Real option value drugs: is it really an option?
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The document discusses the concept of real option value in pharmaceuticals, particularly focusing on how it can be calculated and its implications for treatment decision-making. It features presentations by experts who analyze real option values for various cancer drugs and outline payer concerns regarding their incorporation into cost-effectiveness evaluations. Key points include the effects of potential future treatments on current patient options and the challenges in accurately estimating the real option value in healthcare contexts.
Real option value drugs: is it really an option?
- 1. ohe.org PRESENTATOINISPOR*NEW*ORLEANS Real option value drugs: is it really an option? BREAKOUT*SESSION*6:*IP16 Adrian*Towse Emeritus*Director*and*Senior*Research*Fellow Visting*Professor,*London*School*of*Economics* 21ST MAY(2019
- 2. Real option value drugs: is it really an option? ISPOR&NEW&ORLEANS IP16 2 21ST MAY(2019 ●Meng Li, PhD, ScM, Postdoctoral Research Fellow, Leonard D Schaeffer Center, University of Southern California, Los Angeles, CA, USA. ●Meng will set out estimates of real option value for three drugs and arguing that option value matters and can be calculated. ●Adrian Towse, MA, MPhil, Emeritus Director and Senior Research Fellow, Office of Health Economics ●Adrian will set out likely payer concerns about incorporating real option value into decision making. ●Jens Grueger, formerly Head Global Access, Senior Vice President at F. Hoffmann - La Roche ●Jens will set out how industry considers investment opportunities, arguing that if patients (and society) have preferences these need to be reflected in P&R decisions.
- 4. What%is%real%option%value?% Origin%in%finance 4 Option:#Right,#but no obligation to#take#certain#action at#a#later#time Financial+option:#An#option#on#financial#assets#(stocks,#bonds,#etc.)# • Call#option#and#put#option Real+option:#An#option#(managerial#operating#flexibility)#on#real#assets#(real#estate,#land,#oil,#etc.) • Delaying#constructing#a#plant,#expanding#production#capacity Growth+option:#The#flexibility#to#make#further#investments#once#the#prerequisite#investment#is# made • Initial#synthesis#and#preclinical#testing
- 8. Real%option%value%has%been%estimated%as%(forecasted)% additional%survival%gains%in%several%cancers% Forecasted future&survival&trends&based&on&historical&real2world&survival&trends&in&SEER&data Sanchez&2012:&TKIs&for&CML&– 9%&of&conventional&survival&gains Thornton&Snider&2017:&Nivolumab&for&RCC,&squamous&and&non2squamous&NSCLC&– 18%,&5%,&and& 10%& • (Conventional)&Gains in&survival&of&6.3&months,&4.5&months,&and&7.5&months,&ignoring&future&innovations • Forecasted&survival&improvement:&0.44%,&0.39%,&and&0.27%&per&year 8
- 10. Estimating)real)option)value)in)a)CEA The)case)for)ipilimumab 10 Ipilimumab+as+first0line+treatment+for+metastatic+melanoma • Phase+III:+200602010 • Efficacy:+Median+OS+11.2+months+vs.+dacarbazine Ipilimumab Vemurafenib, Trametinib,+ Dafrafenib,+Pembrolizumab,+ Nivolumab,+Talimogene+ laherparepvec,+Cobimetinib Dacarbazine Interferon+++++++Interleukin
- 13. Pipeline'approach Projected)time)of)arrival) 0 clinicaltrials.gov,)published)statistics) Projected)likelihood)of)arrival 0 clinicaltrials.gov,)published)statistics Projected)efficacy 0 phase)II)studies Projected)price) 0 a)published)study)on)the)price)trend)of)cancer)drugs 13
