Value-Based Pricing Alternatives for Personalised Drugs: Implications of Asymmetric Information and Competition

Timely, Cheap, or Risk-Free? The Effect of Regulation on the Price and Availability of New Drugs

The high level of regulation of innovative drugs on the market, which is necessary to protect consumers, produces important effects on drug availability and innovation. In public healthcare systems, the need to curb prices comes from expenditure considerations. The aim of price regulation is to obtain a more equitable allocation of the value of an innovative drug between industries and patients (by reducing prices to make drugs more affordable), but it may also reduce access. (In the listing process, the industry may find it more convenient to limit commercialisation to profitable subgroups of patients.) Furthermore, with the advent of personalised medicine, there is another important dimension that has to be considered, namely, incentives to invest in drug personalisation. In this paper, we review and discuss the impact of different pricing rules on the expenditure and availability of new drugs.

The impact of conventional cost-effectiveness analysis on pricing dynamics in the market of new medicines: a proposed countervailing approach

BACKGROUND

Countries using cost effectiveness ratio as a decision tool for price and reimbursement decisions still witness accelerating price increases. The objective of this paper is to propose a change in the application of the incremental cost effectiveness ratio as a criterion for price policy.

RESEARCH DESIGN

We develop a model that sets a price for marginal effectiveness equal to the marginal willingness to pay, but it reimburses average effectiveness according to the size of increased QALY gain.

RESULTS

This new formula also allows to split the economic value of drug between patients and the industry and creates a reward to invest into QALY gains. We show some empirical data of the new prices derived from the application of the new formula, as well as the implications in terms of the consumer and manufacturer´s surplus based on two potential scenarios of the incentives generated by this new formulation.

DISCUSSION

We propose that small increases in life expectancy be priced differently from substantial as a way of containing the price dynamics.

CONCLUSIONS

A change in the application of the ICER threshold will help to reduce the price pressure on public budgets.

Value-Based Pricing and Budget Impact Analysis for Multi-Indication Drugs: A Case Study of Immunotherapies

We aimed to calculate the value-based price of each indication and compare the drug price and budget impact among value-based pricing (VBP) scenarios, using immunotherapy as a case. Atezolizumab, nivolumab, and pembrolizumab prices were estimated for VBP scenarios, namely indication value-based pricing (IBP), IBP with refund, and weighted-average pricing (WAP). To estimate the value-based price of each indication, cost-effectiveness analyses were conducted by setting the incremental cost-effectiveness ratio of the first reimbursed indication to the threshold. The budget impact for each scenario was compared with that of the pricing system in Korea (which has a 4.75% price reduction). The value-based prices of non-reimbursed indications were lower for atezolizumab and higher for nivolumab than those for the reimbursed indication. The drug price fluctuations were the largest in IBP, varying between 28.56–328.81% of the current list price. The net price of the non-reimbursed indications decreased from 0% to 71.44% in IBP with refund, and the budget impact was the lowest among VBPs. Although the fluctuation in the budget impact in WAP was smaller than IBP, higher drug prices were identified for low-value indications. In conclusion, IBP with refund is a viable method for multi-indication drugs, because it has minimal drug price and budget impact changes.

Value-based drug price schemes: a welfare analysis

Objectives

The market for innovative drugs is characterized by high levels of regulation, whose impact on the market is not neutral. On the one hand, strict regulation may in fact adversely affect incentives to develop new and better products; on the other hand, high prices may drive an unsustainable increase in healthcare costs. This trade-off is particularly important in Europe, where about 75% of drugs costs are financed by the public sector.

Methods

We develop a simple model that allows to compare the impact of different listing and pricing strategies on the social value of innovative drugs, the consumer surplus and the expected profit of the industry.

Key findings

Uncertainty in the expected price, as well as other forms of access regulation, may lead to a fairer division of the social value between patients and the industry, at the cost of leaving some of the potential value of the drug unexploited.

Conclusions

The regulator may improve value for money if it is prepared either to restrict access to the drug or to reduce the expected price. In both cases, the number of groups of patients treated may be different from the social optimum.

Beyond price: the effects of non-financial barriers on access to drugs and health outcomes

OBJECTIVES

We study the impact of the pharmacy dispensing channel (as a proxy for access to drugs) on the drug purchases, health outcomes, and health care utilization (emergency room visits or hospitalizations) of chronically ill patients in Liguria, Italy, in 2017.

