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

Abstract

Aims

Six Delta is a six-dimensional independent platform for outcome-based pricing/contracting. The first dimension (δ1) estimates prices on the basis of cost-effectiveness (CEA) and cost-utility analysis (CUA). 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

CEA and CUA were performed using established methods. Probabilistic sensitivity analyses (PSA) were performed to generate cost-effectiveness acceptability curves (CEAC), specifically the PSA incremental cost-effectiveness (PSA ICER) and incremental cost-utility ratio generated CEACs (PSA ICUR). Price of treatment was estimated at three certainty levels (0%, turning point%, 100%). The marketed drug price at turning point was used to estimate prices at 0% and 100% certainty levels, as per PSA ICER and PSA ICUR-generated CEACs. The resulting prices were pooled, inflated, and simulated by Monte Carlo Simulation (MCS) methods to estimate the dimension-specific price based on CEA and CUA (DSP_CEA/CUA). A proof-of-concept exercise with osimertinib in NSCLC was performed for two hypothetical outcome-based contracts: 1-year (2019–2020) and 2-years (2019–2021).

Results

Turning points were estimated at the 50% certainty level in both PSA ICER and ICUR-generated CEACS. At these points, the wholesale acquisition cost for osimertinib was $14,616 (30-day prescription); inflated by 0.44% for 1-year and by 0.72% for 2-year contracts. Additional prices at 0% and 100% certainty levels were quantified based on the PSA ICER and ICUR-generated CEACs. The MCS yielded a DSP_CEA/CUA of $16,391 for the 1-year contract and a DSP_CEA/CUA at $16,677 for the 2-year contract for a 30-day prescription.

Conclusions

We demonstrated that conventional CEA and CUA methods generate price estimates at varying levels of certainty that can be integrated into our proposed Six Delta platform for outcome-based pricing/contracting.

Keywords:

• Cost-effectiveness analysis
• cost-utility analysis
• pricing
• 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: integration analysis of the six dimensions (6 δs)

Pricing methods in outcome-based contracting: δ6: adherence-based pricing

Pricing methods in outcome-based contracting: δ2: willingness-to-pay-based pricing

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

Pricing methods in outcome-based contracting: δ4: safety-based pricing

Pricing methods in outcome-based contracting: δ3: reference-based pricing

Transparency

Declaration of funding

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

Declaration of financial/other relationships

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

No assistance was received in the preparation of this article.

Notes

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