It Takes 2 to Tango. Setting Out the Conditions in Which Performance-Based Risk-Sharing Arrangements Work for Both Parties.

OBJECTIVES: Faster regulatory approval processes often fail to achieve faster patient access. We seek an approach, using performance-based risk-sharing arrangements, to address uncertainty for payers regarding the relative effectiveness and value for money of products launched through accelerated approval schemes. One important reason for risk sharing is to resolve differences of opinion between innovators and payers about a technology's underlying value. To date, there has been no formal attempt to set out the circumstances in which risk sharing can address these differences. METHODS: We use a value of information framework to understand what a performance-based risk-sharing arrangements can, in principle, add to a reimbursement scheme, separating payer perspectives on cost-effectiveness and the value of research from those of the innovator. We find 16 scenarios, developing 5 rules to analyze these 16 scenarios, identifying cases in which risk sharing adds value for both parties. RESULTS: We find that risk sharing provides an improved solution in 9 out of 16 combinations of payer and innovator expectations about treatment outcome and the value of further research. Among our assumptions, who pays for research and scheme administration costs are key. CONCLUSIONS: Steps should be undertaken to make risk sharing more practical, ensuring that payers consider it an option. This requires additional costs to the health system falling on the innovator in an efficient way that aligns incentives for product development for global markets. Health systems benefits are earlier patient access to cost-effective treatments and payers with higher confidence of not wasting money. Innovators get greater returns while conducting research.

The Allocation of the Economic Value of Second-Generation Antipsychotics Over the Product Life Cycle: The Case of Risperidone in Sweden and the United Kingdom.

OBJECTIVE: This article estimates the life-cycle value of risperidone as representative of second-generation antipsychotics (SGA) relative to haloperidol (first-generation antipsychotics). METHODS: We estimated the number of patients treated with risperidone in Sweden and the United Kingdom, from 1994 to 2017, using data of usage and volume sales. We collected data from the literature on the effectiveness (quality-adjusted life-years per patient per year), direct costs (health services), and indirect costs (productivity) of risperidone and haloperidol. We proxied the incremental value added by the new class (SGA) using a comparator from the inferior class. Next, we modeled the life-cycle uptake of risperidone to estimate the life-cycle incremental cost (ie, direct, indirect, and medicine costs), incremental quality-adjusted life-years, and net monetary benefit of risperidone. We also assessed the life-cycle distribution of the social surplus between the payer (consumer surplus) and the innovator (producer surplus). RESULTS: For the United Kingdom, consumer surplus represents around 72% of the total surplus before patent expiration and around 95% after patent expiration. For Sweden, the consumer surplus represents around 94% of the total surplus before patent expiration and around 99% after generic competition. CONCLUSION: These results suggest that the value added by SGAs to the system is higher than the expected value estimated using cost-effectiveness analysis at launch. Pricing and reimbursement decisions could recognize the full life cycle of value of innovative medicines. This not only presents a challenge of estimation but also of assessing the appropriate division of shares of social value.

Why We Need a New Outcomes-Based Value Attribution Framework for Combination Regimens in Oncology.

BACKGROUND: Novel oncology treatment strategies increasingly use medicines with distinct but complementary mechanisms of action in combination or in close sequence. Payers, when confronted with higher total cost of providing combination regimens involving multiple therapies and usually longer treatment durations, are reluctant to reimburse them, particularly when they perceive the expected incremental benefits from adding a new medicine (the add-on) to a currently reimbursed medicine (the backbone) not to represent value for money to the health system. Nevertheless, depending on how value is attributed to the add-on versus the backbone, a clinically effective medicine used as part of a regimen that increases treatment duration might be found "not cost-effective at zero price." This phenomenon, signaling a policy problem not a pricing issue, first needs to be better understood before a generalizable and transparent solution can be presented. OBJECTIVE: This article sets out when this policy challenge arises and describes general principles that any proposed solution to the value attribution problem must satisfy. METHODS: We develop a simplified conceptual framework and use this to address 2 topics. The first is to understand the origin of problems posed by the current approach for attributing value in incremental cost-effectiveness analyses of combination regimens. The second is to discuss 2 new approaches in the literature designed to address the challenge. FINDINGS: We find that neither meets our criteria, meaning that further work is needed to resolve the issue. Finally, we briefly discuss the implications of relaxing the simplifying assumptions in our conceptual framework.

