An integrated valuation model for payer and investor.

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.

Does the Structure Matter? An External Validation and Health Economic Results Comparison of Event Simulation Approaches in Severe Obesity.

OBJECTIVES: As obesity-associated events impact long-term survival, health economic (HE) modelling is commonly applied, but modelling approaches are diverse. This research aimed to compare the events simulation and the HE outcomes produced by different obesity modelling approaches. METHODS: An external validation, using the Swedish obesity subjects (SOS) study, of three main structural event modelling approaches was performed: (1) continuous body mass index (BMI) approach; (2) risk equation approach; and (3) categorical BMI-related approach. Outcomes evaluated were mortality, cardiovascular events, and type 2 diabetes (T2D) for both the surgery and the control arms. Concordance between modelling results and the SOS study were investigated by different state-of-the-art measurements, and categorized by the grade of deviation observed (grades 1-4 expressing mild, moderate, severe, and very severe deviations). Furthermore, the costs per quality-adjusted life-year (QALY) gained of surgery versus controls were compared. RESULTS: Overall and by study arm, the risk equation approach presented the lowest average grade of deviation (overall grade 2.50; control arm 2.25; surgery arm 2.75), followed by the continuous BMI approach (overall 3.25; control 3.50; surgery 3.00) and by the categorial BMI approach (overall 3.63; control 3.50; surgery 3.75). Considering different confidence interval limits, the costs per QALY gained were fairly comparable between all structural approaches (ranging from £2,055 to £6,206 simulating a lifetime horizon). CONCLUSION: None of the structural approaches provided perfect external event validation, although the risk equation approach showed the lowest overall deviations. The economic outcomes resulting from the three approaches were fairly comparable.

Are We Ready for a New Approach to Comparing Coverage and Reimbursement Policies for Medical Nutrition in Key Markets: An ISPOR Special Interest Group Report.

OBJECTIVES: Healthcare policy makers should ensure optimal patient access to medical nutrition (MN) as part of the management of nutrition-related disorders and conditions. Questions remain whether current healthcare policies reflect the clinical and economic benefits of MN. The objective of this article is to characterize coverage and reimbursement of MN, defined as food for special medical purposes/medical food for a diverse set of countries, including Australia, Belgium, Brazil, Canada, China, France, Germany, Hong Kong, Italy, Japan, The Netherlands, Singapore, Spain, United Kingdom, and United States. METHODS: Data sources included published literature and online sources. ISPOR's Nutrition Economics Special Interest Group developed a data collection form to guide data extraction that included reimbursement coverage, years that reimbursement policies were established, and presence of a formal health technology assessment (HTA) for MN technologies. RESULTS: Reimbursement coverage of MN technologies varied across the countries that were reviewed. All but 3 countries limited coverage to specific formulations of products, regardless of demonstrated clinical benefit. The year that reimbursement policies were established varied across countries (ranging from 1984 to 2017), and only 4 countries regularly update policies. France and Brazil are the only countries with a formal HTA process for MN technologies. CONCLUSIONS: Most countries have limited MN reimbursement, have not updated reimbursement policies, and lack HTA for MN technologies. These limitations may lead to suboptimal access to MN technologies where they are indicated to manage nutrition-related disorders and conditions, with the potential of negatively affecting patient and healthcare system outcomes.

A Meal Replacement Program for the Treatment of Obesity: A Cost-Effectiveness Analysis from the Swiss Payer's Perspective.

BACKGROUND: Obesity is a disease associated with high direct medical costs and high indirect costs resulting from productivity loss. The high prevalence of obesity generates the need for payers to identify cost-effective weight loss approaches. Among various weight management techniques, the OPTI (Optifast®) program is a clinically recognised total meal replacement diet that can lead to significant weight loss and reduction in complications. This study's objective is to assess OPTI program's cost-effectiveness in Switzerland in comparison to "no intervention" and pharmacotherapy. METHODS: An event-driven decision-analytic model was used to estimate the payer's cost savings through the reimbursement of OPTI program over a 1-year period as well as a lifetime in Switzerland. The analysis was performed on a broad population of people with obesity with a body mass index (BMI) higher than 30 kg/m2 following the OPTI program vs two comparators (liraglutide and "no intervention"). The model incorporated a higher risk of complications due to an increased BMI and their related healthcare costs. Data sources included published literature, clinical trials, official Swiss price/tariff lists and national population statistics. The primary perspective was that of a Swiss payer. Scenario analyses - for example, for patients with existing complications (such as myocardial infarction, stroke, type 2 diabetes mellitus) or severe obesity - were conducted to test the robustness of the results. RESULTS: The OPTI program results in cost savings of CHF 20,886 (€ 18,724) and CHF 15,382 (€ 13,790) per person compared with "no intervention" and liraglutide 3 mg, respectively. In addition, OPTI program led to 1.133 and 0.734 quality-adjusted life years (QALYs) gained respectively against its comparators. Scenario analyses showed similar outcomes with cost savings and QALYs gained. CONCLUSION: OPTI program is a dominant strategy compared to "no intervention" and liraglutide 3 mg as it leads to both cost savings and QALY gain. Therefore, reimbursing the OPTI program for patients with obesity would be cost-effective for Swiss payers.

