Dataset Information

The value of innovation under value-based pricing.

ABSTRACT:

Objective

The role of cost-effectiveness analysis (CEA) in incentivizing innovation is controversial. Critics of CEA argue that its use for pricing purposes disregards the 'value of innovation' reflected in new drug development, whereas supporters of CEA highlight that the value of innovation is already accounted for. Our objective in this article is to outline the limitations of the conventional CEA approach, while proposing an alternative method of evaluation that captures the value of innovation more accurately.

Method

The adoption of a new drug benefits present and future patients (with cost implications) for as long as the drug is part of clinical practice. Incidence patients and off-patent prices are identified as two key missing features preventing the conventional CEA approach from capturing 1) benefit to future patients and 2) future savings from off-patent prices. The proposed CEA approach incorporates these two features to derive the total lifetime value of an innovative drug (i.e., the value of innovation).

Results

The conventional CEA approach tends to underestimate the value of innovative drugs by disregarding the benefit to future patients and savings from off-patent prices. As a result, innovative drugs are underpriced, only allowing manufacturers to capture approximately 15% of the total value of innovation during the patent protection period. In addition to including the incidence population and off-patent price, the alternative approach proposes pricing new drugs by first negotiating the share of value of innovation to be appropriated by the manufacturer (>15%?) and payer (<85%?), in order to then identify the drug price that satisfies this condition.

Conclusion

We argue for a modification to the conventional CEA approach that integrates the total lifetime value of innovative drugs into CEA, by taking into account off-patent pricing and future patients. The proposed approach derives a price that allows manufacturers to capture an agreed share of this value, thereby incentivizing innovation, while supporting health-care systems to pursue dynamic allocative efficiency. However, the long-term sustainability of health-care systems must be assessed before this proposal is adopted by policy makers.

SUBMITTER: Moreno SG

PROVIDER: S-EPMC4826462 | biostudies-literature | 2016

REPOSITORIES: biostudies-literature

ACCESS DATA

Publications

The value of innovation under value-based pricing.

Moreno Santiago G SG Ray Joshua A JA

Journal of market access & health policy 20160407

<h4>Objective</h4>The role of cost-effectiveness analysis (CEA) in incentivizing innovation is controversial. Critics of CEA argue that its use for pricing purposes disregards the 'value of innovation' reflected in new drug development, whereas supporters of CEA highlight that the value of innovation is already accounted for. Our objective in this article is to outline the limitations of the conventional CEA approach, while proposing an alternative method of evaluation that captures the value of ...[more]

PMID: 27123192

Similar Datasets

Project description:Background & aimsIncreasing drug prices lead to payer coverage restrictions, which limit access to therapy. We assessed the cost effectiveness of rifaximin in management of patients with irritable bowel syndrome with diarrhea (IBS-D) under common payer coverage restrictions and determined the maximum price at which rifaximin would be cost effective using contemporary cost-effectiveness thresholds.MethodsA decision analytic model was constructed to evaluate quality of life, cost, and cost effectiveness of rifaximin for patients with IBS-D and complete noncoverage (insurer pays none of the drug cost), unrestricted access (insurer pays 100% of the drug cost), and formulary-restricted access (insurer pays 100% of the drug cost after for patients failed by initial therapy). The maximum cost-effective drug price was determined for each level of drug coverage using threshold analysis adjusted for willingness to pay thresholds from $50,000 to $150,000 per quality-adjusted life year (QALY). Analysis was performed from a payer perspective with a 1-year time horizon.ResultsUnrestricted and formulary-restricted access were more effective than complete non-coverage, resulting in additional 0.03 and 0.05 QALYs gained over noncoverage. However, unrestricted and formulary-restricted coverage were more expensive. At current drug prices, unrestricted or formulary-restricted coverage would cost an additional $1,207,136 or $171,850/QALY gained, compared to complete non-coverage. A 12% to 62% price reduction ($18.46 to $26.34/pill) for formulary-restricted access and 84% to 88% price reduction ($3.53 to $4.71/pill) for unrestricted access would be needed for rifaximin to be a cost-effective treatment strategy. Rifaximin retreatment intervals, response rates, and adverse events were important factors in sensitivity analysis.ConclusionUsing a decision analytic model, we show that payer coverage for rifaximin for patients with IBS-D exceeds generally accepted cost-effectiveness thresholds at current drug prices. Improved payer coverage could be justified using value-based pricing methods.