Considering Severity in Health Technology Assessment: Can We Do Better?

There is strong evidence that individuals and the public assign relatively greater value to health gains from relatively more severe health states. This preference is increasingly reflected in health technology assessment, with some consideration of severity incorporated by health technology assessment bodies in, among others, The Netherlands, England and Wales, Norway, Sweden, and the United States. If a societal "severity premium" is to be considered fairly and consistently, we argue that a more explicit and quantitative approach is needed. We highlight drawbacks of categorical approaches, especially discontinuities between severity categories that arguably violate concepts of vertical equity, and argue that a more continuous approach to understanding severity is needed. We also note challenges to more explicit approaches, including implications of a lower threshold for less severe conditions and the relative complexity of calculating a continuous severity adjustment.

Estimating health system opportunity costs: the role of non-linearities and inefficiency.

BACKGROUND: Empirical estimates of health system opportunity costs have been suggested as a basis for the cost-effectiveness threshold to use in Health Technology Assessment. Econometric methods have been used to estimate these in several countries based on data on spending and mortality. This study examines empirical evidence on four issues: non-linearity of the relationship between spending and mortality; the inclusion of outcomes other than mortality; variation in the efficiency with which expenditures generate health outcomes; and the relationship among efficiency, mortality rates and outcome elasticities. METHODS: Quantile Regression is used to examine non-linearities in the relationship between mortality and health expenditures along the mortality distribution. Data Envelopment Analysis extends the approach, using multiple measures of health outcomes to measure efficiency. These are applied to health expenditure data from 151 geographical units (Primary Care Trusts) of the National Health Service in England, across eight different clinical areas (Programme Budget Categories), for 3 fiscal years from 2010/11 to 2012/13. RESULTS: The results suggest differences in efficiency levels across geographical units and clinical areas as to how health resources generate outcomes, which indicates the capacity to adjust to a decrease in health expenditure without affecting health outcomes. Moreover, efficient units have lower absolute levels of mortality elasticity to health expenditure than inefficient ones. CONCLUSIONS: The policy of adopting thresholds based on estimates of a single system-wide cost-effectiveness threshold assumes a relationship between expenditure and health outcomes that generates an opportunity cost estimate which applies to the whole system. Our evidence of variations in that relationship and therefore in opportunity costs suggests that adopting a single threshold may exacerbate the efficiency and equity concerns that such thresholds are designed to counter. In most health care systems, many decisions about provision are not made centrally. Our analytical approach to understanding variability in opportunity cost can help policy makers target efficiency improvements and set realistic targets for local and clinical area health improvements from increased expenditure.

Should We Pay for Scientific Knowledge Spillovers? The Underappreciated Value of "Failed" R&D Efforts.

Recent experience with COVID-19 has reminded us of the importance of scientific progress in enabling pharmaceutical innovation. Developing novel therapies is a highly risky but rewarding process: it not only produces innovative drugs, but also valuable scientific knowledge that benefits the community of innovators. This paper examines whether the existing reward system for pharmaceutical research and development (R&D) leads to socially optimal levels of scientific knowledge generation and sharing, with a particular focus on the value of failures in the pharmaceutical R&D efforts. We first outline a conceptual approach based on the idea that pharmaceutical R&D efforts produce both medicines and scientific knowledge, and illustrate this with some examples of how failures may generate information beneficial to concurrent and subsequent R&D efforts. We then summarize the relatively small literature on failures in pharmaceutical R&D and their impact on R&D decision making. Lastly, we discuss several market-based and nonmarket-based policy approaches that can address potential shortcomings in the current reward system which may lead to suboptimal R&D and knowledge sharing.

How Should the World Pay for a Coronavirus Disease (COVID-19) Vaccine?