The impact of early phase price agreements on prices of orphan drugs.

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.

Replication of Published Health Economic Obesity Models: Assessment of Facilitators, Hurdles and Reproduction Success.

OBJECTIVES: This research aims to (1) replicate published health economic models, (2) compare reproduced results with original results, (3) identify facilitators and hurdles to model replicability and determine reproduction success, and (4) suggest model replication reporting standards to enhance model reproducibility, in the context of health economic obesity models. METHODS: Four health economic obesity models simulating an adult UK population were identified, selected for replication, and evaluated using the Consolidated Health Economic Evaluation Reporting Standards (CHEERS) checklist. Reproduction results were compared to original results, focusing on cost-effectiveness outcomes, and the resulting reproduction success was assessed by published criteria. Replication facilitators and hurdles were identified and transferred into related reporting standards. RESULTS: All four case studies were state-transition models simulating costs and quality-adjusted life-years (QALYs). Comparing original versus reproduction outcomes, the following deviation ranges were observed: costs - 3.9 to 16.1% (mean over all model simulations 3.78%), QALYs - 3.7 to 2.1% (mean - 0.11%), and average cost-utility ratios - 3.0 to 17.9% (mean 4.28%). Applying different published criteria, an overall reproduction success was observed for three of four models. Key replication facilitators were input data tables and model diagrams, while missing standard deviations and missing formulas for equations were considered as key hurdles. CONCLUSIONS: This study confirms the feasibility of rebuilding health economic obesity models, but minor to major assumptions were needed to fill reporting gaps. Model replications can help to assess the quality of health economic model documentation and can be used to validate current model reporting practices. Simple changes to actual CHEERS reporting criteria may solve identified replication hurdles.

Pricing of orphan drugs in oncology and rare diseases.

Objective: The objective of this paper is to determine an upper price limit for an orphan drug by taken a broader perspective and, including also other monetary and non-monetary values for the society. Methods: This model is based on the expected free cash flows and the required minimum rate of return for the investor. In addition we calculated an innovation premium resulting from cost savings due to the substitution effect and the monetary gain in QALYs of a new medicine. We selected Spinraza®, a first in class drug with only best supportive care as comparator, and Perjeta®, a first in class drug with already an actual treatment as comparator. Results: The results show that Spinraza® leads to an innovation premium of € 78,966 and Perjeta® shows an innovation premium of € 4,388, because there were no cost savings. The analyses show the outcomes are sensitive to discount rate for QALYs. Conclusion: The break-even price from only an investor perspective may not reflect the value of drug from a broader perspective. This study shows drug prices based on an innovation premium may be more representative of the actual value of innovation for the society.

Event simulation and external validation applied in published health economic models for obesity: a systematic review.

INTRODUCTION: This study aims to determine methodological variations in the event simulation approaches of published health economic decision models, in the field of obesity, and to investigate whether their predictiveness and validity were investigated via external event validation techniques, which investigate how well the model reproduces reality. AREAS COVERED: A systematic review identified a total of 87 relevant papers, of which 72 that simulated obesity-associated events were included. Most frequently simulated events were coronary heart disease (≈ 83%), type 2 diabetes (≈ 74%), and stroke (≈ 66%). Only for ten published model-based health economic assessments in obesity an external event validation was performed (14%; 10 of 72), and only for one the predictiveness and validity of the event simulation was investigated in a cohort of obese subjects. EXPERT COMMENTARY: We identified a wide range of obesity related event simulation approaches. Published obesity models lack information on the predictive quality and validity of the applied event simulation approaches. Further work on comparing and validating these event simulation approaches is required to investigate their predictiveness and validity, which will offer guidance future modelling in the field of obesity.

