Reimbursement authorities are faced with significant escalating health care costs, pressured budgets and numerous launches of biotech and pharmaceutical technologies with uncertain “value for money”. At the same time, biotechnology/pharmaceutical companies are assessing their developmental pipeline. An economic modeling application, based on cost-effective methodology, is illustrated which helps analyze and predict the appropriate patient populations, future market access value and pricing for future product opportunities by considering payers' use of cost-effectiveness methods and willingness to pay thresholds.

Methods

A deterministic Markov Excel model is illustrated comparing chronic liver disease populations treated with a new product candidate, Drug X, to established standard care. The US and European (e.g., Italy, Germany) healthcare system perspectives were evaluated; the methodology followed respective country economic guidelines. The literature provided disease transitions, utilities, resource utilization and direct cost estimates. Physicians validated disease progression rates, treatment patterns and resource utilization. Estimated life expectancy, quality-adjusted life expectancy, total lifetime costs and incremental cost-utility ratios between strategies were determined. A unified analysis tested scenarios for sub-populations by Metavir stage to understand the aggregate weighted incremental cost-utility outcomes and trade-offs. Price ranges for Drug X were solved using Crystal Ball® software for various scenarios at selected fixed payer's willingness to pay thresholds. Probabilistic Monte Carlo sensitivity analysis was performed for an array of parameters.

Results

The model estimated that the most cost-effective sub-populations included the F3 and F4 Metavir patients, compared to the broadest population. At a payer's willingness to pay threshold of $50,000/QALY, the expected incremental efficacy required in F3 and F4 patients for Drug X to be cost-effective over 20 years were predicted at 16% and 45%, for annual price points ranging from US$1,500 to US$4,000, respectively. Sensitivity analysis determined the critical drivers included incremental efficacy/safety rates, drug price, patient sub-population and utility values.

Conclusion

Econometric valuation modeling has been influential in guiding the Company on anticipated key market access dynamics; predict cost-effective positioning and treatment populations; and project cost-effective pricing for new product opportunities. This approach may also help payers by identifying the patient groups that will gain clinical benefit at a cost-effective drug price. Furthermore, manufacturers' are increasingly recognizing that this valuation approach may reduce product development risk by establishing more realistic estimates of market potential, pricing and societal need.