- 14. Pipeline'approach'– eligible'new'molecules Investigational,drug Phase,III,start, date Estimated,FDA, approval,date Probability,of, FDA,approval OS,in,phase, II,,months GSK1120212 Nov,2010 Jan,2014 77% 14.2 Talimogene, Laherparepvec Apr,2009 May,2012 77% 14.7 Vemurafenib Jan,2010 Jul,2011 77% 15.9 GSK2118436 Dec,2010 Feb,2014 77% 13 14 Expectation:,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,Nov,2011,,,,,,,,,,,,,,,,77%,,,,,,,,,,,,,,,,,,,14.5,,,,,, Price,per,life,year,gained,=,$54,100,+,$8,500,x,Approval,year,(0,for,1995,,1,for,1996,,…) Cost,for,new,2L,treatment:,$140,617 Howard,DH,,Bach,PB,,Berndt,ER,,Conti,RM.,Pricing,in,the,market,for,anticancer,drugs.,J,Econ,Perspect 2015;29:139b62
- 16. 284,816 109,728 175,087 83,650 71,281 12,369 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 Ipilimumab4+ dacarbazine Dacarbazine Incremental Healthcare)cost,)$ Conventional Option4value Results'– QALYs,'healthcare'costs,'and'ICER 16 2.29 1.53 0.76 0.42 0.36 0.06 0 0.5 1 1.5 2 2.5 3 Ipilimumab4+ dacarbazine Dacarbazine Incremental QALYs Conventional Option4value QALYs4 Costs ICER4decreased4by40.4%.4 18% 24% 7.9% 29.4% 65.0% 7.1%
- 17. If#you#have#a#lot#of#time#and#money… Non$cancer)mortality • Forecast)using)SEER$Medicare)or)other)claims)or)EHR)data Cancer$specific)mortality • Phase)I)&)II)trials)and)the)FDA’s)fast$track)reviews • Prediction)models)for)length)of)phase)III)and)likelihood)of)approval) QoL improvement • Trend)may)be)inferred)from)published)data 17
- 18. Generalizing*to*other*disease*areas Other&cause+mortality • Claims,+EHR,+or+survey+data • Subtracting+cause&specific+mortality+from+the+all&cause+mortality+of+the+general+population+(Rosenberg+ 2006) Disease&specific+mortality • Pipeline+approach+would+still+apply 18 Rosenberg+MA.+Competing+risks+to+breast+cancer+mortality.+J+Natl Cancer+Inst Monogr.+2006;53706:15&9
- 19. Ex#post#estimates'of'real'option'value Used%actual%approval%dates%and%observed%efficacy%of%subsequent%innovations Philipson 2010:%AZT%for%HIV/AIDS%– 145%%to%469%%of%conventional%survival%gains Thornton%Snider%2012:%Tamoxifen for%preventing%breast%cancer%– 24% Thornton%Snider%2018:%Ipilimumab%for%metastatic%melanoma%– 15%%to%49% 19
- 20. Does%real%option%value%really%exist%in%treatment%decision4 making? Forthcoming:,Meng,Li,,Anirban Basu,,Caroline,Bennette,,David,Veenstra,,Louis,Garrison.,Do# cancer#treatments#have#option#value?#Real4world#evidence#from#metastatic#melanoma. Health, Economics. Disclosure,of,ipilimumab’s phase,II,results,led,to,an,immediate,increase,in,active,treatment,vs., no,treatment,among,metastatic,melanoma,patients 20
- 22. ohe.org PRESENTATOINISPOR*NEW*ORLEANS Payer concerns about incorporating real option value into decision making REAL*OPTION*VALUE*DRUGS:*IS*IT* REALLY*AN*OPTION? Adrian*Towse Emeritus*Director*and*Senior*Research*Fellow Visting*Professor,*London*School*of*Economics* 21ST MAY(2019
- 23. Payer concerns ISPOR&NEW&ORLEANS IP16 23 21ST MAY(2019 ●The(potential(for(double(counting ●Whether(the(uncertainty(around(estimation(is(being(handled(correctly ●Evidence(on(patient(preferences ●Opportunity(cost(– amending(the(valueCforCmoney(threshold ●Another(excuse(for(a(higher(price ●Whether(prices(already(exceed(value?
