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Nuijten M, Capri S. Valuation of Medical Innovation Handling with Uncertainty and Risk. JOURNAL OF MARKET ACCESS & HEALTH POLICY 2024; 12:199-208. [PMID: 39193543 PMCID: PMC11348113 DOI: 10.3390/jmahp12030016] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Figures] [Subscribe] [Scholar Register] [Received: 03/04/2024] [Revised: 04/30/2024] [Accepted: 07/25/2024] [Indexed: 08/29/2024]
Abstract
Background: The purpose of this paper is to address how to handle uncertainty when performing an economic valuation of a medical innovation R&D project in orphan diseases from the perspective of the investor. Methods: We describe the specific uncertainty related to cash flows and the cost of capital for innovation in orphan diseases. The uncertainty in cash flows relates to sales, manufacturing and R&D costs, and probabilities of failure for each phase in the clinical trial program. We consider different net present values (NPVs) and higher standard deviations for orphan drugs compared to non-orphan drugs. Results: Numerical case base examples showed the differences in trade-off by an investor for R&D projects with differences in NPV and level of uncertainty. The investor will transfer the additional uncertainty in cash flows in a higher cost of capital. An alternative approach is the application of an "acceptability curve" based on a probabilistic sensitivity analysis, which displays the cumulative probabilities at a range of different values for the NPV. Finally, we consider uncertainty in the cost of capital itself by applying the Capital Asset Pricing Model (CAPM). Conclusions: In this paper, we described various types of uncertainty and explored various approaches to how to handle uncertainty in the economic valuation of medical innovation in orphan diseases. The bridging of health economics with economic valuation theory in the healthcare market is to our knowledge a novel approach for the valuation of medical innovation by investors.
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Affiliation(s)
- Mark Nuijten
- A2M, 1546 Lg Amsterdam, The Netherlands
- Department of Biotechnology Engineering, Ben-Gurion University, Beersheba 8410501, Israel
| | - Stefano Capri
- School of Economics and Management, Cattaneo-LIUC University, 21053 Castellanza, Italy;
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Glaus CEG, Kloeti A, Vokinger KN. Defining 'therapeutic value' of medicines: a scoping review. BMJ Open 2023; 13:e078134. [PMID: 38110384 DOI: 10.1136/bmjopen-2023-078134] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Journal Information] [Submit a Manuscript] [Subscribe] [Scholar Register] [Indexed: 12/20/2023] Open
Abstract
OBJECTIVES In recent years, discussions on the importance and scope of therapeutic value of new medicines have intensified, stimulated by the increase of prices and number of medicines entering the market. This study aims to perform a scoping review identifying factors contributing to the definition of the therapeutic value of medicines. DESIGN Scoping review. DATA SOURCES We searched the MEDLINE, CINAHL, Embase, Business Source Premier, EconLit, Regional Business News, Cochrane, Web of Science, Scope and Pool databases through December 2020 in English, German, French, Italian and Spanish. ELIGIBILITY CRITERIA Studies that included determinants for the definition of therapeutic value of medicines were included. DATA EXTRACTION AND SYNTHESIS Data were extracted using the mentioned data sources. Two reviewers independently screened and analysed the articles. Data were analysed from April 2021 to May 2022. RESULTS Of the 1883 studies screened, 51 were selected and the identified factors contributing to the definition of therapeutic value of medicines were classified in three categories: patient perspective, public health perspective and socioeconomic perspective. More than three-quarters of the included studies were published after 2014, with the majority of the studies focusing on either cancer disorders (14 of 51, 27.5%) or rare diseases (11 of 51, 21.6%). Frequently mentioned determinants for value were quality of life, therapeutic alternatives and side effects (all patient perspective), prevalence/incidence and clinical endpoints (all public health perspective), and costs (socioeconomic perspective). CONCLUSIONS Multiple determinants have been developed to define the therapeutic value of medicines, most of them focusing on cancer disorders and rare diseases. Considering the relevance of value of medicines to guide patients and physicians in decision-making as well as policymakers in resource allocation decisions, a development of evidence-based factors for the definition of therapeutic value of medicines is needed across all therapeutic areas.
