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

Figures & data

Figure 1. The 6-step method of δ3. Abbreviations. RP, reference price; PPP, purchasing power parity; GDP, gross domestic product; OECD, Organization for Economic Co-operation and Development; MCS, Monte Carlo Simulation; DSP_Reference, Dimension-specific price for δ3.

Table 1. The set of four criteria for selecting countries.

Criteria	Rational
1. Drug is available in the foreign country	Drug prices can be transparent and not predicted
2. Price information is available in the foreign country	Referencing in home country is accurate
3. Foreign countries are members within the OECD	Data on economic indicators are available and updated
4. Pricing methods in the foreign countries involve value assessment	Value-based pricing is ensured

Abbreviations. OECD, Organization for Economic Co-operation and Development.

Table 2. Model inputs.

Parameter	Estimate	Reference
Foreign countries	UK, Canada	^12^,^13
Price of osimertinib (2018)
US (USD)	USD $14,616	^14
UK (GBP)	GBP £5,770	^12
Canada (CAD)	CAD $8,974	^13
Exchange rate (2018)
USD to GBP	0.78	^7
USD to CAD	1.30	^7
PPP (2018)
US	1 (Reference)
UK	0.69	^7
Canada	1.25	^7
Real GDP per capita (2018) US $
US	$62,480	^7
UK	$46,256	^7
Canada	$47,725	^7
Percentage (%) GDP spent on pharmaceuticals (2018)
US	2.04%	^7
UK	1.11%	^7
Canada	1.86%	^7
Inputs for the outcome-based contracts*
Medical Inflation rate projected for 2019–2020	0.44%	^9
Medical Inflation rate projected for 2019–2021	0.72%	^9

*As projected from the US Bureau of Labor Statistics by averaging the medical consumer price index (mCPI) of prescriptions estimates of 2014–2018.

Abbreviations. US, United States; UK, United Kingdom; PPP, purchasing power parity; GDP, gross domestic product.

Table 3. Selected foreign countries.

Criteria	UK	Canada
1. Drug is available in the foreign country	✓	✓
2. Price information is available in the foreign country	✓	✓
3. Foreign countries are members within the OECD	✓	✓
4. Pricing methods in the foreign countries involve value assessment	✓	✓

Abbreviations. OECD, Organization for Economic Co-operation and Development; UK, United Kingdom.

Table 4. Adjusting for exchange rate.

Selected foreign country	Price of osimertinib in US$ adjusted for exchange rate in 2018 (30-day prescription)
UK	$7,426
Canada	$6,913

Abbreviations. UK, United Kingdom.

Table 5. Estimated RP scenarios (unadjusted for inflation rates) for osimertinib in US$and price adjustments to WAC 2018 price.

Economic indicators	RP scenario (% adjustment)
	Relative to the UK	Relative to Canada
Based on PPP	$10,762 (−26.37%)	$5,531 (−62.16%)
Based on real GDP per capita	$10,030 (−31.37%)	$9,051 (−38.07%)
Based on percentage (%) of GDP spent on pharmaceuticals	$13,647 (−6.62%)	$7,582 (−48.12%)
Based on minimum foreign price*	$6,914 (−52.70%)
Based on average foreign prices	$7,170 (−50.95%)

*The price in Canada was the lowest price for osimertinib.

The price adjustments are without inflation rate: +0.44% for 1-year contract; +0.72% for 2-year contract.

Abbreviations. RP, reference price; WAC, wholesale acquisition cost; UK, United Kingdom; PPP, purchasing power parity; GDP, gross domestic product.

Table 6. Estimated RP scenarios adjusted for inflation rates as needed for 1-year contract (2019–2020) and 2-year contract (2019–2021), and the DSP_Reference.

Reference-based pricing	1-year contract (2019–2020)^⸸	2-year contract (2019–2021)^ǂ
Based on PPP
Referenced to the UK	$10,827	$10,867
Referenced to Canada	$5,595	$5,636
Based on real GDP per capita
Referenced to the UK	$10,095	$10,136
Referenced to Canada	$9,115	$9,156
Based on percentage (%) of GDP spent on pharmaceuticals^‡
Referenced to the UK	$13,712	$13,753
Referenced to Canada	$7,647	$7,688
Based on minimum foreign price	$6,944	$6,963
Based on average foreign price	$7,201	$7,221
Average RP scenarios (SD)	$8,892 ($2,606)	$8,928 ($2,610)
DSPReference (% price adjustment)*	$9,395 (−35.72%)	$9,442 (−35.40%)

*Price adjustment to 2018 wholesale acquisition cost of osimertinib for 30-day prescription.

^⸸Inflation rate in 2019–2020 was projected at 0.4395833% but rounded to 0.44% for reporting.

^ǂInflation rate in 2019–2021 was projected at 0.71875% but rounded to 0.72% for reporting.

Abbreviations. RP, reference price; UK, United Kingdom; PPP, purchasing power parity; GDP, gross domestic product; SD, standard deviation; DSP_Reference, Dimension-specific price in δ3.

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