Value-based pricing of add-on life-extending medicines based on economic evaluation

Abstract

Value-based pricing of new medicines, when defined as pricing or reimbursement based on economic evaluation, requires the use of a threshold incremental cost-effectiveness ratio. Value-based pricing can leave little room for setting a price above zero for manufacturers of new life-extending add-on medicines that are used in combination regimens. This study aimed to present and explore different methodological approaches for pricing life-extending add-on medicines in this value-based pricing framework. The analysis demonstrated that excluding the costs of background therapy will create opportunity costs. A proportional division of the price can avoid opportunity costs. In the absence of information on relative health benefits, a counterfactual scenario of a head-to-head trial has suggested halving the price of background therapy in the relevant patient subgroups. Overall, the most plausible approach appears to be a proportional division of the total price of the combination therapy, in proportion to the health benefits of the add-on medicine and the background therapy.