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Affiliation(s)
- Camille E G Glaus
- Academic Chair for Regulation in Law, Medicine, and Technology, Faculty of Law and Faculty of Medicine, University of Zurich, Zurich, Switzerland
| | - Andrina Kloeti
- Academic Chair for Regulation in Law, Medicine, and Technology, Faculty of Law and Faculty of Medicine, University of Zurich, Zurich, Switzerland
| | - Kerstin N Vokinger
- Academic Chair for Regulation in Law, Medicine, and Technology, Faculty of Law and Faculty of Medicine, University of Zurich, Zurich, Switzerland
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Abouarab B, Bazarian C, Ben Chaouch Z, Lo AW, Mourenza Gonzalez G, Novak R, Vigneault F. Financing repurposed drugs for rare diseases: a case study of Unravel Biosciences. Orphanet J Rare Dis 2023; 18:287. [PMID: 37700316 PMCID: PMC10496212 DOI: 10.1186/s13023-023-02753-y] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Grants] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Received: 12/16/2021] [Accepted: 06/04/2023] [Indexed: 09/14/2023] Open
Abstract
BACKGROUND We consider two key challenges that early-stage biotechnology firms face in developing a sustainable financing strategy and a sustainable business model: developing a valuation model for drug compounds, and choosing an appropriate operating model and corporate structure. We use the specific example of Unravel Biosciences-a therapeutics platform company that identifies novel drug targets through off-target mechanisms of existing drugs and then develops optimized new molecules-throughout the paper and explore a specific scenario of drug repurposing for rare genetic diseases. RESULTS The first challenge consists of producing a realistic financial valuation of a potential rare disease repurposed drug compound, in this case targeting Rett syndrome. More generally, we develop a framework to value a portfolio of pairwise correlated rare disease compounds in early-stage development and quantify its risk profile. We estimate the probability of a negative return to be [Formula: see text] for a single compound and [Formula: see text] for a portfolio of 8 drugs. The probability of selling the project at a loss decreases from [Formula: see text] (phase 3) for a single compound to [Formula: see text] (phase 3) for the 8-drug portfolio. For the second challenge, we find that the choice of operating model and corporate structure is crucial for early-stage biotech startups and illustrate this point with three concrete examples. CONCLUSIONS Repurposing existing compounds offers important advantages that could help early-stage biotech startups better align their business and financing issues with their scientific and medical objectives, enter a space that is not occupied by large pharmaceutical companies, and accelerate the validation of their drug development platform.
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Affiliation(s)
- Bechara Abouarab
- Sloan School of Management, MIT, Cambridge, USA
- Laboratory for Financial Engineering, MIT, Cambridge, USA
| | - Christian Bazarian
- Sloan School of Management, MIT, Cambridge, USA
- Laboratory for Financial Engineering, MIT, Cambridge, USA
| | - Zied Ben Chaouch
- Department of Electrical Engineering and Computer Science, MIT, Cambridge, USA
- Laboratory for Financial Engineering, MIT, Cambridge, USA
| | - Andrew W Lo
- Sloan School of Management, MIT, Cambridge, USA.
- Computer Science and Artificial Intelligence Laboratory, MIT, Cambridge, USA.
- Laboratory for Financial Engineering, MIT, Cambridge, USA.
- Santa Fe Institute, Santa Fe, USA.
