New research supports value-based pricing
By: John Doyle, DrPH, MPH | November 11, 2015
The pursuit of value-based pricing for pharmaceutical drugs makes sense in theory – drugs that deliver greater patient value should reward a higher price point. Proving the incremental value of a treatment relative to its competitors is a complicated challenge that the industry is only beginning to figure out. Myriad valuation techniques are currently used by various healthcare system stakeholders to appraise drugs, yet no gold standard framework exists.
A team of experts at Quintiles established an initiative to develop an integrated, systematic, and evidence-based approach to appraising a drug’s relative performance. We created a multi-attribute valuation methodology that would take into account efficacy, safety and economic factors to determine the relative value of pharmaceuticals. Given the plethora of publications on cancer drug valuation schemes, we decided to pilot this framework on a cohort of oncologic therapies. We performed regression analysis to determine the relationship between incremental drug effectiveness and the Quintiles Drug Value Score. We also reviewed the existing value-based assessment frameworks for cancer drugs to assess the strengths and limitations of each framework.
We reviewed published clinical trial results archived in PubMed from 2005-2013 and Health Technology Assessments (HTAs) captured in Quintiles’ HTA Accelerator database to measure key value attributes including overall survival, progression free survival, and adverse events, of four oncology drugs. The cost per month of each drug was calculated based on dosing and published wholesale acquisition costs. Drugs were then compared vis-à-vis value score vs. cost per month to understand the value-cost relationship.
A rationale for value based pricing
Our analysis shows a positive relationship between clinical benefits generated and cost of drug. Notably, there is a distinct correlation between pricing and survival rates: the framework showed an increase of approximately $221/month (p < .05) for each month of overall survival improvement.
This research represents an important next step in rationalizing value-based pricing in oncology treatments. Our evidence-based appraisal framework offers a pragmatic approach to pricing drugs in a value-based environment. The framework also provides pharmaceutical companies a mechanism to assess future-state external valuations of target-product profiles as well as an evidence development strategy for demonstrating value-based pricing of their drugs.
We will be sharing details of these results in a poster at ISPOR in Milan today and we are excited to see where these results take us. Further research is needed to compare the results of this multi-attribute analysis and scoring framework with frameworks being developed by other organizations.
Notwithstanding its limitations, we expect this framework to be a valuable tool for biopharma companies to better position their treatments with payers and policy-makers. We are looking forward helping our customer use this tool to more quantitatively define their value propositions and demonstrate the competitive advantage of their drugs. By proving their external value of their medications, pharma can capture more intrinsic value of their innovation.