Foreign countries rely on flawed and outdated HTA or ”value assessment” methods to justify low prices for medicines
Do foreign countries’ standards objectively reward value, or subjectively cut drug costs?
Key Takeaways
The value standards embedded in foreign health technology assessments (HTAs) significantly underestimate the true societal benefits of innovative medicines. Prices recommended by foreign countries that employ HTA (Canada and Germany) undervalued medicines by approximately 90%.
When high-income foreign countries use traditional HTA as a bargaining tool to deny coverage and/or secure lower prices, they free ride on the R&D investments made outside their countries and reduce patient access to novel medicines in their own countries.
Countries that rely on faulty and outdated HTA approaches as their justification for capping the prices may be using it as an excuse to pay less, which gives the US public and policymakers the inaccurate impression that US market-based system – which fuels global biopharmaceutical innovation – is broken.
Formalized HTA processes have been employed for many years in a number of countries to determine the value of novel health technologies and, in many cases, to inform reimbursement and pricing decisions. These agencies perform HTA on behalf of ministries of health (or equivalent) and therefore tend to take a narrow perspective of value based on fixed short-term healthcare budgets when they perform assessments¹ ˗⁵.
To achieve cost savings, international systems outside of the US rely on a mix of value assessment models that fail to capture the full scope of benefits for patients and caregivers. These assessments use low and outdated, willingness- to-pay thresholds – often based on flawed quality-adjusted life years (QALYs) – to develop recommended prices, which result in artificially low prices relative to a treatment’s true societal value.
These HTA methods used by ex-US countries have important known limitations and often reflect only a portion of the societal benefits and costs savings that stem from a healthcare intervention⁶. For example, they ignore that new medicines not only benefit patients, but also their family members and society at large by enabling faster return to work, therefore increasing taxes paid and disability allowances not paid⁷. One study found that medicines increased wages by $233 billion annually in the US, roughly in line with the amount spent on medicines in the US during the same time period (2000-2014)⁸. Additionally, some medical innovations provide benefits over current treatment options, such as more convenient dosing regimens or alternative administration methods (for example, subcutaneous at-home treatment versus intravenous at-hospital treatment). These benefits may accrue to the patient (i.e., need to take medicines less frequently, reduced medical travel costs) and also generate positive spillovers to society (increased adherence to treatment of schizophrenia reduces risk of psychotic episodes that might otherwise end with the patient being jailed, for example)⁹ ¹⁰.
In addition to ignoring the key value elements important to patients and caregivers, the traditional models used by HTAs to estimate net health benefit and assess cost-effectiveness of innovative technologies also failed to reflect key real-world market dynamics that impact value estimates. These models often ignore how a product’s price changes during its time on the market either due to competition during the branded period or generic entry following loss of exclusivity¹¹. Instead, they assume a constant price (usually set to be the list price at launch) over the patient’s lifetime or modeling horizon. This approach, in effect, overestimates the cost of treatment as it does not account for the price reductions throughout product life-cycle and underestimate the true societal value of innovative medicines, resulting in coverage and reimbursement decisions limiting patient access to life-saving medicines¹².
This analysis aims to measure the extent to which HTA-recommended prices in our countries underestimate the true value of medicines.
Methodology to Compare Societal VBPs to ex-US HTA-Recommend Prices
While no single assessment model can fully capture an intervention’s value over time and across various patient populations and markets, Generalized Cost-Effectiveness Analysis (GCEA) provides important improvements to some of the most glaring weaknesses with traditional CEA (TCEA) models. The variations between key value metrics from different assessment models illustrates not only the degree to which conventional models used by countries outside the US subjectively suppress value determinations, but also the inherent limitations of TCEA as the basis for coverage and pricing.
The GCEA methodology has been proposed by an expert panel of 12 leading health economists as an updated value assessment method to account for elements of value overlooked by many foreign assessments that fail to integrate market dynamics (e.g., price drop due to generic entry), societal value elements (e.g., productivity and caregiver burden), and patient risk preferences over future health outcomes¹³. As a result of these methodological improvements, GCEA produces a more comprehensive estimate of a treatment’s societal value¹⁴.
