Quintiles Approach To Global Value Based Pricing (Nov 12) Fs

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The ability to strategically price a product in a changing market can be challenging. The traditional price setting process is influenced by several key factors: the manufacturer (production cost and quality of product), the customers and consumers (willingness-to-pay), and the market (market dynamics and competitors). A successful pricing strategy should take into account all of these factors to arrive at a value-based price (VBP).


Quintiles has developed a flexible and adaptable value-based pricing framework that can be applied to any therapeutic area and used to evaluate any number of varying product profiles. It involves understanding how payers value asset attributes and how their willingness-to-pay helps quantify each individual attributes’ contribution to a price. Likewise, the VBP framework can inform what asset attributes contribute to physician prescribing and how their willingness-to-prescribe can translate into market uptake. Because this VBP framework incorporates views from multiple stakeholders, such as payers and physicians, the resulting outputs can be incorporated into other efforts like forecasting estimated market share, prescribing and uptake; or likelihood of coverage and level of reimbursement.

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Quintiles Approach To Global Value Based Pricing (Nov 12) Fs

  1. 1. The Quintiles Approach toGlobal Value-Based Pricing November 2012 Copyright © 2012 Quintiles
  2. 2. Uniquely Positioned to DeliverUnparalleled Insight… Pricing Know-How  Quintiles has unique datasets and extensive experience in developing global P&R strategies that aim to determine the value-maximizing price associated Pricing & with the optimal product positioning Access Know-how 14 years of global Unique payer pricing experience database Global Evidence-Perspective Based Strategy Evidence-Based Strategy • Our evidence-based market access strategies are differentiated by their foundation in actionable health economics, insight from our clinical teams, and intelligence from our commercial teams Health Economists 300 PhD’s on staff Global Perspective  Our global pricing experts have an extensive network in developed and emerging markets from which we can provide direct payer and regulatory insight Offices in over Over 200 global 60 countries consultants 2
  3. 3. Value-Based Pricing IntroductionThe definition of value differs between various stakeholder groups. An understanding ofeach groups’ perception of value is required to develop an evidence-based pricingstrategy Value-Based PricingValue-based pricing is a structured way of estimating price of a new asset based on itsperceived value (supported by evidence) by various stakeholders 3
  4. 4. Key Business QuestionsOur analytics offering allows us to tackle several business questions related to our clients’global pricing strategy • Which stakeholder(s) are most influential for pricing decisions? Does this vary across markets? Solutions Who Matters? • What are the interdependent relationships between stakeholders? • Clear understanding of global stakeholder dynamics • How do stakeholders place value on products (e.g. health • Proven methodologyWhat Matters to economics, net price, cost reduction)? that can quantify and Them? • What are the pricing thresholds they will tolerate and how do relay product-specific you develop access, and revenue strategies around those? value • Access to integrated and unique data sources • What information and tools are needed to develop evidence How Do You based strategies to convince your stakeholders? • Customizable dashboards and toolsInfluence them? • How can you best integrate numerous unstructured data sets to capture and in a manner to derive value out of them? measure value 4
  5. 5. Approach to Pricing Four core pricing analytics verticals provide the pricing insights necessary to develop a comprehensive Evidence-Based Global Pricing Strategy 12-18 Months Before Launch 6-12 Months Before Launch 0-6 Months Before Launch Value-Based Revenue Payer Account Payer Contracting Pricing Optimization Segmentation Strategy • Triangulation of three • Quantitative research with • Prioritizing market • Developing revenue pricing inputs: key stakeholders (n = 75 – opportunity with payers by: maximizing contracting 1. Value-based Price Appraisal 400) – Size/Coverage strategy with: 2. Reference Price – Formulary tier design 1. Formulary Mapping • Output Benchmarking 2. Contract and Utilization – Price/demand equation – Cost-control mechanisms 3. Willingness-to-Pay Analysis Assessment – Pricing scenarios – Competitive positioning 3. Scenario Cost Analysis • Qualitative sample size (n = – Preference/share – Decision making process 20 – 25 relationship – Revenue-optimizing pricing strategyPhase I – Initial Assessment Phase II – Refinement Phase III – Tactical 5