A health economic model to assess the cost-effectiveness of OPTIFAST for the treatment of obesity in the United States.

OBJECTIVES: Obesity is associated with high direct medical costs and indirect costs resulting from productivity loss. The high prevalence of obesity generates a justified need to identify cost-effective weight loss approaches from a payer's perspective. Within the variety of weight management techniques, OPTIFAST is a clinically recognized and scientifically proven total meal replacement Low Calorie Diet that provides meaningful results in terms of weight loss and reduction in comorbidities. The objective of this study is assess potential cost-savings of the OPTIFAST program in the US, as compared to "no intervention" and pharmacotherapy. METHODS: An event-driven decision analytic model was used to estimate payer's cost-savings from reimbursement of the 1-year OPTIFAST program over 3 years in the US. The analysis was performed for the broad population of obese persons (BMI >30 kg/m2) undergoing the OPTIFAST program vs liraglutide 3 mg, naltrexone/bupropion and vs "no intervention". The model included the risk of complications related to increased BMI. Data sources included published literature, clinical trials, official US price/tariff lists, and national population statistics. The primary perspective was that of a US payer; costs were provided in 2016 US dollars. RESULTS: OPTIFAST leads over a period of 3 years to cost-savings of USD 9,285 per class I and II obese patient (BMI 30-39.9 kg/m2) as compared to liraglutide and USD 685 as compared to naltrexone/bupropion. In the same time perspective, the OPTIFAST program leads to a reduction of cost of obesity complications of USD 1,951 as compared to "no intervention", with the incremental cost-effectiveness ratio of USD 6,475 per QALY. Scenario analyses also show substantial cost-savings in patients with class III obesity (BMI ≥ 40.0 kg/m2) and patients with obesity (BMI = 30-39.9 kg/m2) and type 2 diabetes vs all three previous comparators and bariatric surgery. CONCLUSIONS: Reimbursing OPTIFAST leads to meaningful cost-savings for US payers as compared with "no intervention" and liraglutide and naltrexone/bupropion in obese patients. Similar results can be expected in matching healthcare settings of other countries. Moreover, OPTIFAST has additional clinical and economic advantages through very low complication and adverse events rates.

Economic viability of Stratified Medicine concepts: An investor perspective on drivers and conditions that favour using Stratified Medicine approaches in a cost-contained healthcare environment.

RATIONALE: Stratified Medicine (SM) is becoming a natural result of advances in biomedical science and a promising path for the innovation-based biopharmaceutical industry to create new investment opportunities. While the use of biomarkers to improve R&D efficiency and productivity is very much acknowledged by industry, much work remains to be done to understand the drivers and conditions that favour using a stratified approach to create economically viable products and to justify the investment in SM interventions as a stratification option. CONCEPT: In this paper we apply a decision analytical methodology to address the economic attractiveness of different SM development options in a cost-contained healthcare environment. For this purpose, a hypothetical business case in the oncology market has been developed considering four feasible development scenarios. CONCLUSIONS: The article outlines the effects of development time and time to peak sales as key economic value drivers influencing profitability of SM interventions under specific conditions. If regulatory and reimbursement challenges can be solved, decreasing development time and enhancing early market penetration would most directly improve the economic attractiveness of SM interventions. Appropriate tailoring of highly differentiated patient subgroups is the prerequisite to leverage potential efficiency gains in the R&D process. Also, offering a better targeted and hence ultimately more cost-effective therapy at reimbursable prices will facilitate time to market access and allow increasing market share gains within the targeted populations.

Systematic review and overview of health economic evaluation models in obesity prevention and therapy.

INTRODUCTION: Given the increasing clinical and economic burden of obesity, it is of major importance to identify cost-effective approaches for obesity management. Areas covered: This study aims to systematically review and compile an overview of published decision models for health economic assessments (HEA) in obesity, in order to summarize and compare their key characteristics as well as to identify, inform and guide future research. Of the 4,293 abstracts identified, 87 papers met our inclusion criteria. A wide range of different methodological approaches have been identified. Of the 87 papers, 69 (79%) applied unique /distinctive modelling approaches. Expert commentary: This wide range of approaches suggests the need to develop recommendations /minimal requirements for model-based HEA of obesity. In order to reach this long-term goal, further research is required. Valuable future research steps would be to investigate the predictiveness, validity and quality of the identified modelling approaches.