| | | | - Richard Novak
- Wyss Institute, Harvard University, Boston, USA
- Unravel Biosciences, Boston, USA
| | - Frederic Vigneault
- Wyss Institute, Harvard University, Boston, USA
- Unravel Biosciences, Boston, USA
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Skweres-Kuchta M, Czerska I, Szaruga E. Literature Review on Health Emigration in Rare Diseases-A Machine Learning Perspective. INTERNATIONAL JOURNAL OF ENVIRONMENTAL RESEARCH AND PUBLIC HEALTH 2023; 20:2483. [PMID: 36767849 PMCID: PMC9915846 DOI: 10.3390/ijerph20032483] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Figures] [Subscribe] [Scholar Register] [Received: 11/24/2022] [Revised: 01/15/2023] [Accepted: 01/28/2023] [Indexed: 06/18/2023]
Abstract
The article deals with one of the effects of health inequalities and gaps in access to treatments for rare diseases, namely health-driven emigration. The purpose of the paper is to systematize knowledge about the phenomenon of health emigration observed among families affected by rare diseases, for which reimbursed treatment is available, but only in selected countries. The topic proved to be niche; the issue of "health emigration in rare diseases" is an area for exploration. Therefore, the further analysis used text mining and machine learning methods based on a database selected based on keywords related to this issue. The results made it possible to systematize the guesses made by researchers in management and economic fields, to identify the most common keywords and thematic clusters around the perspective of the patient, drug manufacturer and treatment reimbursement decision-maker, and the perspective integrating all the others. Since the topic of health emigration was not directly addressed in the selected sources, the authors attempted to define the related concepts and discussed the importance of this phenomenon in managing the support system in rare diseases. Thus, they indicated directions for further research in this area.
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Affiliation(s)
- Małgorzata Skweres-Kuchta
- Department of Organization and Management, Institute of Management, University of Szczecin, Cukrowa 8 Street, 71-004 Szczecin, Poland
| | - Iwona Czerska
- Department of Marketing Research, Faculty of Management, Wroclaw University of Economics and Business, 118/120 Komandorska Str, 53-345 Wroclaw, Poland
| | - Elżbieta Szaruga
- Department of Transport Management, Institute of Management, University of Szczecin, Cukrowa 8 Street, 71-004 Szczecin, Poland
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Towards sustainability and affordability of expensive cell and gene therapies? Applying a cost-based pricing model to estimate prices for Libmeldy and Zolgensma. Cytotherapy 2022; 24:1245-1258. [PMID: 36216697 DOI: 10.1016/j.jcyt.2022.09.002] [Citation(s) in RCA: 9] [Impact Index Per Article: 4.5] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Received: 01/16/2022] [Revised: 09/01/2022] [Accepted: 09/01/2022] [Indexed: 01/31/2023]
Abstract
BACKGROUND AIMS Drug prices are regarded as one of the most influential factors in determining accessibility and affordability to novel therapies. Cell and gene therapies such as OTL-200 (brand name: Libmeldy) and AVXS-101 (brand name: Zolgensma) with (expected) list prices of 3.0 million EUR and 1.9 million EUR per treatment, respectively, spark a global debate on the affordability of such therapies. The aim of this study was to use a recently published cost-based pricing model to calculate prices for cell and gene therapies, with OTL-200 and AVXS-101 as case study examples. METHODS Using the pricing model proposed by Uyl-de Groot and Löwenberg, we estimated a price for both therapies. We searched the literature and online public sources to estimate (i) research and development (R&D) expenses adjusted for risk of failure and cost of capital, (ii) the eligible patient population and (iii) costs of drug manufacturing to calculate a base-case price for OTL-200 and AVXS-101. All model input parameters were varied in a stepwise, deterministic sensitivity analysis and scenario analyses to assess their impact on the calculated prices. RESULTS Prices for OTL-200 and AVXS-101 were estimated at 1 048 138 EUR and 380 444 EUR per treatment, respectively. In deterministic sensitivity analyses, varying R&D estimates had the greatest impact on the price for OTL-200, whereas for AVXS-101, changes in the profit margin changed the calculated price substantially. Highest prices in scenario analyses were achieved when assuming the lowest number of patients for OTL-200 and highest R&D expenses for AVXS-101. The lowest R&D expenses scenario resulted in lowest prices for either therapy. CONCLUSIONS Our results show that, using the proposed model, prices for both OTL-200 and AVXS-101 lie substantially below the currently (proposed) list prices for both therapies. Nevertheless, the uncertainty of the used model input parameters is considerable, which translates in a wide range of estimated prices. This is mainly because of a lack of transparency from pharmaceutical companies regarding R&D expenses and the costs of drug manufacturing. Simultaneously, the disease indications for both therapies remain heavily understudied in terms of their epidemiological profile. Despite the considerable variation in the estimated prices, our results may support the public debate on value-based and cost-based pricing models, and on "fair" drug prices in general.