  6. 6. VBP FrameworkAnchored by our health economic modeling capability, we are able to develop evidence-based pricing recommendation that holds up to stakeholders’ scrutiny Business Challenge Inability to financially quantify a product’s value and determine its stakeholders’ substantiated pricing potential Value-Based Pricing Framework Our Framework Triangulation of three evidence-based methodologies: 1. Health Economic Price Appraisal: - Formulates a pricing range based on a health economic appraisal of product benefits measured by a variety of metrics including cost-savings and cost- effectiveness potential Health- Economic 2. Reference Price Benchmarking: Analysis - Assesses the pricing structure of comparable products including an evaluation of real-world dosing (contracts including risk-sharing deals also considered) Value-based 3. Willingness-to-Pay Assessment: Pricing Recomm. - Utilizes qualitative feedback from key decision makers to understand price expectations and thresholds vis-à- vis current competitors and comparables Reference Willingness- Price to-Pay Benchmarking Assessment Outcomes Pricing potential predicated on estimated cost-benefit vis-à-vis comparable drugs, past experience with reference products, and willingness to pay in the marketplace 6
  7. 7. VBP Approach Leveraging a unique framework and all encompassing process-oriented approach to convert therapeutic area and market-specific insight into actionable pricing for clients1. Pricing Insight: 2. Components Analysis: 3. VBP Framework: 4. Value-Based Pricing: Existing Client Pricing Work Comp. Health- Economic 1 Analysis HTAs Comp Comp. Value-based 2 3 Pricing Recomm. Comp. Comp. Comp. Secondary 4 5 6 Reference Willingness- Research Price to-Pay Benchmarking Assessment 7
  8. 8. Illustrative - Oncology VBP Equation Overview Foundational components will be segregated into quantitative and qualitative components which will inform the pricing equation to derive a product’s value proposition Foundational AdditiveVBP = Cost of Comparator + [(Clinical Differentiation x Evidence) x Market Forces)]Range • Cost of selected • OS, PFS, ORR • Trial Design Results • Affordability Components comparator • % patients alive at Year 1 / 2 • Trial Type • Unmet Need • Route of Administration / • Trial Size • Competition Dosage Frequency • Biomarker Test • Novelty • Maintenance of QoL Certainty • Time to Launch • Adverse Events • Treatment Duration (Mos) Source • HECON Models • HECON Models • Qualitative Interviews • Qualitative Interviews • Quantitative Web Survey • $’s • % premium or discount • % premium or discount • % premium or discount Unit 8
  9. 9. VBP and Market AccessPayer handling of specific assets will differ by market type as each market’s approach toproduct evaluation is driven by different factors Free Markets • Multiple-payer market; discrete decision making Low Restrict High Restrict No Coverage • Specialty tiers and co-insurance 1 US Probability of Coverage at Level • Shifting burden of cost onto patient 0.9 HTA Markets 0.8 0.7 • Single-payer market; HTA-based 0.6 decision making 0.5 • Favorable handling if achieve break- 0.4 even threshold of £30,000 UK • National vs. local decision makers 0.3 0.2 0.1 Innovative Markets 0 • Single-payer market; innovation-driven $15,000 $30,000 $45,000 $60,000 $75,000 $90,000 $105,000 $120,000 decisions Annual Cost of Therapy Germany • Justify clinical benefits to de-anchor from generic price • National vs. local decision makersVBP model outputs allow the user to understand the probability of coverage at a specificcost by specific payer market type 9
  10. 10. Market Research Analytics Overview A conjoint-based discrete choice exercise elucidates how multiple components interplay to drive price acceptance and access restrictions Several different profiles for Conjoint / Discrete each new product Choice Analysis Comp. 1 Comp Comp. 2 3Comp. Comp. Comp. 4 5 6 Future Market Scenarios: Conjoint/Discrete Choice Analysis: Mutually Exclusive Attributes: Future market scenarios created using an Profiles are assessed via conjoint Limited number of components experimental design to vary component values for analysis to generate eachincluded in conjoint exercise for each new product. Respondents rate their WTP component’s importance & its each product profile. and access restrictions for each product profile as contribution towards price and compared to SOC. access 10
  11. 11. Preliminary VBP ModelThe VBP model will calculate component values based on primary research and populatea preliminary VBP equation --Illustrative-- 1. User to select indication, country, and comparator 3. VBP ranges and premium/discount automatically populated based on selection 2. User to select component values based on asset under consideration 11
  12. 12. Illustrative Analytic OutputsThe visualization afforded by outputs will enable easier understanding of stakeholderperception of various components Water Fall Charts – Price Access Component’s Tornado Diagram Relationship – Sensitivity Analysis contribution to price – Efficiency Curves To assess the To analyze impact of To display sensitivity relationship between price increase on analysis & relative components and coverage / approval component importance variables towards decisions (relative to calculating the value- SOC) based price 12