Project description:Importance:The high cost of self-injectable epinephrine autoinjectors may represent a barrier to community anaphylaxis management. Value-based pricing can provide a benchmark for rational epinephrine autoinjector costs. Objective:To define value-based pricing of community epinephrine autoinjectors. Design, Setting, and Participants:In an economic evaluation study using a cost-effectiveness birth cohort model over an extended 80-year time horizon, Markov simulations of children with peanut allergy evaluated cost ceilings for value-based epinephrine prices in peanut allergy. Simulation inputs included all-cause age-adjusted mortality (2013 US life tables), 2013 published food allergy fatality rates, 2017 rates of autoinjector device carriage, and 2016 published market costs of self-injectable epinephrine. All costs were expressed in 2018 US dollars and discounted at 3% per annum. Exposures:Cohorts of children with peanut allergy prescribed epinephrine autoinjectors were compared with those not receiving personal epinephrine prescriptions. Children without epinephrine autoinjectors assumed 10-fold to 100-fold fatality risk increases. Costs were evaluated from a societal perspective. Main Outcomes and Measures:Fatality risk, quality-adjusted life-years, and incremental cost-effectiveness ratio. Results:A total of 100?000 simulated infants with peanut allergy entered each strategy, with two-thirds of the group receiving annual personal epinephrine prescriptions and using those devices appropriately when indicated. Over the time horizon, the cost of anaphylaxis preparedness and treatment in those with personal epinephrine devices was $25?478 (95% CI, $25?399-$25?557) compared with $654 (95% CI, $645-$663) for those without personal epinephrine, resulting in an average food allergy fatality of 0.00056 (95% CI, 0.000414-0.000706) per patient prescribed self-injectable epinephrine and 0.00148 (95% CI, 0.001242-0.001718) in those not prescribed self-injectable epinephrine. The value-based price (incremental cost-effectiveness ratio, $100?000 per quality-adjusted life-year) for personal epinephrine based on 10-fold fatality risk difference was $24. At a market cost of $715 per twin pack, the autoinjector incremental cost-effectiveness ratio was $2?742?697 per quality-adjusted life-year. If a hypothetical fatality risk protection from personal epinephrine was modeled at 100-fold, the value-based price ceiling for a personal autoinjector was $264. Conclusions and Relevance:In a simulation of children with peanut allergy, a value-based epinephrine cost has a ceiling of $24 for a personal autoinjector, even at an exaggerated fatality risk.

Project description:ObjectiveIn the field of global mental health, there is a need for identifying core values and competencies to guide training programs in professional practice as well as in academia. This paper presents the results of interdisciplinary discussions fostered during an annual meeting of the Society for the Study of Psychiatry and Culture to develop recommendations for value-driven innovation in global mental health training.MethodsParticipants (n = 48), who registered for a dedicated workshop on global mental health training advertised in conference proceedings, included both established faculty and current students engaged in learning, practice, and research. They proffered recommendations in five areas of training curriculum: values, competencies, training experiences, resources, and evaluation.ResultsPriority values included humility, ethical awareness of power differentials, collaborative action, and "deep accountability" when working in low-resource settings in low- and middle-income countries and high-income countries. Competencies included flexibility and tolerating ambiguity when working across diverse settings, the ability to systematically evaluate personal biases, historical and linguistic proficiency, and evaluation skills across a range of stakeholders. Training experiences included didactics, language training, self-awareness, and supervision in immersive activities related to professional or academic work. Resources included connections with diverse faculty such as social scientists and mentors in addition to medical practitioners, institutional commitment through protected time and funding, and sustainable collaborations with partners in low resource settings. Finally, evaluation skills built upon community-based participatory methods, 360-degree feedback from partners in low-resource settings, and observed structured clinical evaluations (OSCEs) with people of different cultural backgrounds.ConclusionsGlobal mental health training, as envisioned in this workshop, exemplifies an ethos of working through power differentials across clinical, professional, and social contexts in order to form longstanding collaborations. If incorporated into the ACGME/ABPN Psychiatry Milestone Project, such recommendations will improve training gained through international experiences as well as the everyday training of mental health professionals, global health practitioners, and social scientists.

Dataset Information

The value of innovation under value-based pricing.

Objective

Method

Results

Conclusion

Publications

The value of innovation under value-based pricing.

Similar Datasets

OmicsDI is part of the ELIXIR infrastructure