- 24. The potential for double counting ISPOR&NEW&ORLEANS IP16 24 21ST MAY(2019 ●If(I(want(to(reward(health(gain((in(QALYs),(then(I(reward(the(health(gain((QALYs)(when(the( (future)(new(treatment(appears ●If(I(reward(the(current(treatment(for(possible(QALYs(delivered(by(a((future)(new(treatment,( then(I(am(paying(twice(for(the(same(health(gain. ●Real(option(value(of(the(current(treatment(is(that(it(can(keep(a(patient(alive(for(long(enough,( such(that,(should(the(new((future)(treatment(appear,(the(patient(can(exercise(the(option(of( taking(the(new((future)(treatment.(From(a(payer(perspective(this(is(a(risk(neutral(calculation. ●If(the((future)(new(treatment(is(assumed(to(be(priced(at(the(payers(WTP(valueMforMmoney( threshold(or(costMeffectiveness(threshold,(then(the(option(value(for(the(payer(will(be(zero.( There(will(be(no(“headroom”(in(the(option(value(calculation(for(a(real(option(premium.(
- 25. Uncertainty around estimation ISPOR&NEW&ORLEANS IP11 25 21ST MAY(2019 ● Assume(it(is(measured(in(QALYs ● If(we(take(a(value=of=information((VoI)(approach,(then(do(we: ● “adopt”(the(option(without(further(evidence(of(expected(effect?((which(I(think(is(what(Meng(is(suggesting) ● “decline”(to(pay(for(the(option(on(the(grounds(that(the(expected(effect(is(not(positive(and(additional( information(is(not(going(to(change(that ● Adopt(with(a(requirement(for(additional(evidence.(I(would(interpret(this(as,(in(principle,(allowing(payment( to(be(made(if(the(outcome((of(a(new(future(treatment)(is(achieved. ● Retrospective(payment(would(provide(an(appropriate(incentive.(The(company(can(invest(in(the(knowledge( that(it(will(get(paid(if(the(option(value(turns(out(to(be(realised.( ● There(is(a(separate(issue(as(to(the(need(to(develop(standard(methods(for(any(calculation.(
- 26. Opportunity cost – amending the value-for-money threshold ISPOR&NEW&ORLEANS IP11 26 21ST MAY(2019 ●Assume(the(option(value(is(measured(in(NMB(or(in(QALYs.(Latter(can(be(done(via(a(WTP(for(a( QALY(based(on(the(MRS(as(between(QALYs(and(income,(or(value(for(a(QALY(based(on(a( budget(constrained(threshold((ʎ) ●We(still(have(an(issue(as(to(whether(alternative(uses(of(the(money(are(on(treatments(that(also( have(an(option(value.((
- 27. Payer concerns ISPOR&NEW&ORLEANS IP16 27 21ST MAY(2019 ●The(potential(for(double(counting ●Whether(the(uncertainty(around(estimation(is(being(handled(correctly ●Evidence&on&patient&preferences ●Opportunity(cost(– amending(the(valueBforBmoney(threshold ●Another(excuse(for(a(higher(price ●Whether(prices(already(exceed(value?
- 28. Novel elements of value. Another excuse for a higher price? ISPOR&NEW&ORLEANS IP16 28 21ST MAY(2019 Value Quality( adjusted- life(years-- (QALYs)- gained- Net-health- system- costs Productivity Adherence (improving- factors Value-of- knowing Fear-of- contagion Insurance- value Severity-of- disease Value-of- hope Real- option( value Equity Scientific- spillovers • Do(we(want(to( include(them? • Can(we( measure? • Can(we(avoid( double( counting? • How(do(we( aggregate?