  13. 13. Case Studies 13
  14. 14. Quintiles’ Consulting CapabilitiesThe definition of value differs between various stakeholder groups. An understanding ofeach groups’ perception of value is required to develop an evidence-based pricingstrategy GOVERNANCE & QUALITY ASSURANCE Commercial Regulatory Brand Strategy & Quality Market Access R&D Market Intelligence Regulatory Strategy R&D Compliance Outcomes Product & Portfolio Strategy Pharmacovigilance Research Clinical Transformation Outsourcing Strategy Quality Systems Optimization Clinical Analytics Development Launch Prep Peak Mature Submission Launch Process Optimization IT Strategy and Implementation Change Management Program Management RISK MANAGEMENT 14 14
  15. 15. Case Study:Preliminary Value-based Pricing Strategy Background Background Approach Duration: 20 Weeks Situation: The client sought to develop an evidence based pricing opportunity assessment framework that will support overall pricing development process by understanding the drivers and Quintiles Consulting Team barriers to pricing and market access in multiple markets 1. The Quintiles Global Consulting (QGC) team conducted HTA Primary Market Research Secondary Market assessment, primary stakeholder and secondary research: Research KOLs Payer i. Reviewed historical HTA’s to identify the decision driving Pharmaco- Analyst and components and threshold values economic and Industry Q Internal Academic Reports ii. Conducted a market and indication specific quantitative HTA Expert Papers Experts survey to understand individual attributes’ importance and contribution to overall premium 2. QGC triangulated a pricing framework via three perspectives Pricing Methodology to develop a value-based pricing model in MS excel i. An analogue assessment for reference price benchmarking ii. A primary research willingness-to-pay assessment Health- iii. A health economic analysis Economic Analysis  Benefits to Client Value-based Pricing Recom. 1. Review and analysis of the HTA decision rationale and Reference Willingness-to- indication level thresholds, pricing drivers and their sensitivity Price Pay Benchmarking Assessment to price 2. Quantification of clinical value components and market conditions that impact the overall price premium 3. Preliminary pricing range established using a flexible Value Based Pricing Model and Strategy evidence-based excel model that is pre-populated with Recommendations stakeholder’s feedback and can be adjusted as product profile and market conditions evolve in future 4. A process map to optimally incorporate and “operationalize” the value-based pricing approach and framework 15
  16. 16. Case Study:Value Based Pricing & Market Access Strategy Background Background Approach Duration: 12 Weeks Situation: The client sought a pricing estimation and an understanding of the drivers and barriers to formulary access and Quintiles Consulting Project Team use for multiple IV anti-infectives in preclinical development 1. The Quintiles Eidetics and Quintiles Global Consulting (QGC) Physicians group s worked collaboratively Primary Research Secondary Research i. Eidetics conducted a quantitative survey to investigate the Payers effect of product attributes on perceptions and use Value-based ii. QGC input questions into the Eidetics survey and utilized Pricing Model the output to guide their research and recommendations 2. QGC conducted research in a comprehensive and structured manner: i. Assessed the anit-infectives pricing and reimbursement landscape including market access barriers and value Market Access Strategy and Value Story drivers for competitors and market comparables ii. Calculating a value-based price predicated on its estimated cost-benefit vis-à-vis comparable drugs in the marketplace  Benefits to Client Model Structure 1. Understanding of the hospital formulary decision-making process for IV anti-infectives 2. Insights into the drivers and barriers to access, restrictions and use for their products 3. An assessment of the thresholds / trade-offs of product attributes (efficacy, safety, cost , etc) driving access and use 4. Insights from analogous products, primary willingness-to-pay research, and from our treatment cost pricing model 5. Pricing recommendations from an evidence-based framework that can be adapted with new inputs as circumstances develop 16