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Scheijmans FEV, Zomers ML, Fadaei S, Onrust MR, van der Graaf R, Delden JJMV, van der Pol WL, van Thiel GJMW. The reimbursement for expensive medicines: stakeholder perspectives on the SMA medicine nusinersen and the Dutch Coverage Lock policy. BMC Health Serv Res 2022; 22:1320. [PMID: 36333803 PMCID: PMC9636634 DOI: 10.1186/s12913-022-08690-z] [Citation(s) in RCA: 1] [Impact Index Per Article: 0.5] [Reference Citation Analysis] [Abstract] [Track Full Text] [Download PDF] [Journal Information] [Subscribe] [Scholar Register] [Received: 03/07/2022] [Accepted: 07/25/2022] [Indexed: 11/06/2022] Open
Abstract
Background The reimbursement for expensive medicines poses a growing challenge to healthcare worldwide. In order to increase its control over the costs of medicines, the Dutch government introduced the Coverage Lock (CL) policy in 2015. The CL postpones decisions regarding reimbursement of expensive medicines until detailed advice on i.e., cost-effectiveness has been given. The CL has been in place for six years, has raised many questions and concerns, but currently, no evaluation is known to the authors. A better understanding of the effects of the CL on all stakeholders involved may contribute to reflections on the CL process and help find ways to improve it. An evaluation of Dutch policy will also be relevant for other countries that aim to optimize reimbursement procedures for expensive treatments. To perform this evaluation, we focused on the CL procedure for the medicine nusinersen. Nusinersen is the first treatment for spinal muscular atrophy (SMA). Following EMA approval in May 2017, it was placed in the CL. The analysis of cost-effectiveness and added therapeutic value resulted in an advice for reimbursement limited to children younger than 9.5 years at the start of treatment; this was implemented from August 2018 onwards. Methods Qualitative stakeholder perspective analysis of the CL procedure focusing on nusinersen with 15 stakeholders. Results Stakeholders raised key issues of the CL based on their experience with nusinersen: emotional impact of the CL, duration of the CL procedure, appropriateness of the CL procedure for different types of medicines, transparency of the CL, a wish for patient-centred decision-making and the lack of uniformity of access to expensive treatments. Discussion Stakeholders supported measures to control healthcare expenses and to ensure reasonable pricing. They considered the delay in access to therapies and lack of procedural transparency to be the main challenges to the CL. Stakeholders also agreed that the interests of patients deserve more attention in the practical implementation of the reimbursement decision. Stakeholders suggested a number of adjustments to improve the CL, such as a faster start with conditional reimbursement programs to ensure access and intensify European collaboration to speed up the assessment of the medicine. Supplementary Information The online version contains supplementary material available at 10.1186/s12913-022-08690-z.