The potential health and economic value of a vaccine for coronavirus disease (COVID-19) is self-evident given nearly 2 million deaths, "collateral" loss of life as other conditions go untreated, and massive economic damage. Results from the first licensed products are very encouraging; however, there are important reasons why we will likely need second and third generation vaccines. Dedicated incentives and funding focused explicitly on nurturing and advancing competing second and third generation vaccines are essential. This article proposes a collaborative, market-based financing mechanism for the world to incentivize and pay for the development of, and provide equitable access to, second and third generation COVID-19 vaccines. Specifically, we propose consideration of a Benefit-Based Advance Market Commitment (BBAMC). The BBAMC uses health technology assessment to determine value-based prices to guarantee overall market revenues, not revenue for any specific product or company. The poorest countries would not pay a value-based price but a discounted "tail-price." Innovators must agree to supply them at this tail price or to facilitate technology transfer to local licensees at low or zero cost to enable them to supply at this price. We expect these purchases to be paid for in full or large part by global donors. The BBAMC therefore sets prices in relation to value, protects intellectual property rights, encourages competition, and ensures all populations get access to vaccines, subject to agreed priority allocation rules.

Hemophilia Gene Therapy Value Assessment: Methodological Challenges and Recommendations.

Gene therapy for hemophilia is designed to produce health gains for patients over many years. Rewarding that value creation on the basis of a one-time treatment implies a large upfront cost. This cost can only be justified by long-term health benefits and being cost-effective compared with conventional treatments. Yet, uncertainties about the long-term benefits make it challenging to assess clinical and economic value of gene therapies at launch. We identify and discuss key methodological challenges in assessing the value of gene therapy for hemophilia, including the immaturity of evidence on the durability of benefits, lack of definition and valuation of cure for chronic diseases, absence of randomized controlled trials, limitations of traditional quality of life measures in hemophilia, approach for qualifying cost-savings compared with current treatments, and choice of perspective. The Institute for Clinical and Economic Review has developed a framework for assessing single or short-term therapies (ICER-SST) and has applied it in hemophilia. After reviewing this framework and its application, we recommend the following when assessing the value of hemophilia gene therapies: (1) leveraging expert clinical opinion to justify assumptions on the durability of benefits; (2) using external synthetic controls and lead-in, self-controlled trials to assess comparative effectiveness; (3) addressing limitations of traditional quality of life measures through the use of modified utility collection approaches; (4) adjusting cost offsets from gene therapies with caution; (5) considering outcome-based contracting to address uncertainties about prices and long-term outcomes; and (6) presenting societal and healthcare system perspectives in parallel.

Reconciling ACEA and MCDA: is there a way forward for measuring cost-effectiveness in the U.S. healthcare setting?

BACKGROUND: The ISPOR Special Task Force (STF) on US Value Assessment Frameworks was agnostic about exactly how to implement the quality-adjusted life year (QALY) as a key element in an overall cost-effectiveness evaluation. But the STF recommended using the cost-per-QALY gained as a starting point in deliberations about including a new technology in a health plan benefit. The STF offered two major alternative approaches-augmented cost-effectiveness analysis (ACEA) and multi-criteria decision analysis (MCDA)-while emphasizing the need to apply either a willingness-to-pay (WTP) or opportunity cost threshold rule to operationalize the inclusion decision. METHODS: The MCDA model uses the multi-attribute utility function. The ACEA model is based on the expected utility theory. In both ACEA and MCDA models, value trade-offs are derived in a hierarchical model with two high-level objectives which measure overall health gain separately from financial attributes affecting consumption. RESULTS: Even though value trade-offs can be elicited or revealed without considering budget constraints, we demonstrate that they can be used similarly to WTP-based cost-effectiveness thresholds for resource allocation decisions. The consideration of how costs of medical technology, income, and severity of disease affect value trade-offs demonstrates, however, that reconciling decisions in ACEA and MCDA requires that health and consumption are either complements or independent attributes. CONCLUSIONS: We conclude that value trade-offs derived either from ACEA or MCDA move similarly with changes in main factors considered by enrollees and decision makers-costs of the medical technology, income, and severity of disease. Consequently, this complementarity between health and consumption is a necessary condition for reconciling ACEA and MCDA. Moreover, their similarity would be further enhanced if the QALY is used as the key attribute or anchor in the MCDA value function: the choice between the two is a pragmatic question that is still open.

Challenges in valuing and paying for combination regimens in oncology: reporting the perspectives of a multi-stakeholder, international workshop.

