Pricing of orphan drugs in oncology and rare diseases

Nuijten, Mark; Capri, Stefano

doi:10.1080/20016689.2020.1838191

Cited by 12 publications

(14 citation statements)

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“…The concept of the new Pricing Model is briefly described here, but full details are provided in two previous publications [7,8]. The present value equation is based on the discounted cash flows and the cost of capital [7,8].…”

Section: Conceptmentioning

confidence: 99%

The impact of early phase price agreements on prices of orphan drugs

Nuijten¹,

Wilder

2021

BMC Health Serv Res

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Background Innovative orphan drugs often have an incremental cost-effectiveness ratio (ICER) which is higher than the maximum threshold for reimbursement. Payers have limited budgets and often cannot pay the full price of a new product, but pharmaceutical and biotechnology companies require a minimum price to satisfy their investors. The objective of this study was to present a possible solution to bridge this pricing gap by having early phase price agreements, which reduce the risk for investors. Methods We used a Pricing Model, which determines the minimum (break-even) price of an innovative drug from an investor’s perspective. This model is based on economic valuation theory, which uses the expected free cash flows and the required cost of capital. We selected two orphan drugs with a positive clinical assessment and an ICER higsher than the Dutch maximum threshold of €80,000 per QALY gained to use as examples in the model: Spinraza for spinal muscular atrophy and Orkambi for cystic fibrosis. RESULTS: The results show that early pricing agreements before phase III trials can substantially lower the drug price resulting from a lower cost of capital. The minimum price for orphan drugs can be reduced by 27.4%, when cost of capital decreases from 12 to 9%. An additional adjustment of other critical parameters due to early pricing agreements (lower probabilities of phase III failure and lower research and development (R&D) costs) can further reduce the minimal price by 62.8%. Conclusion This study shows that earlier timing of price negotiations resulting in an agreement on drug price can substantially lower the minimal price of orphan drugs for the investor.

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Section: Conceptmentioning

confidence: 99%

The impact of early phase price agreements on prices of orphan drugs

Nuijten¹,

Wilder

2021

BMC Health Serv Res

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“…The consequence is that such a high price discount probably leads to a negative net present value for the investor, which means that the rate of return required to persuade the investor for the initial investment, is not sufficient. [ 1 ]…”

Section: Introductionmentioning

confidence: 99%

“…However, new hurdles for market access and other restricting drug policy changes have emerged from the beginning of this century, which have become constraints for the actual future sales, both in number of units sold and monetary values, as well as the potential drug price. [ 1 ] The critical determinants for reimbursement are now: indication, positioning, comparator, efficacy and safety, cost-effectiveness, and budget impact. In order to maximize the probability of reimbursement at an acceptable drug price at time of launch, it is for a company essential to forecast the potential market size and acceptable price for the new drug at the early onset of the clinical development program.…”

Section: Introductionmentioning

confidence: 99%

An integrated valuation model for payer and investor

Nuijten¹,

Capri

2022

Journal of Market Access & Health Policy

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Background In order to optimize positioning and associated drug price for both payer and investor, it is for a company essential to forecast the potential market access attractiveness for the new drug for different indications at the early onset of the clinical development program. This analysis must include the constraints from the perspective of the payer, but also the biotech companies, who require a minimum drug price to satisfy their investors. This paper aims to provide an Integrated Valuation Model for payer and investor, bridging concepts from health economics and economic valuation reflecting the perspectives of the payer and the investor for a drug in early clinical development phase. The concept is illustrated for a new hypothetical drug (Product X) in advanced breast cancer in 1-line, 2-line, and 3-line position. Methods The Integrated Valuation Model includes the outcomes of the budget impact model, pricing matrix model, and cost-effectiveness model reflecting the payer’s perspective. These models are interacted and linked with a discounted cash flow model in order to reflect also the economic value from the investor’s perspective. Results The maximum price in 1-line position is €269.7 for the payer and the minimum price is €14.7 for the investor, which are unit prices per administration corresponding with treatment regimens for the comparative treatments. In 2-line position, the maximum price is €274.1 for the payer and the minimum price for the investor increases to €184.5 for the investor because of the smaller market size in 2-line position, which leads to a smaller pricing corridor to satisfy both payer and investor. Consequently, Product X has market access attractiveness for both payer and investor in 1-line and 2-line position. However, the minimum price €942.7 in 3-line position for the investor is higher than the maximum price €283.3 for the payer, which means there is no market potential. Conclusion The practical strategic application of the Integrated Valuation Model is optimization of positioning and price of Product X. Hence, it can be a transparent tool in early-stage development of a compound based on upfront assessment of market access attractiveness for the payer and the investor.

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“…The pharmaceutical market has been experiencing rising expenditure on prescription drugs over the past decades although the number of prescriptions lled has remained constant. (1)(2)(3)(4) This is mainly attributed to high costs and increased availability of patented drugs (mainly oncology-related medication), including orphan drugs (OD) and advanced therapy medicinal products (ATMPs), a group which includes gene therapies, somatic cell therapies and tissue engineered products. (5) As these therapy forms often represent the rst causal treatment approach, they are commonly referred to as "innovative therapies".…”

Section: Introductionmentioning

confidence: 99%

Spinal Muscular Atrophy: The High Costs of Innovative Therapies for Rare Diseases

Brennenstuhl

Green

Störzinger

et al. 2021

Preprint

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Background: Despite numbers of prescriptions filled remaining constant, expenditures for drugs are rising. Among others, this is caused by high prices for orphan drugs and advanced therapy medicinal products (ATMPs). Despite attempts by policymakers to intervene, the increasing use of these therapies poses numerous challenges on the health care system.Results: Using data from the University Hospital Heidelberg, we found that the division of pediatric neurology is experiencing a strong increase in drug costs, caused by two pharmaceuticals for the treatment of spinal muscular atrophy (SMA), Nusinersen and Onasemnogene Abeparvovec. To put this finding in a broader context, we conducted a survey of 41 German SMA treatment centers revealing a general lack of human and infrastructure resources for therapy and follow-up care, which demonstrates insufficient reimbursement of treatment. To improve structural conditions, we propose that disease-independent registries for medication surveillance that comply with the rules of the European Union are needed as well as the development of a fair funding model.Conclusion: Innovative forms of therapy require a critical discussion and concise regulation of treatment application and follow-up reimbursement as well as international industry-independent registry work. Based on the previously described model of “evidence-based dynamic pricing” by the Techniker Krankenkasse, we propose a revised model which offers an internationally scalable solution to meet these challenges.

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Pricing of orphan drugs in oncology and rare diseases

Cited by 12 publications

References 13 publications

The impact of early phase price agreements on prices of orphan drugs

The impact of early phase price agreements on prices of orphan drugs

An integrated valuation model for payer and investor

Spinal Muscular Atrophy: The High Costs of Innovative Therapies for Rare Diseases

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