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Emerging Picture of Value Based Pricing
1. The Emerging Picture of “Value
Based Pricing”
Kakushin Web-Based Conference
17 October 2012
Jon Sussex
Deputy Director
Office of Health Economics
www.ohe.org
1
2. Agenda
• What we know about UK Government “VBP”
proposals
• What that might mean in practice
• Centrality of “threshold” concept
• Non-linear pricing etc.
• Conclusions
3. At the NICE Annual Conference, 11 May 2011,
Earl Howe (Minister of Health) stated:
• “What Ministers are seeking are new arrangements to
encourage the development of drugs to address areas of
unmet need and bring prices and benefits into line”
• “We've got to think about moving away from the drugs
budget and towards a health budget”
• Ministers “are not too afraid of increasing the drugs budget,
as such”
4. “VBP” for all new medicines from 1/1/14
1. Pharmacoeconomic
evaluation - QALYs
2. “Burden of illness” July 2011
3. “Therapeutic
innovation &
improvements”
4. “Wider societal
December 2010
benefits”
5. Combined via
adjusted £/QALY
threshold
http://www.dh.gov.uk/en/Consultations/Responsestoconsultations/DH_128226
5. “4.10 The Government proposes that the price threshold
structure is determined as follows:
i. there would be a basic threshold, reflecting the benefits
displaced elsewhere in the NHS when funds are allocated to new
medicines;
ii. there would be higher thresholds for medicines that tackle
diseases where there is greater “burden of illness”: the more the
medicine is focused on diseases with unmet need or which are
particularly severe, the higher the threshold;
iii. there would be higher thresholds for medicines that can
demonstrate greater therapeutic innovation and improvements
compared with other products;
iv. there would be higher thresholds for medicines that can
demonstrate wider societal benefits.”
6. Elements of “Value” internationally
E&W Australia Canada France Italy Japan Sweden
Clinical effectiveness
Cost effectiveness
Alternatives available /
unmet need
Disease severity EoL
New mode of action
Paediatric
Cost savings beyond
health care
Productivity
7. VBP – Taxonomy of approaches
What elements How measured How How linked to
of value and valued aggregated price
• QALYs • Natural units • Deliberative • Formula
• Other types of • Categories process • Negotiation
health gain • Yes/No • Weighted
• Severity QALYs
• ‘Unmet need’ • Whose • MCDA*
• ‘Innovation’ values? • Net benefit £
• Wider societal
impacts
*MCDA = Multi-Criteria Decision Analysis
For full info see OHE Research Paper 11/04; Sussex, Towse & Devlin; August 2011 at:
http://www.ohe.org/publications/recent-publications/list-by-title-20/detail/date////operationalising-value-based-pricing-of-medicines-a-
taxonomy-of-approaches.html
8. How to aggregate the elements of value
Pros Cons
Weighted QALYs Incremental QALYS are major ‘QALYs are not the only fruit….’
part of benefit of many If incremental QALYs are
medicines small/zero, then other benefits
Familiarity of QALYs forced to be small/zero too
Need a £ per weighted QALY
threshold value (opportunity
cost)
MCDA Points Includes all categories of Need a £ per point threshold
benefits, including QALYs and value (opportunity cost)
non-QALY health gains, without
distortion
Pragmatic – used by PCTs
£ Net Benefit Includes all categories of Very explicit – valuing each type
benefits without distortion. of benefit separately in £ terms
Goes directly to value of each may be deemed politically more
benefit category difficult
10. DH Response to the Consultation
• 5.8 “…we intend to maintain the effect of the funding direction…”
• 5.9 “…there are questions about the impact of medicine prices on
companies’ decisions on where to allocate investments or conduct
research…”
• 5.28 “..the Government does not agree that a new medicine should
be automatically exempted..because its total budget impact is
..below an arbitrary threshold..”
• 5.47 “…the benefits of enabling pricing by indication are likely to be
outweighed by the practical difficulties…explore alternatives..”
• 5.60 “..we recognise the value that incremental developments can
bring…”
• 5.102 “…we have not ruled out the possibility that there may be a
role for some type of Patient Access Scheme (PAS) arrangements…”
• 6.5 “Our preference ..would be..to achieve a negotiated
settlement…”
11. Estimated NICE threshold ICER (£/QALY) in practice
Devlin et al. 2010
100%
90%
80%
70% Model Threshold: ICER giving X% chance of
rejection
Probability of rejection
60% (mean values for other parameter)
50%
50% 25% 75%
40%
ICER only £40,552 £27,066 £54,006
30%
Basic Model £40,345 £27,383 £53,271
20% Min & max; Min: Min: Min:
All models £40,206 £27,066 £52,856
10% Max: Max: Max:
£40,721 £27,446 £54,006
0%
£0 £10,000 £20,000 £30,000 £40,000 £50,000 £60,000 £70,000
ICER (cost/QALY)
Basic model
ICER only
ICER & total pts in RCTs
Basic with no. RCTs & mean pt numbers disaggregated
Omitting only Tx and pt group submission
Omitting only Tx and pt group submission and adding ICER-squared
12. Estimated threshold: cancer
Devlin et al. 2010
100%
90%
80%
• ‘Cancer’ dummy
70% significant
Probability of rejection
60% • 102 cancer decisions
50%
Cancer included in the
Not cancer
analysis
40%
• 92 pre-EOL (38 no, 54
30%
yes); 10 post EOL (7
20% no, 3 yes, of which 2
10% considered under
0%
EOL).
£0 £10,000 £20,000 £30,000 £40,000 £50,000 £60,000 £70,000
ICER (cost/QALY)
• The estimate of the threshold (probability of rejection = 50%) is:
• £50,139 for cancer drugs
• £37,805 for non-cancer drugs
• NICE decisions reveal a willingness to ‘pay’ an additional > £10k per QALY gained
by cancer patients
13. “Thresholds” or converting benefits into £
• NB: If benefits include more than QALYs then idea of a
unique £/QALY threshold becomes redundant
• NHS opportunity cost (OC)
• Social value of a QALY (SV)
• Equal in an ideal world but the world is not ideal
• SV of a QALY in UK appears to be around or a bit above
NICE’s £20k-£30k range but there is much uncertainty
as valuations vary wildly across individuals
• If SV>OC then health care budget spending is below
socially desired levels
15. Different prices for different indications
with different values?
• Single ‘blended’ price
• Or different prices for different indications:
• NICE technology appraisal TA176 for cetuximab
required a 16% discount when used with
oxaliplatin (+ 5-fluorouracil and folinic acid)
• But not for another (+5FU, folinic acid and
irinotecan) where the patient cannot take
oxaliplatin
16. Negotiation and PAS
• Imprecision / uncertainty / multiple indications =>
plenty of scope for negotiation where the “value
based price” is a binding constraint
• VBP does not imply no further role for Patient Access
Schemes and non-linear pricing:
Government VBP consultation response, July 2011:
“We have not ruled out … ‘PAS’ arrangements in the
new system.”
17. “VBP”: big change or name change?
• Wider scope of benefits and costs taken into
account
• Chance for more openness or likelihood of
less?
• Price negotiation for individual medicines, not
regulation of company profit from total sales
to NHS