- 29. Whether prices already exceed value? 21ST MAY(2019 ISPOR&NEW&ORLEANS IP16 29 Trends(in(cancer(drug(prices(in(the( USA(suggest(prices(that(are(above( $150K(per(QALY. If(this(is(an(appropriate(benchmark,( then(adding(in(elements(to(achieve( a(higher(price(is(difficult(to(justify. Of(course,(rationally(the(anchor( price(for(a(QALY(would(be( appropriate(and(adding(relevant( elements(of(value(to(make(a( judgement(about(value(would(then( be(appropriate.((
- 30. Summary of payer concerns ISPOR&NEW&ORLEANS IP16 30 21ST MAY(2019 ●The(potential(for(double(counting ●Whether(the(uncertainty(around(estimation(is(being(handled(correctly? ●Evidence(on(patient(preferences ●Opportunity(cost(– amending(the(valueDforDmoney(threshold ●Another(excuse(for(a(higher(price? ●Whether(prices(already(exceed(value?
- 31. To#keep#up#with#the#latest#news#and#research,#subscribe#to#our#blog.# OHE’s#publications#may#be#downloaded#free#of#charge#from#our#website. ohe.org OHE Southside 105#Victoria#Street## London#SW1E 6QT## United Kingdom Telephone +44#(0)20#7747 8850 FOLLOW%US To#enquire#about#additional#information#and#analyses,## please contact: Adrian%Towse Emeritus%Director%and%Senior%Research%Fellow,%OHE Visting%Professor,%London%School%of%Economics atowse@ohe.org
- 33. The$potential$for$double$counting • With$the$appropriate$methods,$double$counting$is$not$inevitable$ • Existing$studies$estimated$option$value$created$by$the$current$life;extending$ treatment$and$future$treatments,$but$did$not$address$how$to$apportion$option$ value • The$option$value$of$the$current$treatment$in$terms$of$NMB$depends$on$the$cost; effectiveness$of$future$treatments
- 35. Opportunity*cost*– amending*the*value6for6money* threshold • Alternative*uses*of*the*money*on*treatments*may*also*have*option*value • Whether*thresholds*need*to*be*amended*depends*on*the*option*value*of*these* alternative*uses
- 38. • No$current$disease$modifying$therapies • Many$different$therapeutic$approaches • First$generation$therapies$will$likely$only$slow$disease$progression • They$will$create$learning$for$new$therapeutic$options$(path$dependence) • And$they$may$preserve$more$cognition$so$that$more$effective$future$therapies$will$ start$from$a$higher$baseline Example:)Alzheimer)Disease 38
- 39. Acute&myeloid&leukemia&(AML) • Cure&(bone&marrow&transplantation)&already&exists&but&may¬&be&available&for&the& specific&patients&in&time;&improvements&in&PFS&and&overall&survival&may&make&the& difference • Patients&on&gilteritinib in&relapsed/refractory&FLT3+&AML&had&higher&rates&of&allogeneic& hematopoietic&stem&cell&transplant&than&those&on&salvage&therapy,&at&26%&versus& 15%,&(Alexander&E.&Perl&at&2019&AACR&Annual&Meeting) Gene&therapies • Can&we&keep&patients&alive&so&that&they&can&benefit&from&emerging&gene&therapies? • If&patients&use¤t&gene&therapies,&will&they&still&have&an&option&to&benefit&from&next& generation&gene&therapies&that&may&have&better&outcomes? Other&Examples 39
- 40. • Informally+include+this+in+our+investment+decisions+by+assuming+that+there+is+a+higher+ willingness+to+pay+for+therapies+in+areas+of+high+unmet+need+where+initial+therapies+ create+paths+to+the+development+of+new+therapies. • Where+therapies+are+already+available+(as+in+the+case+of+bone+marrow+ transplantation),+include+this+in+overall+survival+analyses+and+economic+models • Other+therapies+in+development+considered+competitors+rather+than+options • If+there+is+clear+guidance+that+initial+therapies+should+not+receive+special+ considerations,+will+we+ever+get+the+next+generation? What%does%this%mean%for%industry 40