Emerging Picture of Value Based Pricing


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Emerging Picture of Value Based Pricing

  1. 1. The Emerging Picture of “Value Based Pricing” Kakushin Web-Based Conference 17 October 2012 Jon Sussex Deputy Director Office of Health Economics www.ohe.org 1
  2. 2. Agenda• What we know about UK Government “VBP” proposals• What that might mean in practice• Centrality of “threshold” concept• Non-linear pricing etc.• Conclusions
  3. 3. At the NICE Annual Conference, 11 May 2011, Earl Howe (Minister of Health) stated: • “What Ministers are seeking are new arrangements to encourage the development of drugs to address areas of unmet need and bring prices and benefits into line” • “Weve got to think about moving away from the drugs budget and towards a health budget” • Ministers “are not too afraid of increasing the drugs budget, as such”
  4. 4. “VBP” for all new medicines from 1/1/14 1. Pharmacoeconomic evaluation - QALYs 2. “Burden of illness” July 2011 3. “Therapeutic innovation & improvements” 4. “Wider societalDecember 2010 benefits” 5. Combined via adjusted £/QALY threshold http://www.dh.gov.uk/en/Consultations/Responsestoconsultations/DH_128226
  5. 5. “4.10 The Government proposes that the price thresholdstructure is determined as follows:i. there would be a basic threshold, reflecting the benefitsdisplaced elsewhere in the NHS when funds are allocated to newmedicines;ii. there would be higher thresholds for medicines that tacklediseases where there is greater “burden of illness”: the more themedicine is focused on diseases with unmet need or which areparticularly severe, the higher the threshold;iii. there would be higher thresholds for medicines that candemonstrate greater therapeutic innovation and improvementscompared with other products;iv. there would be higher thresholds for medicines that candemonstrate wider societal benefits.”
  6. 6. Elements of “Value” internationally E&W Australia Canada France Italy Japan SwedenClinical effectiveness       Cost effectiveness    Alternatives available /  unmet needDisease severity EoL   New mode of action Paediatric Cost savings beyond health careProductivity 
  7. 7. VBP – Taxonomy of approaches What elements How measured How How linked to of value and valued aggregated price • QALYs • Natural units • Deliberative • Formula • Other types of • Categories process • Negotiation health gain • Yes/No • Weighted • Severity QALYs • ‘Unmet need’ • Whose • MCDA* • ‘Innovation’ values? • Net benefit £ • Wider societal impacts *MCDA = Multi-Criteria Decision AnalysisFor full info see OHE Research Paper 11/04; Sussex, Towse & Devlin; August 2011 at:http://www.ohe.org/publications/recent-publications/list-by-title-20/detail/date////operationalising-value-based-pricing-of-medicines-a-taxonomy-of-approaches.html
  8. 8. How to aggregate the elements of value Pros ConsWeighted QALYs Incremental QALYS are major ‘QALYs are not the only fruit….’ part of benefit of many If incremental QALYs are medicines small/zero, then other benefits Familiarity of QALYs forced to be small/zero too Need a £ per weighted QALY threshold value (opportunity cost)MCDA Points Includes all categories of Need a £ per point threshold benefits, including QALYs and value (opportunity cost) non-QALY health gains, without distortion Pragmatic – used by PCTs£ Net Benefit Includes all categories of Very explicit – valuing each type benefits without distortion. of benefit separately in £ terms Goes directly to value of each may be deemed politically more benefit category difficult
  9. 9. NICE’s thinking