We performed GCEA analyses* for a sample of drugs with significant budget impacts to the US to answer the following research question: how do price recommendations from Canadian and German health technology assessment (HTA) agencies differ from GCEA value-based prices? Compared with the TCEAs used to derive the HTA-recommended prices, our GCEAs adjusted for uncertainty over future health outcomes, patient productivity gains, price drops due to genericization, and the benefits of the treatment to future patients
International prices were extracted and computed for Canada and Germany. For Canada, key inputs were extracted from Canada’s Drug Agency (CDA) value assessments¹⁵. To compute the recommended price, the CDA recommended price reduction (based on a willingness-to-pay threshold of 50,000 CAD per QALY) was applied
to the manufacturer submitted list price for each CDA assessment. For comparability to US societal value-based prices, the resulting recommended prices were then converted to 2024 USD using 2024 Canadian consumer price index data and the average exchange rate from June 2024. Germany does not rely on a willingness-to-pay thresholds and, in the absence of publicly available data, German HTA-recommended prices were approximated by net prices extracted from published literature¹⁶. German recommended price data was limited due to a law enacted in February of 2024 which allows pharmaceutical manufacturers to keep negotiated prices confidential in Germany¹⁷.
Results
CDA-Recommended Prices Undervalued Treatments by 90% while German Recommend Prices Undervalued Treatments by 94%.
The comparison between societal value-based prices and the Canadian- and German-recommended prices revealed that the ex-US HTA assessments significantly underestimated the true societal benefits of innovative medicines. Across 10 treatments evaluated by CDA, Canadian recommended prices consistently undervalued the societal benefit of medical innovations. The median ratio of Canadian recommended prices to societal value was 10%, and for some treatments CDA valued drugs at 4% of their societal value (Figure 1). The maximum observed Canadian recommended price was for Cancer Drug 1 ($32,215, 25% of societal value), while Type 2 Diabetes Drug 1, Cardiovascular Drug 1, and Obesity Drug had recommended prices equivalent to 4% of their societal value.
Finally, among five drugs included in this study with publicly available German recommended pricing data, the median ratio of German prices to societal value was 6% (Figure 1). German recommended prices represented the smallest percentage of societal value for Type 2 Diabetes Drug 2 ($650, 2%) and the largest percentage of societal value for Cardiovascular Drug 2 ($1,022, 13%).
Discussion
Undervaluing medicines reduces patient access and harming global incentives for future advances in R&D
These flawed assessments used in foreign countries demonstrate how those agencies care more about the government budget than value to society as a whole. It also leads to an inaccurate and potentially underestimated valuation of health interventions, which has direct consequences for patients when they are denied access based on HTA¹⁸. When deemed not cost-effective based on HTA, medicines may be blocked by a country or else their entry to a market may be delayed; consider that while 85% of new medicines launched anywhere in the world between 2012 and 2021 were available in the USA, that figure was 61% in Germany, 59% in the UK, and 52% in France, and delays
in access to medicines among European countries can be substantial, for example, averaging from 100 days in Germany to 800 days in Poland¹⁹ ²⁰. Furthermore, by underutilizing what have actually been cost-effective medicines, society reduces incentives for the development of more such medicines that would have likewise been worth their risk-adjusted costs of development and the prices—though really the profits—to incentivize those investments.
Each of the 10 drugs in our analysis was initially developed and approved in the US where market-based pricing system played an important role in incentivizing research into new innovation. As high-income developed countries apply traditional CEA methods as a bargaining tool to secure lower prices that are actually below what their citizens would be able and willing to pay, they freeride on the global R&D investment and possibly cause some innovation to go unfunded²¹. The political effect is that these underestimations of value and lower prices outside the US have been used to argue that Americans are paying more than they should truly be willing to pay.
