Making Sense of Uncertainty with Simulation: New Paper in Value in Health
The tandom increase in drugs receiving accelerated approval and in drugs for rare diseases has led to a surge in interest in innovative payment models. These models try to deal with evidentiary and pricing challenges by distributing risk between the contract parties — usually a manufacturer and a payer, like a health insurance plan. Value-based contracting is one type of innovative payment model that has drawn particular attention.
The central idea behind a value-base contract is that payers only pay for treatments that work. In this type of contract, the payer purchases the treatment and then, for each patient that doesn’t achieve a pre-specified health outcome, the manufacturer provides a rebate. The details, including the upfront cost, target health outcome, timeline, and rebate amount, are agreed upon by both parties during contract negotiation.
Value-based contracts have been posed as particularly well-suited to situations in which there is limited clinical evidence and high costs, as in cell and gene therapy. This evidence and cost combination may understandably increase payer hestiancy to adopt a new intervention, yet to be proven in real-world settings. Value-based contracts, then, offer a way to share the risk posed by high costs and limited evidence between the manufacturer and the payer, and thus may improve access to new interventions.
Despite these benefits, uptake of value-based contracts has been limited, perhaps due in part to the challenges associated with estimating the financial outcomes associated with different contract considerations. For example, how does the size of the evidence base impact the likely range of financial outcomes in a value-based contract? Our latest publication in Value in Health set-out to tackle exactly this issue.
Variables addressed in our simulation study
In our paper, we use statistical simulations to quantify the impact of different contract considerations and sources of uncertainty on the likely financial impact of a value-based contract. Our paper explores the financial impact of the following variations in a contract:
Treating a small number of patients compared to a large number of patients
A treatment that is effective most of the time compared to a treatment that is effective half the time
A treatment that is supported by a small evidence base compared to a treatment that is supported by a large evidence base
A small rebate percentage compared to a large rebate percentage
We also include a short case-study based on Zynteglo, BlueBird Bio’s approved cell and gene therapy for beta thalassemia. Zynteglo was approved based on evidence from two clinical trials with a combined 36 patients and launched with a starting price of $2.8 million USD. The organization publicly offered a value-based contract with an 80% rebate if treated patients did not achieve the specified health outcome.
If you are considering a value-based contract, reach-out to see how we can help negotiate a better contract for you.
In the mean time, read the full paper for free on the Value in Health website.