1. Value-based differential pricing, where prices reflect local willingness-to-pay for health and other value elements, is a theoretically robust approach, though many countries currently use therapeutic added value plus price bargaining. 2. Measurement of relative health gain will remain important, but broader definitions of value need further development, moving from listing to measuring to weighting different factors. 3. The UK experience shows measuring broader value factors is possible, but weighting them explicitly makes preferences and social welfare functions clear and may cause backlash without understanding public and patient preferences. A deliberative process combining societal weighting and structured decision-making is needed for fair value assessment.

1. ISPOR Special Task Force on
U.S. Value Frameworks: A non-
US perspective
Professor Adrian Towse
Director, Office of Health Economics
London, UK
May 22, 2017

2. My Comments
 QALYs and cost-effectiveness versus Therapeutic Added Value
and bargaining
 Absent emphasis on evidence, which dominates most HTA
processes
 Additional elements of value – the UK experience of value-
based pricing
 Decision making to include equity weighting and non-QALY
effects
2

3. Value Based Differential Pricing
• Health systems have third party
payers acting as agents for
patients and citizens
• Need to act as proxies for
informed citizens
• Health systems should set price
(WTP) for health gain (and other
elements) reflecting enrollees
preferences
• Optimal global R&D comes from
prices reflecting value at local
willingness-to-pay thresholds for
patent duration
Danzon, P.; Towse, A.; Mestre-Ferrandiz, J 2015. Value-based
Differential Pricing: Efficient Prices For Drugs In A Global Context. Health
Economics Volume: 24 Issue: 3 Pages: 294-301

4. My Comments
 QALYs and cost-effectiveness versus Therapeutic Added Value
and bargaining
 Absent emphasis on evidence, which dominates most HTA
processes
 Additional elements of value – the UK experience of value-
based pricing
 Decision making to include equity weighting and non-QALY
effects
4

5. My Comments
 QALYs and cost-effectiveness versus Therapeutic Added Value
and bargaining
 Absent emphasis on evidence, which dominates most HTA
processes
 Additional elements of value – the UK experience of value-
based pricing
 Decision making to include equity weighting and non-QALY
effects
5

6. EEPRU work – approach and findings
• Discrete Choice Experiment (DCE) with 3669 respondents
• Chose whether NHS should treat patient group A or B, who
differed in terms of four attributes: life expectancy without
treatment; HRQOL without treatment; survival gain from
treatment; and HRQOL gain from treatment.
• These attributes were used to explore Therapeutic Improvement
(TI), derive Burden of Illness (BOI), QALY gain and End of Life
(EOL).
• Respondents preferred to treat patients with larger QALY gains,
but at a diminishing rate meaning there was no support for TI
• Respondents preferred to treat patients with a shorter life
expectancy (EOL)

7. Methodology for estimating the wider economic impacts of
health treatments
1. Changes in patient health have wider economic consequences
2. Patients’ wider economic impact: production net of consumption
3. Estimating net production as a function of patient health
4. Results – single patient net production rates (given health state)
Patient
Age: 64
Gen: M
(ICD:
QoL:
G)
60%
Net production
£500 pcm
Calculation
Mechanism
5. Results – treatment impacts (by ICD, and for marginal NHS £)
Source: Gavin Roberts DH: https://www.slideshare.net/OHENews/roberts-wider-
societal-impacts-v0-11-to-share

8. Absolute and Proportional QALY Shortfalls
QoL
With current
treatment
Area D
Area B
Area C
Area A
Time
Absolute QALY shortfall is total potential health going forwards (Areas A+B+C+D) minus current health
prospects (Area D), i.e. Areas A+B+C.
Proportional QALY shortfall is the ratio of health lost to total potential health going forwards, i.e. Areas
A+B+C as a proportion of Areas A+B+C+D.
Fair Innings (Proportional QALY shortfall from birth) is not shown in Figure 1.