BACKGROUND: It is increasingly common for two or more treatments for cancer to be combined as a single regimen. Determining value and appropriate payment for such regimens can be challenging. This study discusses these challenges, and possible solutions. METHODS: Stakeholders from around the world attended a 2-day workshop, supported by a background paper. This study captures key outcomes from the discussion, but is not a consensus statement. RESULTS: Workshop attendees agreed that combining on-patent treatments can result in affordability and value for money challenges that delay or deny patient access to clinically effective treatments in many health systems. Options for addressing these challenges include: (i) Increasing the value of combination therapies through improved clinical development; (ii) Willingness to pay more for combinations than for single drugs offering similar benefit, or; (iii) Aligning the cost of constituent therapies with their value within a regimen. Workshop attendees felt that (i) and (iii) merited further discussion, whereas (ii) was unlikely to be justifiable. Views differed on the feasibility of (i). Key to (iii) would be systems allowing different prices to apply to different uses of a drug. CONCLUSIONS: Common ground was identified on immediate actions to improve access to combination regimens. These include an exploration of the legal challenges associated with price negotiations, and ensuring that pricing systems can support implementation of negotiated prices for specific uses. Improvements to clinical development and trial design should be pursued in the medium and longer term.

Establishing a reasonable price for an orphan drug.

BACKGROUND: This paper addresses the question of what a reasonable price for an orphan drug is. The research proposes a way to adjust an established payer/HTA body incremental cost-effectiveness threshold (CET) to take account of differences in patient populations and costs of research and development in order to sustain prices that generate rates of return from investments in developing orphan drugs that are no greater than the industry average. METHODS: We investigated the cost of conducting research for orphan drugs as compared to non-orphan drugs, as well as patient population sizes targeted by orphans and non-orphans. We provided an empirical illustration based on novel drug approvals of orphan and non-orphan drugs of the FDA between 2011 and 2015 (N = 182). RESULTS: Using, for illustration, the NICE incremental CET (£20 K per QALY) as an anchor and adjusting by R&D costs and expected market revenue, we estimated the adjusted reasonable CET for orphan drugs to be £39.1 K per QALY at the orphan population cut-off and £78.3 K per QALY at the orphan population mid-point. For ultra-orphan drugs the adjusted CET was £937.1 K. CONCLUSIONS: We propose one general method for establishing a reasonable price for an orphan drug, based on the proposition that rates of return for investments in developing orphan drugs should not be greater than the industry average. More research is required on data and assumptions, but with the data and assumptions we use, we find that in order to secure such a reasonable price for an orphan drug, the CET for orphans would need to be higher. This could be one approach for establishing the maximum allowable price society should be willing to pay, although decision-makers may still wish to negotiate a lower price, or refuse to pay such a premium over the value-based price in order to treat these groups of patients.

Uncertainty and Cures: Discontinuation, Irreversibility, and Outcomes-Based Payments: What Is Different About a One-Off Treatment?

Payers are concerned that one-off "cures" bring great uncertainty with the consequential risk of incorrect adoption decisions, and significant budget impact from large one-off payments. Innovators worry about bias against "cures" in favor of repeat treatment, which is not in patients' interests. We find that even in the absence of a difference in uncertainty of outcomes, adverse pay-offs differ. The greater financial risk associated with a cure is related to the issue of treatment discontinuation, driven by irreversibility. This paper uses a stylized example to illustrate the need to separate three different elements of the issue: (i) one-off versus repeat or ongoing treatment, (ii) duration of treatment effect, and (iii) the potential role of financial arrangements or risk sharing to mitigate the financial risk to the payer. It concludes that: (i) prevalence and discontinuation issues mean that the impact on the payer of an incorrect decision is greater with a one-off treatment than a repeat therapy; (ii) with evidence collection this risk diminishes over time (a form of CED or OWR); and (iii) financial arrangements or risk sharing can eliminate differences for the payer as between one-off and repeat therapy. The impact of (iii) also addresses payer concerns about budget impact.

Objectives, Budgets, Thresholds, and Opportunity Costs-A Health Economics Approach: An ISPOR Special Task Force Report [4].