Economic Evaluation in Stratified Medicine: Methodological Issues and Challenges.

BACKGROUND: Stratified Medicine (SM) is becoming a practical reality with the targeting of medicines by using a biomarker or genetic-based diagnostic to identify the eligible patient sub-population. Like any healthcare intervention, SM interventions have costs and consequences that must be considered by reimbursement authorities with limited resources. Methodological standards and guidelines exist for economic evaluations in clinical pharmacology and are an important component for health technology assessments (HTAs) in many countries. However, these guidelines have initially been developed for traditional pharmaceuticals and not for complex interventions with multiple components. This raises the issue as to whether these guidelines are adequate to SM interventions or whether new specific guidance and methodology is needed to avoid inconsistencies and contradictory findings when assessing economic value in SM. OBJECTIVE: This article describes specific methodological challenges when conducting health economic (HE) evaluations for SM interventions and outlines potential modifications necessary to existing evaluation guidelines /principles that would promote consistent economic evaluations for SM. RESULTS/CONCLUSIONS: Specific methodological aspects for SM comprise considerations on the choice of comparator, measuring effectiveness and outcomes, appropriate modeling structure and the scope of sensitivity analyses. Although current HE methodology can be applied for SM, greater complexity requires further methodology development and modifications in the guidelines.

Health Economics in Medical Nutrition: An Emerging Science.

RATIONAL: The objective of this paper is to describe the applications of health economic theory to medical nutrition. BACKGROUND: The published literature provides evidence that medical nutrition, e.g. oral nutritional supplements, is an effective treatment for patients with disease related malnutrition. Malnutrition is associated with mortality risk and complication rates, including infections. Malnutrition is not a new problem and with an ageing population it continues to become a major public health concern as increasing age is associated with an increased risk of malnutrition. FINDINGS: This overview shows that in the case RCTs are providing the clinical evidence, there is no methodological difference between a cost-effectiveness analysis for pharmaceutical or nutrition. However, in nutrition the evidence may not always come from RCT data, but will be more often based on observational data. Therefore the clinical evidence of nutrition in itself is not the issue, but the handling of clinical evidence from observational studies. As the link between the consumption of a food product and a resulting health status is often more difficult to establish than the effect of a drug treatment it requires the further development of adapted methodologies in order to correctly predict the impact of food-related health effects and health economic outcomes from a broader perspective.

Cost-effectiveness in Clostridium difficile treatment decision-making.

AIM: To develop a framework for the clinical and health economic assessment for management of Clostridium difficile infection (CDI). METHODS: CDI has vast economic consequences emphasizing the need for innovative and cost effective solutions, which were aim of this study. A guidance model was developed for coverage decisions and guideline development in CDI. The model included pharmacotherapy with oral metronidazole or oral vancomycin, which is the mainstay for pharmacological treatment of CDI and is recommended by most treatment guidelines. RESULTS: A design for a patient-based cost-effectiveness model was developed, which can be used to estimate the cost-effectiveness of current and future treatment strategies in CDI. Patient-based outcomes were extrapolated to the population by including factors like, e.g., person-to-person transmission, isolation precautions and closing and cleaning wards of hospitals. CONCLUSION: The proposed framework for a population-based CDI model may be used for clinical and health economic assessments of CDI guidelines and coverage decisions for emerging treatments for CDI.

Health economic modeling to assess short-term costs of maternal overweight, gestational diabetes, and related macrosomia - a pilot evaluation.

BACKGROUND: Despite the interest in the impact of overweight and obesity on public health, little is known about the social and economic impact of being born large for gestational age or macrosomic. Both conditions are related to maternal obesity and/or gestational diabetes mellitus (GDM) and associated with increased morbidity for mother and child in the perinatal period. Poorly controlled diabetes during pregnancy, pre- pregnancy maternal obesity and/or excessive maternal weight gain during pregnancy are associated with intermittent periods of fetal exposure to hyperglycemia and subsequent hyperinsulinemia, leading to increased birth weight (e.g., macrosomia), body adiposity, and glycogen storage in the liver. Macrosomia is associated with an increased risk of developing obesity and type 2 diabetes mellitus later in life. OBJECTIVE: Provide insight in the short-term health-economic impact of maternal overweight, GDM, and related macrosomia. To this end, a health economic framework was designed. This pilot study also aims to encourage further health technology assessments, based on country- and population-specific data. RESULTS: The estimation of the direct health-economic burden of maternal overweight, GDM and related macrosomia indicates that associated healthcare expenditures are substantial. The calculation of a budget impact of GDM, based on a conservative approach of our model, using USA costing data, indicates an annual cost of more than $1,8 billion without taking into account long-term consequences. CONCLUSION: Although overweight and obesity are a recognized concern worldwide, less attention has been given to the health economic consequences of these conditions in women of child-bearing age and their offspring. The presented outcomes underline the need for preventive management strategies and public health interventions on life style, diet and physical activity. Also, the predisposition in people of Asian ethnicity to develop diabetes emphasizes the urgent need to collect more country-specific data on the incidence of macrosomic births and health outcomes. In addition, it would be of interest to further explore the long-term health economic consequences of macrosomia and related risk factors.