9. Extract from Table II. Disease weightings using different measures of burden
and wider social benefits: top 3, displaced rate, and bottom three diseases
Proportionate
shortfall
%
QALY
loss
Absolute shortfall
QAL
Y
loss
Wider social benefits
(net production
£
C22
Liver cancer 73% C22 Liver cancer 10.7 M05
Rheumatoid
arthritis
£30,034
C25
Pancreatic
cancer
73% C25
Pancreatic
cancer
9.97 E11 Diabetes
£27,421
C34 Lung cancer 71% C34 Lung cancer 9.68 M45
Ankylosing
spondylitis
£26,190
Displaced
Average of
displaced
QALYs
8% Displaced
Average of
displaced
QALYs
2.07 Displaced
Average of
displaced
QALYs
£11,611
K50
Irritable Bowel
Syndrome
1% L40 Psoriasis 0.19 C22 Liver cancer -£32,709
E66 Obesity 0% E66 Obesity 0.18 C34 Lung cancer -£36,067
M45
Ankylosing
spondylitis
0% M45
Ankylosing
spondylitis 0.11 C25
Pancreatic
Cancer
-£53,860
Source: Claxton K, Sculpher M, Palmer S, Culyer AJ (2015). Causes for concern: is nice failing to
uphold its responsibilities to all NHS patients? Health Economics. 2015 Jan 7;24(1):1-7

10. My Comments
 QALYs and cost-effectiveness versus Therapeutic Added Value
and bargaining
 Absent emphasis on evidence, which dominates most HTA
processes
 Additional elements of value – the UK experience of value-
based pricing
 Decision making to include equity weighting and non-
QALY effects
10

11. A reordering of process?
Safety
Efficacy,
effectiveness
Value for
money (CE)
Other factors of
value to decision
making (ethical
issues, social
values,
implementation
feasibility, unmet
needs, innovation
value, legal
issues, …)
Affordability
(BIA)
Source: Ron Goeree, Director PATH Research
Institute, Professor, McMaster University
Looking at other factors of potential value is
usually an afterthought for decision makers

12. A reordering of process?
Safety
Efficacy,
effectiveness
Value for
money (CE)
Other factors of
value to decision
maker (ethical
issues, social
values,
implementation
feasibility, unmet
needs, innovation
value, legal issues,
…)
Affordability
(BIA)
Criteria: broader definition of value
(risks, benefits)
Overall D-M Framework:
Opportunity costs
(value-for-money)
Source: Ron Goeree, Director PATH Research
Institute, Professor, McMaster University
Is it becoming core to the value
assessment?

13. HealthofB
Health of A0
//
//
E
HB  

fA
fB



a b
c
de
f?
HA
But we have different meanings and therefore
measures of equity (Culyer 2015)
a = equity = equal health (45o line from 0)
b = equal health gain (45o line from E)
c = QALY = QALY = QALY, i.e. QALY maximisation
d = maintaining initial distribution of disease
burden (line through 0 and E)
e = distribution in proportion to need (inverse of d)
f = equal shares of resource
Culyer A (2015). Equity and Efficiency.
http://www.ispor.org/Event/ReleasedPresentations/2015Santiago

14. Conclusions
1. Value-based differential pricing is the theoretically robust way to price drugs
reflecting local WTP for health and related elements of value – the STF is close to
this
» But many countries use Therapeutic Added Value plus price bargaining
2. Measurement of relative / comparative health gain will remain a key focus
3. Work on the broader definition of value needs to continue.
4. Moving from listing the things that matter to measuring them to weighting them
are three very different steps.
5. We need to work on measuring them. The UK experience shows it can be done.
6. Weighting in any form makes the Social Welfare Function explicit and will generate
a backlash
7. It requires better understanding of the preferences of the public and of patients.
8. But a deliberative process is still necessary in value assessment. It cannot be done
by algorithm. Introducing structure to this process (MCDA) is a challenge but also
necessary
9. A fair process is therefore required which combines elements of societal weighting
and a structured deliberative decision making process