Measuring the Budget Impact of Nondiscriminatory Cost-Effectiveness

What is the net effect on health care budgets of relying on a nondiscriminatory generalized risk-adjusted cost-effectiveness (GRACE) framework to establish value-based prices rather than traditional cost-effectiveness analysis (CEA)?This economic evaluation found that GRACE increases value-based prices for more severe diseases but decreases them for less severe ones. On net, using GRACE value-based prices is approximately budget-neutral compared with the use of CEA value-based prices.GRACE provides an alternative to CEA that complies with US federal prohibitions on discriminatory cost-effectiveness methods, facilitating transparency in price-setting for drugs without sacrificing the overall cost-efficiency gains of traditional CEA.

Corresponding Author: Darius N. Lakdawalla, PhD, Leonard D. Schaeffer Center for Health Policy and Economics, University of Southern California, 635 Downey Way, Los Angeles, CA 90089-3333 (dlakdawa@usc.edu).

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