Pricing methods in outcome-based contracting: δ5: risk of efficacy failure-based pricing

Abstract

Aims

Six Delta is a six-dimensional independent platform for outcome-based pricing/contracting. The fifth dimension (δ5) estimates prices on the basis of the risk of efficacy failure of a drug. We describe this dimension’s methodology and present a proof-of-concept application to the treatment of non-small cell lung cancer (NSCLC) with EGFR mutation with osimertinib.

Materials and methods

The risk of efficacy failure pricing dimension utilizes a seven-step method: (1) defining risk; (2) extracting data; (3) predicting models; (4) performing Monte Carlo Simulation (MCS) to estimate risk of efficacy failure; 5) estimating ranges for a payback; (6) adjusting for medical inflation; and (7) performing Monte Carlo Simulation (MCS) to estimate the DSP_{Risk of efficacy failure}. A proof-of-concept exercise with osimertinib in NSCLC was performed for two hypothetical outcome-based contracts: 1-year (2019–2020) and 2-year (2019–2021). We estimated the risk of efficacy failure for osimertinib in terms of overall and progression-free survival versus standard of care. We used the estimated risk to estimate the price reduction on the wholesale acquisition cost (WAC) for the two hypothetical contracts: a 1-year (2019–2020) and 2-year contract (2019–2021). From this we estimated the DSP_{Risk of efficacy failure}.

Results

Based on the risk of OS and PFS efficacy failure for osimertinib in OS and PFS, in the 1-year contract, the DSP_{Risk of efficacy failure} was estimated at $12,652 (or −13.44% the 2018 WAC) for a 30-day prescription. For the 2-year contract (2019–2021), the DSP_{Risk of efficacy failure} was estimated at $13,019 (or −10.93% the 2018 WAC).

Conclusions

We demonstrated that pricing methods based on risk of efficacy failure methods can be integrated into our proposed Six Delta platform for outcome-based pricing/contracting.

Keywords:

• Risk of failure
• outcome-based-contracting
• pricing methods
• osimertinib
• lung cancer

JEL classification codes:

• D40
• C00

View correction statement:

The six Delta platform for outcome-based contracting for pharmaceuticals

This article is part of a series including:

Pricing methods in outcome-based contracting: δ1: cost effectiveness analysis and cost-utility analysis-based pricing

Transparency

Declaration of funding

The work reported herein was performed without sponsorship or grant funding.

Declaration of funding/other interests

The authors have no financial relationships to declare.

JME peer reviewers on this manuscript have no relevant financial or other relationships to disclose.

Author contributions

All named authors meet the International Committee of Medical Journal Editors (ICMJE) criteria for authorship of this manuscript.

Acknowledgements

We thank Elmira Torabzadeh, Dillon Aberasturi, Yingying Lu, Jian Dai, from the College of Public Health, University of Arizona, for validating the mathematical equations and performing independent revisions for the assumptions, equations, and calculations. Sandipan Bhattacharjee is now at the University of Texas at Austin.

Notes

i Microsoft Excel 365 is a registered trademark of Microsoft Research Lab, Redmond, Washington, DC, USA.