Pricing methods in outcome-based contracting: 5: risk of efficacy failure-based pricing.
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AIMS: Six Delta is a six-dimensional independent platform for outcome-based pricing/contracting. The fifth dimension (5) estimates prices on the basis of the risk of efficacy failure of a drug. We describe this dimension's methodology and present a proof-of-concept application to the treatment of non-small cell lung cancer (NSCLC) with EGFR mutation with osimertinib. MATERIALS AND METHODS: The risk of efficacy failure pricing dimension utilizes a seven-step method: (1) defining risk; (2) extracting data; (3) predicting models; (4) performing Monte Carlo Simulation (MCS) to estimate risk of efficacy failure; 5) estimating ranges for a payback; (6) adjusting for medical inflation; and (7) performing Monte Carlo Simulation (MCS) to estimate the DSPRisk of efficacy failure. A proof-of-concept exercise with osimertinib in NSCLC was performed for two hypothetical outcome-based contracts: 1-year (2019-2020) and 2-year (2019-2021). We estimated the risk of efficacy failure for osimertinib in terms of overall and progression-free survival versus standard of care. We used the estimated risk to estimate the price reduction on the wholesale acquisition cost (WAC) for the two hypothetical contracts: a 1-year (2019-2020) and 2-year contract (2019-2021). From this we estimated the DSPRisk of efficacy failure. RESULTS: Based on the risk of OS and PFS efficacy failure for osimertinib in OS and PFS, in the 1-year contract, the DSPRisk of efficacy failure was estimated at $12,652 (or -13.44% the 2018 WAC) for a 30-day prescription. For the 2-year contract (2019-2021), the DSPRisk of efficacy failure was estimated at $13,019 (or -10.93% the 2018 WAC). CONCLUSIONS: We demonstrated that pricing methods based on risk of efficacy failure methods can be integrated into our proposed Six Delta platform for outcome-based pricing/contracting.