Across stakeholder groups in the US, there has been a growing recognition that Europe leveraged biased HTA approaches to freeride on the contributions made by the US to incentivize pharmaceutical innovations. Consequently, a wide range of policies have been proposed to address such disparities in contributions, including proposals that would anchor US prices to those in other countries. Proponents of these policies argue that they
will result in more equitable contributions across countries as manufacturers increase prices for drugs currently marketed in countries outside the US. Such expectations, however, are unrealistic based on real-world business practices. Practically speaking, manufacturers are not able to change the price set by foreign governments. Therefore, for products already on the market the only recourse would be to withdraw those existing products from these markets altogether²². However, pulling existing products from other markets or threatening to not launch new drugs will increase the risk that those governments may pursue policies that shorten or end the exclusivity period of the product, paving the way for other manufacturers from other counties to make generic copies of the original products, which will leave the innovators worse off. Therefore, these proposed policies may result in significant cuts in worldwide pharmaceutical investments and increasing costs of innovative drugs in the US.
Conclusion
High-income foreign countries that rely on central planning and traditional CEAs as their justification for capping drug prices may be using it as an excuse to pay less, which also gives the US public, policymakers, physicians, and payers the (inaccurate) impression that medicines are not worth what the US is paying for them. Traditional CEA can thus create the appearance that the US market-based system is broken and in need of a regulatory fix, namely price controls. But our analyses showed that a good case can be made the US’s patent-based, market-based competitive framework is working reasonably well, despite an imperfect insurance system, to bring about aordable biomedical innovation that benefits not only US citizens, but everyone worldwide²³. Should US policymakers impose foreign price controls on novel medicines in a misguided eort to spare US payers from perceived ”overpaying”, they would be undermining innovation that would be cost-effective for the US and beneficial globally.
The adoption of outdated methodology abroad can delay access to life-saving medicines for patients here in the U.S.
Read what this report means for patient access and the future of U.S. biomedical innovation.
* The analyses were performed by researchers from EntityRisk and FTI Consulting.
References
Bleichrodt H, Crainich D, Eeckhoudt L. Comorbidities and the willingness to pay for health improvements. J Public Econ. 2003;87:2399–406.
Gyrd-Hansen D. Willingness to pay for a QALY: theoretical and methodological issues. Pharmacoeconomics. 2005;23:423–32.
Lakdawalla DN, Phelps CE. Health technology assessment with risk aversion in health. J Health Econ. 2020;72:102346.
Nielsen JS, Gyrd-Hansen D, Kjær T. Sample restrictions and the elicitation of a constant willingness to pay per quality adjusted life year. Health Econ. 2021;30:923–31.
Breslau RM, Cohen JT, Diaz J, Malcolm B, Neumann PJ. A review of HTA guidelines on societal and novel value elements. Int J Technol Assess Health Care [Internet]. 2023;39. Available from: https://doi.org/10.1017/S026646232300017X
Rand LZ, Kesselheim AS. Controversy Over Using Quality-Adjusted Life-Years In Cost-Eectiveness Analyses: A Systematic Literature Review. https://doi.org/101377/hltha202100343 [Internet]. 2021 [cited 2021 Sep 19];40:1402–10. Available from: http://www.healthaairs.org/doi/10.1377/ hltha.2021.00343
Lakdawalla DN, Others. Defining elements of value in health care—a health economics approach: an ISPOR Special Task Force report [3]. Value in Health. 2018;21:131–9.
