Severity modifier – to discount or not to discount?

One of the wins to come out of the recent NICE methods review, according to Industry and others in the Life Sciences ecosystem, was the introduction of the severity modifier.[i] The new quantitative modifier replaces the ‘end-of-life’ modifier and appears to allow value of medicines that treat the most severe conditions to be recognised through a higher willingness to pay threshold.

However, the reality may not be as rosy as the headline suggests. There is one short sentence in NICE’s programme manual that marks a departure in the application of QALY weightings, and will likely have a significant impact in the number of treatments that are able to meet the criteria:

“6.2.17 Absolute and proportional shortfall calculations should include discounting at the reference-case rate.”

Historically, where similar modifiers have been implemented, applying a discount rate to the calculations of this kind has not been required, and indeed there is a question about the methodological reasoning for the requirement to discount QALYs within the calculation now. For example, in the appraisal of GSK’s Strimvelis, the higher ICER threshold applied due to the large quality of life gain resulting from the treatment was applied to the ‘undiscounted QALY gain’.[ii] This goes to the whole point of the severity modifier in the first place – to recognise innovative medicines that bring a large amount of benefit for patients with severe diseases.

It is likely that the requirement to take the reference-case discount rate into account when calculating QALY shortfall will mean that fewer medicines would meet the criteria for either the 1.2 weighting or the 1.7 weighting than may have been the case. Equally, the requirement for discounting the QALYs introduces interdependencies with the discount rate used (non-reference case or reference case). So we may see a scenario whereby the application of a non-reference case discount rate enables a medicine to meet the threshold for the QALY weighting, where it would not have been able to were the reference case rate applied.

Whatever your perspective is on the methodological justification for either approach, this detail is an important flag for companies preparing HTA and pricing strategies for medicines launches in coming years.

[i] https://www.abpi.org.uk/media/blogs/2022/january/abpi-analysis-on-nice-s-changes-for-evaluating-new-medicines-next-steps/

[ii] https://www.nice.org.uk/guidance/hst7/documents/committee-papers