The fourth section of our Special Task Force report focuses on a health plan or payer's technology adoption or reimbursement decision, given the array of technologies, on the basis of their different values and costs. We discuss the role of budgets, thresholds, opportunity costs, and affordability in making decisions. First, we discuss the use of budgets and thresholds in private and public health plans, their interdependence, and connection to opportunity cost. Essentially, each payer should adopt a decision rule about what is good value for money given their budget; consistent use of a cost-per-quality-adjusted life-year threshold will ensure the maximum health gain for the budget. In the United States, different public and private insurance programs could use different thresholds, reflecting the differing generosity of their budgets and implying different levels of access to technologies. In addition, different insurance plans could consider different additional elements to the quality-adjusted life-year metric discussed elsewhere in our Special Task Force report. We then define affordability and discuss approaches to deal with it, including consideration of disinvestment and related adjustment costs, the impact of delaying new technologies, and comparative cost effectiveness of technologies. Over time, the availability of new technologies may increase the amount that populations want to spend on health care. We then discuss potential modifiers to thresholds, including uncertainty about the evidence used in the decision-making process. This article concludes by discussing the application of these concepts in the context of the pluralistic US health care system, as well as the "excess burden" of tax-financed public programs versus private programs.

Paying for Cures: Perspectives on Solutions to the "Affordability Issue".

Curative therapies and other medicines considered "game-changing" in terms of health gain can be accompanied by high demand and high list prices that pose budget challenges to public and private payers and health systems-the so-called affordability issue. These challenges are exacerbated when longer term effectiveness, and thus value for money, is uncertain, but they can arise even when treatments are proven to be highly cost-effective at the time of launch. This commentary reviews innovative payment solutions proposed in the literature to address the affordability issue, including the use of credit markets and of staged payments linked to patient outcomes, and draws on discussions with payers in the United States and Europe on the feasibility or desirability of operationalizing any of the alternative financing and payment strategies that appear in the literature. This included a small number of semistructured interviews. We conclude that there is a mismatch between the enthusiasm in the academic literature for developing new approaches and the scepticism of payers that they can work or are necessary. For the foreseeable future, affordability pressures will continue to be handled by aggressive price bargaining, high co-pays (in systems in which this is possible), and restricting access to subgroups of patients. Of the mechanisms we explored, outcomes-based payments were of most interest to payers, but the costs associated with operating such schemes, together with implementation challenges, did not make them an attractive option for managing affordability.

Approaches to Aggregation and Decision Making-A Health Economics Approach: An ISPOR Special Task Force Report [5].

The fifth section of our Special Task Force report identifies and discusses two aggregation issues: 1) aggregation of cost and benefit information across individuals to a population level for benefit plan decision making and 2) combining multiple elements of value into a single value metric for individuals. First, we argue that additional elements could be included in measures of value, but such elements have not generally been included in measures of quality-adjusted life-years. For example, we describe a recently developed extended cost-effectiveness analysis (ECEA) that provides a good example of how to use a broader concept of utility. ECEA adds two features-measures of financial risk protection and income distributional consequences. We then discuss a further option for expanding this approach-augmented CEA, which can introduce many value measures. Neither of these approaches, however, provide a comprehensive measure of value. To resolve this issue, we review a technique called multicriteria decision analysis that can provide a comprehensive measure of value. We then discuss budget-setting and prioritization using multicriteria decision analysis, issues not yet fully resolved. Next, we discuss deliberative processes, which represent another important approach for population- or plan-level decisions used by many health technology assessment bodies. These use quantitative information on CEA and other elements, but the group decisions are reached by a deliberative voting process. Finally, we briefly discuss the use of stated preference methods for developing "hedonic" value frameworks, and conclude with some recommendations in this area.

A Health Economics Approach to US Value Assessment Frameworks-Summary and Recommendations of the ISPOR Special Task Force Report [7].

