Incorporating Life-cycle Price Modelling into Pharmaceutical Cost-effectiveness Evaluations

A Research Paper on the topic of incorporating life-cycle price modelling into pharmaceutical cost-effectiveness evaluations has just been published by OHE.

Why might the launch price of a new drug be a poor indicator of future expenditure for a drug? 

This question is crucial when conducting cost-effectiveness analyses, i.e. when studying whether it is desirable to publicly fund/reimburse a new drug. 

Typically, it is implicitly assumed within cost-effectiveness evaluations that the price of a drug will be constant (in real terms) from the present into the future. However, this approach does not account for drug life cycle pricing, i.e. the evolution of a drug price throughout its life. 

In reality, the drug launch price (which is considered in cost-effectiveness analyses) is likely to decrease when other drugs with similar therapeutic effects enter the market. Also, when the patent of the drug expires, generic versions will most likely be launched and sold at substantially lower prices.

A newly published OHE Research Paper models and studies the price of a new drug along its life-cycle, from launch to discontinuation, to investigate how the price of the drug evolves and how this could affect cost-effectiveness calculations.  

The paper shows the traditional approach to calculating ICERs could lead to the wrong decision, by recommending (or not) drugs that will be no longer (or that will be) cost-effective in the future. 

Access the full paper here.

For more information contact Jorge Mestre-Ferrandiz at OHE.