Background: Time-limited intellectual property protection and subsequent market liberalization are the terms of the social contract between manufacturers of biopharmaceutical products and society in most industrialized nations.

Purpose: To evaluate the effect of patent expiry, generic substitution and price decline on CE ratios over time, as illustrated in an economic evaluation of the use of cinacalcet in patients with ESRD on dialysis.

Methods: Cinacalcet in addition to standard of care was compared to standard of care alone in the prevention of complications associated with uncontrolled mineral metabolism in patients with ESRD in the UK, from the perspective of the National Health Service (NHS). Relative reductions (HRR; 95% CI)  in the rates of fractures (0.46; 0.22 – 0.95), cardiovascular hospitalizations (0.61; 0.43 – 0.86), parathyroidectomy (0.07; 0.01 – 0.55) and all-cause mortality (0.81; 0.45 – 1.45), as observed in the pooled analysis of 4 similarly designed cinacalcet phase 2 and 3 trials in 1,184 patients, were used to build a decision analysis model. CE ratios of cinacalcet (GBP0.145 per mg, 71.6mg/day) were estimated over the lifetime of a 55-year old patient with ESRD, assuming UK mortality rates and national tariffs for the diagnosis related group (DRG) associated with each complication. Combinations of price decline and market substitution upon generic market entry were modeled to start in 2015. CE ratios (2005 GBP per QALY) were calculated for ten cohorts of 55-year olds, starting in 2006. A discount rate of 3.5% was used for both costs and clinical benefits. For each cohort, CE-ratios were discounted to the year 2006.

Results: Baseline (no patent expiry) CE ratio of cinacalcet was GBP35,600 per QALY gained (all values rounded to nearest GBP100). As expected, CE ratios decline over time as a function of generic discount and market share (table: CE ratios for the years 2006, 2010 and 2015).

Conclusions: CE ratios decline over time as a function of patent-expiry and the expected discount and market share of generic molecules. Cost-effectiveness calculations should account for the likely market dynamics associated with time-limited intellectual property rights. Market-adjusted cost-effectiveness ratios may influence funding decisions contingent upon predetermined thresholds.