This summary section first lists key points from each of the six sections of the report, followed by six key recommendations. The Special Task Force chose to take a health economics approach to the question of whether a health plan should cover and reimburse a specific technology, beginning with the view that the conventional cost-per-quality-adjusted life-year metric has both strengths as a starting point and recognized limitations. This report calls for the development of a more comprehensive economic evaluation that could include novel elements of value (e.g., insurance value and equity) as part of either an "augmented" cost-effectiveness analysis or a multicriteria decision analysis. Given an aggregation of elements to a measure of value, consistent use of a cost-effectiveness threshold can help ensure the maximization of health gain and well-being for a given budget. These decisions can benefit from the use of deliberative processes. The six recommendations are to: 1) be explicit about decision context and perspective in value assessment frameworks; 2) base health plan coverage and reimbursement decisions on an evaluation of the incremental costs and benefits of health care technologies as is provided by cost-effectiveness analysis; 3) develop value thresholds to serve as one important input to help guide coverage and reimbursement decisions; 4) manage budget constraints and affordability on the basis of cost-effectiveness principles; 5) test and consider using structured deliberative processes for health plan coverage and reimbursement decisions; and 6) explore and test novel elements of benefit to improve value measures that reflect the perspectives of both plan members and patients.

Toward a Broader Concept of Value: Identifying and Defining Elements for an Expanded Cost-Effectiveness Analysis.

This commentary identifies and defines potentially useful expansions to traditional cost-effectiveness analysis as often used in health technology assessment. Since the seminal 1977 article by Weinstein and Stason, the recommended approach has been the use of the incremental cost-effectiveness ratio based on the metric of the cost per quality-adjusted life-year gained, allowing comparisons across different technologies. An expanded framework, incorporating a wider range of the elements of value, is proposed. In addition to the core value drivers of health gain and other health system cost savings (if any), we propose adding other less recognized elements related to the value of knowing and informational externalities. We describe each of five factors related to the value of knowing: 1) a reduction in uncertainty, reflecting the benefit of a companion diagnostic increasing the certainty of a patient׳s response to a medicine; 2) insurance value related to greater peace of mind due to protection against catastrophic health and financial loss; 3) the value of hope for a "cure," leading individuals to become risk seekers in some circumstances; 4) real option value due to life extension opening possibilities for individuals to benefit from future innovation; and 5) spillovers or externalities arising from benefits of scientific advances that cannot be entirely appropriated by those making the advances. Further thought and research are needed on how best to measure and integrate these elements into an incremental value framework and on coverage and pricing decisions.

ASSESSING VALUE, BUDGET IMPACT, AND AFFORDABILITY IN ASIA.

OBJECTIVES: The aim of this study was to explore definitions of value and the use of budget impact and affordability considerations in health technology assessment (HTA) in the Asia region, particularly in relation to high cost technologies. METHODS: Issues were debated by senior representatives from HTA and payer systems in Asian countries, delegates from industry, and invited experts at the 2016 meeting of the HTAi Asia Policy Forum (HAPF). A premeeting survey was used to gather data on how value is assessed and budget impact calculations are used within current processes, as well as current approaches to managing affordability. RESULTS: All systems consider health benefit to be the key component of value. There is little consensus around "wider" elements of value that should be included. All systems use budget impact in decision making, although meeting attendees noted the challenges in making accurate estimates. The most common strategies used to address affordability concerns to date have been: restricting coverage, for example, to patients who are likely to get the highest value; discounts; and revenue caps. It was noted that these "solutions" may have unintended consequences of creating inequitable access to therapies and failing to provide adequate rewards for innovation. CONCLUSIONS: Decision makers, HTA agencies, and industry need to continue to work together to find mutually agreeable solutions to ensure that patients continue to get equitable access to effective therapies at costs that can be afforded throughout the Asia region.

Value-based differential pricing: efficient prices for drugs in a global context.

This paper analyzes pharmaceutical pricing between and within countries to achieve second-best static and dynamic efficiency. We distinguish countries with and without universal insurance, because insurance undermines patients' price sensitivity, potentially leading to prices above second-best efficient levels. In countries with universal insurance, if each payer unilaterally sets an incremental cost-effectiveness ratio (ICER) threshold based on its citizens' willingness-to-pay for health; manufacturers price to that ICER threshold; and payers limit reimbursement to patients for whom a drug is cost-effective at that price and ICER, then the resulting price levels and use within each country and price differentials across countries are roughly consistent with second-best static and dynamic efficiency. These value-based prices are expected to differ cross-nationally with per capita income and be broadly consistent with Ramsey optimal prices. Countries without comprehensive insurance avoid its distorting effects on prices but also lack financial protection and affordability for the poor. Improving pricing efficiency in these self-pay countries includes improving regulation and consumer information about product quality and enabling firms to price discriminate within and between countries.