Cost-effectiveness of prucalopride in the treatment of chronic constipation in the Netherlands.

OBJECTIVE: To assess the cost-effectiveness of prucalopride vs. continued laxative treatment for chronic constipation in patients in the Netherlands in whom laxatives have failed to provide adequate relief. METHODS: A Markov model was developed to estimate the cost-effectiveness of prucalopride in patients with chronic constipation receiving standard laxative treatment from the perspective of Dutch payers in 2011. Data sources included published prucalopride clinical trials, published Dutch price/tariff lists, and national population statistics. The model simulated the clinical and economic outcomes associated with prucalopride vs. standard treatment and had a cycle length of 1 month and a follow-up time of 1 year. Response to treatment was defined as the proportion of patients who achieved "normal bowel function". One-way and probabilistic sensitivity analyses were conducted to test the robustness of the base case. RESULTS: In the base case analysis, the cost of prucalopride relative to continued laxative treatment was € 9015 per quality-adjusted life-year (QALY). Extensive sensitivity analyses and scenario analyses confirmed that the base case cost-effectiveness estimate was robust. One-way sensitivity analyses showed that the model was most sensitive in response to prucalopride; incremental cost-effectiveness ratios ranged from € 6475 to 15,380 per QALY. Probabilistic sensitivity analyses indicated that there is a greater than 80% probability that prucalopride would be cost-effective compared with continued standard treatment, assuming a willingness-to-pay threshold of € 20,000 per QALY from a Dutch societal perspective. A scenario analysis was performed for women only, which resulted in a cost-effectiveness ratio of € 7773 per QALY. CONCLUSION: Prucalopride was cost-effective in a Dutch patient population, as well as in a women-only subgroup, who had chronic constipation and who obtained inadequate relief from laxatives.

Health economic evaluation of paricalcitol(®) versus cinacalcet + calcitriol (oral) in Italy. [corrected].

BACKGROUND AND OBJECTIVE: Chronic kidney disease (CKD) is a highly morbid disorder. The most severe form of CKD is end-stage renal disease (ESRD), in which the patient requires some form of renal replacement therapy to survive. The increasing incidence, prevalence, and costs of ESRD are major national healthcare concerns. The objective of this study was to determine the cost effectiveness of two innovative therapies, paricalcitol versus cinacalcet + calcitriol (oral) in patients with CKD stage 5 (CKD 5) in the healthcare setting in Italy in 2013. METHODS: A Markov process model was developed employing data sources from the published literature, paricalcitol clinical trials, official Italian price/tariff lists, and national population statistics. The analysis is based on a comparison of treatment with paricalcitol versus cinacalcet + calcitriol (oral) in CKD 5. The perspective of the study was that of the payer [Italian National Health Service (INHS)]. The primary efficacy outcomes in the paricalcitol and cinacalcet + calcitriol (oral) clinical trials (reduction of secondary hyperparathyroidism, complications, and mortality) were extrapolated to effectiveness outcomes: number of life-years gained (LYG) and number of quality-adjusted life-years (QALYs). Clinical and economic outcomes were discounted at 3 %. RESULTS: The base-case analysis is based on a 5-year time horizon. From the INHS perspective, the use of paricalcitol leads to a cost saving of €1,853 and an increase in LYG (0.136) and a gain in QALYs (0.089). Consequently, the use of paricalcitol is dominant over the use of combination cinacalcet + calcitriol (oral paricalcitol leads to cost savings and a higher effectiveness). Sensitivity analyses confirmed the robustness of the model. CONCLUSION: The results showed that the favorable clinical benefit of paricalcitol results in positive health economic benefits. This study suggests that the use of paricalcitol in patients with ESRD may be cost effective from the perspective of the INHS.