  17. 17. Case Study:Global Pricing Reimbursement for Phase 2NCE Background Background StructureCompany: Large Pharmaceutical Company Quintiles Consulting Project TeamSituation:Client had a targeted breast cancer therapy that had finished Phase 2. The clientasked Quintiles to conduct research and develop a value-based pricing model to help KOL Existing &guide the pricing reimbursement decisions for the compound assuming that four Oncologists Productproposed Phase 3 clinical trials would be carried out. The project goals were to: Pipeline Primary Secondary Research Research Payers &• Conduct secondary and primary research on this portion of the breast cancer market with respect to key clinical and pricing reimbursement characteristics Influencers Patient• Assess the clinical relevance and validity of the four proposed Phase 3 clinical trials as Value-Based Population, represented by the reactions of key opinion leader in oncology to those trials Pricing Model Unmet Needs• Analyze and compare the efficacy and side effects of the client’s NCE to other NCEs that would come to the market at the same time, and to existing therapies that would go off patent• Collect data and interpret data on pricing reimbursement aspects, unmet needs, the burden of disease , and ancillary HC costs created or eliminated by the company’s NCE compared to competitor compounds, Critical Assessment of initial development phase and• Develop value-based pricing (VBP) model: compute probability of failure against Scenario Analysis of Pricing Reimbursement Options for NCE primary ORR endpoint; cost/benefit or side effect/efficacy tradeoff for PFS endpoint to determine various pricing reimbursement scenarios for the NCE Benefits to Client 1. Understanding KOL opinion of four proposed Phase 3 trials in different cancer settings with different combinations of therapies and competitor compounds and clinical trials. Related assessment of the client’s compound’s efficacy and side effect data and remaining unmet needs, treatment algorithms for these different settings and patients, including the necessity and value of biomarkers, genetic testing and patient segmentation by responders and non-responders 2. Understanding of how pricing reimbursement decision makers treat new targeted therapies for cancer, including how pricing is set, how formulary inclusion, exclusion decisions are made and how these decisions are likely to change in the next few years 3. Development and application of Quintiles’ value-based pricing model to assess the pricing flexibility the client would have under different scenarios of efficacy and side effects for its own and competitors’ compounds in light of new compounds coming to the market and existing compounds coming off patent 4. Client was advised that two of the proposed clinical trials were not viable, that two of the proposed trials were reasonable, and that a few other trials should be considered. The client also received a complete understanding of the pricing reimbursement range and flexibility for their NCE in its market/competitive situation 17
  18. 18. Case Study:Quantitative Linked Model Pricing Optimization Background Approach Background Client: Major Biopharmaceutical Company Sample: Total N = ~500 Situation: Client had novel compound and MOA coming • Countries: • Respondents: into a class with an entrenched market leader. While clinical • US • Payers trials were still ongoing, there was a need to develop pricing • UK • PCPs prior to the trial results. By developing scenario-based • Germany • CARDs alternatives, efficient commercialization progress regardless of the eventual outcome would be enabled. Key Questions • France • Patients included: • Italy • How payers react to potential price scenarios and potential Approach: price premiums for PRODUCT X? Quantitative linked model to demonstrate how the stakeholders • How physicians react to PRODUCT X’s price in the context interact and achieve demand at each potential price point. of patient out-of-pocket cost , cost/day, and potential tier Model allowed client to set revenue optimizing pricing for each status? potential outcome of their clinical trials. • How likely patients will be to fill a prescription for The final linked model and Preference Share PRODUCT X based on out-of-pocket cost / tier status? SimulatorTM includes input from all three major  Benefits to Client customer groups in the US. Preference • The identification of key endpoints and drivers that will make The resulting Shares User Inputs: preference share • MD Conversion-to-Ongoing-Use PRODUCT X favorable and competitive by market Factor provides a multi- • Clinical performance settings • An understanding of what will most impact PRODUCT X’s faceted view of PRODUCT X potential. • Price opportunity potential by stakeholder type MD • A measure of how each stakeholder influences and is influenced by the other based on different price and product profile scenarios • Price demand curves suitable for revenue optimization and other economic models - with confidence intervals for the MCO Patient market estimates 18 18 18
  19. 19. Contact InformationPlease contact any of the individuals below if you have any questions regarding thematerials presented hereQuintiles Consulting & Market Intelligence Serviceswww.quintiles.com/consultingMridul Malhotra, Pricing Director (Market Access)+1-862-368-9799Mridul.Malhotra@quintiles.comJohn Doyle, Managing Director (Market Access)+1-212-686-8642John.Doyle@quintiles.comBrian Griner, Chief Methodologist (Market Intelligence)+1-908-300-4391Brian.Griner@quintiles.comBrad Perkins, Senior Director of Business Development (Market Intelligence)+1-585-943-8499Bradley.Perkins@quintiles.com 19

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