Chen A, Goldman D. Productivity benefits of medical care: evidence from US-based randomized clinical trials. Value Health J Int Soc Pharmacoeconomics Outcomes Res [Internet]. 2018;21. Available from: https://doi.org/10.1016/j.jval.2018.01.009
Buchanan A, Sint K, Swanson J, Rosenheck R. Correlates of future violence in people being treated for schizophrenia. Am J Psychiatry [Internet]. 2019;176. Available from: https://doi.org/10.1176/appi.ajp.2019.18080909
Berdud M, Wallin-Bernhardsson N, Zamora B, Lindgren P, Towse A. The allocation of the economic value of second-generation antipsychotics over the product life cycle: the case of risperidone in Sweden and the United Kingdom. Value Health J Int Soc Pharmacoeconomics Outcomes Res [Internet]. 2023;26. Available from: https://doi.org/10.1016/j.jval.2022.11.022
Neumann PJ, Podolsky MI, Basu A, Ollendorf DA, Cohen JT. Do cost-eectiveness analyses account for drug genericization? A literature review and assessment of implications. Value Health J Int Soc Pharmacoeconomics Outcomes Res [Internet]. 2022;25. Available from: https://doi.org/10.1016/j. jval.2021.06.014
Whittington MD, Mattingly TJ. Estimating a Drug’s Price After Loss of Exclusivity as a Function of Its Cost of Goods Sold. Appl Health Econ Health Policy [Internet]. 2025 [cited 2025 Feb 10];23:75–83. Available from: https://link.springer.com/10.1007/s40258-024-00928-7
Shafrin J, Kim J, Cohen JT, Garrison LP, Goldman DA, Doshi JA, et al. Valuing the Societal Impact of Medicines and Other Health Technologies: A User Guide to Current Best Practices. Forum Health Econ Policy [Internet]. 2024 [cited 2025 Apr 19];27. Available from: https://pubmed.ncbi.nlm.nih. gov/39512185/
Li M. Generalized cost–eectiveness analysis: charting a path forward for measuring the societal value of medical technologies. J Comp E Res [Internet]. 2024 [cited 2025 Apr 19];14:e240213. Available from: https://becarispublishing.com/doi/10.57264/cer-2024-0213
Canadian Agency for Drugs, in Health (CADTH) T. About Us. 2024.
Gumas ED, H. P, Papanicolas I, Williams RD. How Prices for the First 10 Drugs Up for Medicare Price Negotiations Compare Internationally. The Commonwealth Fund; 2024.
Koyuncu A. Germany again to reform drug pricing and reimbursement laws – With “confidential reimbursements prices” that impede international reference pricing. 2024.
Neumann PJ, Garrison LP, Willke RJ. The History and Future of the “ISPOR Value Flower”: Addressing Limitations of Conventional Cost- Eectiveness Analysis. Value in Health. 2022;25.
Goldman D, Grogan J, Lakdawalla D, Liden B, Shafrin J, Than K-S, et al. Mitigating the Inflation Reduction Act’s Adverse Impacts on the Prescription Drug Market [Internet]. Los Angeles; 2023 Apr. Available from: https://healthpolicy.usc.edu/research/mitigating-the-inflation-reduction-acts- potential-adverse-impacts-on-the-prescription-drug-market/
Newton M, Stoddart K, Travaglio M, Troein P. EFPIA Patients W.A.I.T. indicator 2022 Survey. 2023 Apr.
Jena AB, Philipson T. Cost-eectiveness as a price control. Health A (Millwood) [Internet]. 2007;26. Available from: https://doi.org/10.1377/
hltha.26.3.696
Pharmaceutical Trade Imbalance: America Subsidizing Medicine Prices | National Review [Internet]. [cited 2025 Apr 19]. Available from:
https://urlisolation.com/browser?clickId=08C0D79D-D809-4B32-AAB6-450575E39757&traceToken=1745202602%3Bphrma_2_ hosted%3Bhttps%3A%2Fwww.nationalreview.com%2F20&url=https%3A%2F%2Fwww.nationalreview.com%2F2025%2F03%2Fthe- pharmaceutical-trade-war-with-europe-did-not-begin-recently%2F
Buxbaum JD, Chernew ME, Fendrick AM, Cutler DM. Contributions of public health, pharmaceuticals, and other medical care to us life expectancy changes, 1990-2015. Health A. 2020;39:1546–56.