METHODS

We use the coarsened exact matching algorithm to compare the health outcomes for a treated group of patients living in a local health authority (LHA) where drug distribution through community pharmacies was restricted. These patients were matched to a control group of patients living in other LHAs, where drugs were also dispensed through a broad network of community pharmacies. We exploit a unique administrative dataset with information on the socio-demographic characteristics and health care services utilization of Ligurian patients with chronic cardiovascular and respiratory ailments. We restrict our analysis to patients 65 years of age or older who were admitted to hospitals from 2013 to 2016 with either a principal or secondary diagnosis connected to chronic cardiovascular and respiratory diseases.

RESULTS

Reduced access to drugs leads to lowered drug consumption, a higher probability of adverse health outcomes including mortality, and a higher consumption of medical services in terms of hospitalizations and emergency room visits. These effects increase with patients' age.

CONCLUSION

The pharmacy dispensing channel significantly affects drug consumption and acts as a proxy for adherence among chronically ill patients. Thus, health outcomes and health care utilization should be carefully evaluated when comparing the costs of alternative dispensing channels.

How Risky Is That Risk Sharing Agreement? Mean-Variance Tradeoffs and Unintended Consequences of Six Common Risk Sharing Agreements

Background. Pharmaceutical risk sharing agreements (RSAs) are commonly used to manage uncertainties in costs and/or clinical benefits when new drugs are added to a formulary. However, existing mathematical models of RSAs ignore the impact of RSAs on clinical and financial risk. Methods. We develop a model in which the number of patients, total drug consumption per patient, and incremental health benefits per patient are uncertain at the time of the introduction of a new drug. We use the model to evaluate the impact of six common RSAs on total drug costs and total net monetary benefit (NMB). Results. We show that, relative to not having an RSA in place, each RSA reduces expected total drug costs and increases expected total NMB. Each RSA also improves two measures of risk by reducing the probability that total drug costs exceed any threshold and reducing the probability of obtaining negative NMB. However, the effects on variance in both NMB and total drug costs are mixed. In some cases, relative to not having an RSA in place, implementing an RSA can increase variability in total drug costs or total NMB. We also show that, for some RSAs, when their parameters are adjusted so that they have the same impact on expected total drug cost, they can be rank-ordered in terms of their impact on variance in drug costs. Conclusions. Although all RSAs reduce expected total drug costs and increase expected total NMB, some RSAs may actually have the undesirable effect of increasing risk. Payers and formulary managers should be aware of these mean-variance tradeoffs and the potentially unintended results of RSAs when designing and negotiating RSAs.

Innovation, aging, and health care: Unraveling "silver" from "red" herrings?

This perspective paper argues that a sustainable health system design encompasses identifying opportunities and incentives for innovation, alongside an analysis of its effect on expenditure. Although aging alone is not a powerful cost driver, the combined effect of costly innovation, personalized care, and the rise of chronic conditions is. We identify an increasing role of prevention, the reduction of the prevalence of chronic conditions, re-organisation of incentives in health care markerts, including a closer scrutiny of the appropriateness of new treatments.

A Review of Methodological Considerations for Economic Evaluations of Gene Therapies and Their Application in Literature

OBJECTIVES

To identify methodological considerations discussed in literature addressing economic evaluations (EEs) of gene therapies (GTs). Additionally, we assessed if these considerations are applied in published GT EEs to increase understanding and explore impact.

METHODS

First a peer-reviewed literature review was performed to identify research addressing methodological considerations of GT EEs until August 2019. Identified considerations were grouped in themes using thematic content analysis. A second literature search was conducted in which we identified published evaluations. The EE quality of reporting was assessed using Consolidated Health Economic Evaluation Reporting Standards.

RESULTS

The first literature search yielded 13 articles discussing methodological considerations. The second search provided 12 EEs. Considerations identified were payment models, definition of perspectives, addressing uncertainty, data extrapolation, discount rates, novel value elements, and use of indirect and surrogate endpoints. All EEs scored satisfactory to good according to Consolidated Health Economic Evaluation Reporting Standards. Regarding methodological application, we found 1 methodological element (payment models) was applied in 2 base cases. Scenarios explored alternative perspectives, survival assumptions, and extrapolation methods in 10 EEs.

CONCLUSIONS

Although EE quality of reporting was considered good, their informativeness for health technology assessment and decision makers seemed limited owing to many uncertainties. We suggest accepted EE methods can broadly be applied to GTs, but few elements may need adjustment. Further research and multi-stakeholder consensus is needed to determine appropriateness and application of individual methodological considerations. For now, we recommend including scenario analyses to explore impact of methodological choices and (clinical) uncertainties. This study contributes to better understanding of perceived appropriate evaluation of GTs and informs best modeling practices.