The Interaction between Price Negotiations and Heterogeneity: Implications for Economic Evaluations

Abstract

Economic evaluation is an important element of the decision making process for the reimbursement of drugs. Heterogeneity can be considered an explained variation in clinical or economic outcomes based on the clinical and sociodemographic characteristics of patients. However, to our knowledge, the relationship between price negotiations and population heterogeneity has not been considered in the literature to date. If a company offers a conditional discount that is dependent on obtaining reimbursement in 2 subgroups or indications, an interaction is generated between groups that should be accounted for in economic evaluations. Critically, where the drug has 2 indications but is only cost-effective in 1 indication at the full price (herein “indication 1”), the cost savings realized from implementation of the discount in indication 1 can be used to offset the incremental cost of extending reimbursement to indication 2 at the discounted price. This reduces the incremental cost-effectiveness ratio and increases the probability of positive reimbursement compared to a stratified approach. Given the additional complexity that this introduces, we introduce a framework deemed the “hybrid approach” to guide the economic assessment. We present 2 worked examples. We show that failure to account for the interaction can lead to inaccurate conclusions regarding a drug’s cost effectiveness and that adoption of strategic behavior could theoretically increase the reimbursement price of drugs. By adopting this framework, cost-effective interventions are identified that may have been previously misclassified as not being cost-effective and vice versa. Recognition of the interaction in the literature by pharmaceutical companies may influence the forms of discounts offered to decision makers. Therefore, we expect this research to have far-reaching effects on medical decision making.

Were economic evaluations well reported for the newly listed oncology drugs in China’s national reimbursement drug list

“…The possible reason is that China Guidelines for Pharmacoeconomic Evaluations and Manual (2015 version) were published, which further contributes to guide the implementation and reporting of economics evaluation studies. In addition, the implementation of the NRDL price negotiations in recent years in China is similar to the reimbursement of drugs in many countries [ 118 ]. It will be helpful for manufacturers to provide the published economic evaluation in the price negotiations process.…”

Value-Based Pricing and Budget Impact Analysis for Multi-Indication Drugs: A Case Study of Immunotherapies

“…We developed three scenarios for VBP based on previous studies [ 8 , 9 , 10 ] and calculated the drug price in each scenario. In the first scenario (Scenario 1: IBP), we applied the drug price differently for each indication, depending on the value-based price.…”

“…Second, the hybrid approach maintains a single list price but varies the net price by applying different refund rates or different risk-sharing assessment (RSA) schemes for each indication. Third, the weighted average approach calculates a single price using the weighted average of the value-based price of each indication by the expected amount of usage [ 9 ]. Italy, Belgium, France, and Switzerland vary their net prices for each indication using the hybrid approach [ 10 ].…”

“…Yeung et al calculated the indication value-based prices using clinical trials and real-world data and compared them with the current single price [ 12 ]. O’Donnell et al estimated the drug prices for several VBP scenarios [ 9 ]. However, previous studies have simply estimated drug prices using mean or median survival data, rather than modeling cost-effectiveness analysis for patients.…”