decision makers, providers, and patients with valuable information for optimal outcomes and the allocation of health care resources.”
– International Society of Pharmacoeconomics and Outcomes Research (ISPOR)

HEOR studies may be “piggybacked” onto clinical trials or conducted post-market in more diverse patient populations and settings of care. The goal? To gain market access and reimbursement, of course!

Let’s Start with the HE . . .

The “HE” in HEOR focuses on comparing the value of interventions in monetary terms. When applied to evaluating pharmaceutical products, the term “pharmacoeconomics” or “PE” may be used.

. . . Move onto the OR . . .

The “OR” focuses on comparing the clinical sequelae or outcomes that are meaningful to patients, caregivers, payors, clinicians, employers and society, and go well beyond the surrogate measures (e.g., blood pressure) typical of clinical trials. For example:

Antihypertensive Drug A vs. Drug B 

Clinical Trial Endpoints

Outcomes Research

  • Blood pressure (mmHg)

  • Stroke, heart attack, death, medical resource use (e.g., hospitalization, physician visits), or lost days of work or school


. . . Then Put Them Together and What Have You Got?

The makings of a cost-effectiveness analysis (CEA) . . .


. . . where the result is expressed as the difference in cost divided by the difference in effectiveness of two interventions in as a ratio.

  • In the case where the outcome is a clinical outcome, such as “life year gained (LYG)” or “avoided heart attack,” the ratio is known as an Incremental Cost Effectiveness Ratio (ICER [ouch!]).
  • In the special case in which LYGs are adjusted for quality of life, the outcome is a QALY (Quality Adjusted Life Year), and the ratio, an ICUR. We’ll talk more about that “U” in a minute.

You may now be wondering: Which costs? Which outcomes? Good questions! In both cases, it depends. For example:

  • For U.S. payors, direct medical costs (e.g., for physician visits, drugs, and hospitalization) and clinical outcomes (e.g., heart attack, stroke) are most important.
  • For international payors and employers, Quality Adjusted Life Years (QALYs) and lost productivity may be more important.

Now for that “U,” as in Utilities . . .

Utilities? Gas and electric? Good guess, but no.

In HE, a “utility” (aka “preference”) is a value patients or society places on a given health state. It ranges between 0 and 1, where 0=death or worst possible health and 1=normal or best possible health.

Let’s Do the Math

Here’s a hypothetical example in which cardiac patients can take Drug A or Drug B.


Drug A

Drug B


2 years

5 years

Side Effects



5-Year Cost



Health state utility



What is the ICER and ICUR for Drug B vs Drug A?


Cost Difference




$6,000 ($18,500 minus $12,500)

2 life years (4 minus 2)

$3,000/life year gained (LYG)


3.05 QALYs (4.25 [5 years*0.85] minus 1.2 [2 years* 0.60]


In both cases, these extra costs per LYG and QALY are considered well within the range considered acceptable by payors and society. Tell that to your friends!

Now Get Out Your Pencils, We are Having a Test . . .

(Only kidding)

We’ll be back next month with Part 3 of our series – focusing on CER (what does that stand for?!).

Toto's Tips

  • Don’t let HEOR and CEA scare you away. The concepts involved are common sense and understandable to most people.
  • Bring HEOR concepts into your thinking. You can do your company or client a favor by asking good questions related to a product’s value in the marketplace.
  • Read some journal articles on cost-effectiveness to grow your understanding. You will find many journal articles in PubMed with the terms cost-effectiveness and cost-utility and of these, many that are open access. An overview article by Ramsey et al, 2005 is a good place to start.
  • Review some clinical guidelines to see how they integrate HEOR into their assessments of medical interventions A recent article by Wonderling et al, 2011 may be helpful.