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Nuijten M, Capri S. An integrated valuation model for payer and investor. JOURNAL OF MARKET ACCESS & HEALTH POLICY 2022; 10:2080631. [PMID: 35693380 PMCID: PMC9176355 DOI: 10.1080/20016689.2022.2080631] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Download PDF] [Figures] [Subscribe] [Scholar Register] [Received: 02/18/2022] [Revised: 05/16/2022] [Accepted: 05/18/2022] [Indexed: 06/15/2023]
Abstract
BACKGROUND In order to optimize positioning and associated drug price for both payer and investor, it is for a company essential to forecast the potential market access attractiveness for the new drug for different indications at the early onset of the clinical development program. This analysis must include the constraints from the perspective of the payer, but also the biotech companies, who require a minimum drug price to satisfy their investors. This paper aims to provide an Integrated Valuation Model for payer and investor, bridging concepts from health economics and economic valuation reflecting the perspectives of the payer and the investor for a drug in early clinical development phase. The concept is illustrated for a new hypothetical drug (Product X) in advanced breast cancer in 1-line, 2-line, and 3-line position. METHODS The Integrated Valuation Model includes the outcomes of the budget impact model, pricing matrix model, and cost-effectiveness model reflecting the payer's perspective. These models are interacted and linked with a discounted cash flow model in order to reflect also the economic value from the investor's perspective. RESULTS The maximum price in 1-line position is €269.7 for the payer and the minimum price is €14.7 for the investor, which are unit prices per administration corresponding with treatment regimens for the comparative treatments. In 2-line position, the maximum price is €274.1 for the payer and the minimum price for the investor increases to €184.5 for the investor because of the smaller market size in 2-line position, which leads to a smaller pricing corridor to satisfy both payer and investor. Consequently, Product X has market access attractiveness for both payer and investor in 1-line and 2-line position. However, the minimum price €942.7 in 3-line position for the investor is higher than the maximum price €283.3 for the payer, which means there is no market potential. CONCLUSION The practical strategic application of the Integrated Valuation Model is optimization of positioning and price of Product X. Hence, it can be a transparent tool in early-stage development of a compound based on upfront assessment of market access attractiveness for the payer and the investor.
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Affiliation(s)
- Mark Nuijten
- A2M, Health Economics and Valuation, The Netherlands
| | - Stefano Capri
- Professor School of Economics and Management, Cattaneo-LIUC University, Castellanza (Varese), Italy
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Nuijten M. Pricing Zolgensma - the world's most expensive drug. JOURNAL OF MARKET ACCESS & HEALTH POLICY 2022; 10:2022353. [PMID: 34992762 PMCID: PMC8725676 DOI: 10.1080/20016689.2021.2022353] [Citation(s) in RCA: 7] [Impact Index Per Article: 3.5] [Reference Citation Analysis] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 08/09/2021] [Revised: 12/16/2021] [Accepted: 12/21/2021] [Indexed: 05/20/2023]
Affiliation(s)
- Mark Nuijten
- Department Pricing and Valuation, A2M, Amsterdam, The Netherlands
- CONTACT Mark Nuijten Blokstallen 2, 4611 WB Bergen op Zoom, Amsterdam, The Netherlands
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Nuijten M, Van Wilder P. The impact of early phase price agreements on prices of orphan drugs. BMC Health Serv Res 2021; 21:222. [PMID: 33711994 PMCID: PMC7953706 DOI: 10.1186/s12913-021-06208-7] [Citation(s) in RCA: 2] [Impact Index Per Article: 0.7] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Download PDF] [Figures] [Journal Information] [Subscribe] [Scholar Register] [Received: 10/30/2020] [Accepted: 02/24/2021] [Indexed: 11/30/2022] Open
Abstract
Background Innovative orphan drugs often have an incremental cost-effectiveness ratio (ICER) which is higher than the maximum threshold for reimbursement. Payers have limited budgets and often cannot pay the full price of a new product, but pharmaceutical and biotechnology companies require a minimum price to satisfy their investors. The objective of this study was to present a possible solution to bridge this pricing gap by having early phase price agreements, which reduce the risk for investors. Methods We used a Pricing Model, which determines the minimum (break-even) price of an innovative drug from an investor’s perspective. This model is based on economic valuation theory, which uses the expected free cash flows and the required cost of capital. We selected two orphan drugs with a positive clinical assessment and an ICER higsher than the Dutch maximum threshold of €80,000 per QALY gained to use as examples in the model: Spinraza for spinal muscular atrophy and Orkambi for cystic fibrosis. RESULTS: The results show that early pricing agreements before phase III trials can substantially lower the drug price resulting from a lower cost of capital. The minimum price for orphan drugs can be reduced by 27.4%, when cost of capital decreases from 12 to 9%. An additional adjustment of other critical parameters due to early pricing agreements (lower probabilities of phase III failure and lower research and development (R&D) costs) can further reduce the minimal price by 62.8%. Conclusion This study shows that earlier timing of price negotiations resulting in an agreement on drug price can substantially lower the minimal price of orphan drugs for the investor.
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