  10. 10. DH Response to the Consultation• 5.8 “…we intend to maintain the effect of the funding direction…”• 5.9 “…there are questions about the impact of medicine prices on companies’ decisions on where to allocate investments or conduct research…”• 5.28 “..the Government does not agree that a new medicine should be automatically exempted..because its total budget impact is ..below an arbitrary threshold..”• 5.47 “…the benefits of enabling pricing by indication are likely to be outweighed by the practical difficulties…explore alternatives..”• 5.60 “..we recognise the value that incremental developments can bring…”• 5.102 “…we have not ruled out the possibility that there may be a role for some type of Patient Access Scheme (PAS) arrangements…”• 6.5 “Our preference ..would be..to achieve a negotiated settlement…”
  11. 11. Estimated NICE threshold ICER (£/QALY) in practice Devlin et al. 2010 100% 90% 80% 70% Model Threshold: ICER giving X% chance of rejectionProbability of rejection 60% (mean values for other parameter) 50% 50% 25% 75% 40% ICER only £40,552 £27,066 £54,006 30% Basic Model £40,345 £27,383 £53,271 20% Min & max; Min: Min: Min: All models £40,206 £27,066 £52,856 10% Max: Max: Max: £40,721 £27,446 £54,006 0% £0 £10,000 £20,000 £30,000 £40,000 £50,000 £60,000 £70,000 ICER (cost/QALY) Basic model ICER only ICER & total pts in RCTs Basic with no. RCTs & mean pt numbers disaggregated Omitting only Tx and pt group submission Omitting only Tx and pt group submission and adding ICER-squared
  12. 12. Estimated threshold: cancer Devlin et al. 2010 100% 90% 80% • ‘Cancer’ dummy 70% significantProbability of rejection 60% • 102 cancer decisions 50% Cancer included in the Not cancer analysis 40% • 92 pre-EOL (38 no, 54 30% yes); 10 post EOL (7 20% no, 3 yes, of which 2 10% considered under 0% EOL). £0 £10,000 £20,000 £30,000 £40,000 £50,000 £60,000 £70,000 ICER (cost/QALY) • The estimate of the threshold (probability of rejection = 50%) is: • £50,139 for cancer drugs • £37,805 for non-cancer drugs • NICE decisions reveal a willingness to ‘pay’ an additional > £10k per QALY gained by cancer patients
  13. 13. “Thresholds” or converting benefits into £• NB: If benefits include more than QALYs then idea of a unique £/QALY threshold becomes redundant• NHS opportunity cost (OC)• Social value of a QALY (SV)• Equal in an ideal world but the world is not ideal• SV of a QALY in UK appears to be around or a bit above NICE’s £20k-£30k range but there is much uncertainty as valuations vary wildly across individuals• If SV>OC then health care budget spending is below socially desired levels
  14. 14. Subgroups: multiple prices, a single blended price or non-linear pricing? Price / Cost Demand 0 Quantity
  15. 15. Different prices for different indications with different values?• Single ‘blended’ price• Or different prices for different indications: • NICE technology appraisal TA176 for cetuximab required a 16% discount when used with oxaliplatin (+ 5-fluorouracil and folinic acid) • But not for another (+5FU, folinic acid and irinotecan) where the patient cannot take oxaliplatin
  16. 16. Negotiation and PAS• Imprecision / uncertainty / multiple indications => plenty of scope for negotiation where the “value based price” is a binding constraint• VBP does not imply no further role for Patient Access Schemes and non-linear pricing: Government VBP consultation response, July 2011: “We have not ruled out … ‘PAS’ arrangements in the new system.”
  17. 17. “VBP”: big change or name change?• Wider scope of benefits and costs taken into account• Chance for more openness or likelihood of less?• Price negotiation for individual medicines, not regulation of company profit from total sales to NHS
  18. 18. To enquire about additional information and analyses, pleasecontact Jon Sussex at jsussex@ohe.orgTo keep up with the latest news and research, subscribe to our blog, OHENewsFollow us on Twitter @OHENews, LinkedIn and SlideShareOffice of Health Economics (OHE)Southside, 7th Floor105 Victoria StreetLondon SW1E 6QTUnited Kingdom+44 20 7747 8850www.ohe.orgOHE’s publications may be downloaded free of charge for registered users of itswebsite.©2012 OHE