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The ability to strategically price a product in a changing market can be challenging. The traditional price setting process is influenced by several key factors: the manufacturer (production cost and quality of product), the customers and consumers (willingness-to-pay), and the market (market dynamics and competitors). A successful pricing strategy should take into account all of these factors to arrive at a value-based price (VBP). Quintiles has developed a flexible and adaptable value-based pricing framework that can be applied to any therapeutic area and used to evaluate any number of varying product profiles. It involves understanding how payers value asset attributes and how their willingness-to-pay helps quantify each individual attributes’ contribution to a price. Likewise, the VBP framework can inform what asset attributes contribute to physician prescribing and how their willingness-to-prescribe can translate into market uptake. Because this VBP framework incorporates views from multiple stakeholders, such as payers and physicians, the resulting outputs can be incorporated into other efforts like forecasting estimated market share, prescribing and uptake; or likelihood of coverage and level of reimbursement.
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Copyright © 2012 Quintiles
The Quintiles Approach to Global Value-Based Pricing
November 2012
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Uniquely Positioned to Deliver Unparalleled Insight…
Pricing Know-How
Our global pricing experts have an extensive network
in developed and emerging markets from which we
can provide direct payer and regulatory insight
• Our evidence-based market access strategies are
differentiated by their foundation in actionable health
economics, insight from our clinical teams, and
intelligence from our commercial teams
Evidence-Based Strategy
Global Perspective
Quintiles has unique datasets and extensive
experience in developing global P&R strategies that
aim to determine the value-maximizing price associated
with the optimal product positioning
Global Perspective
Evidence-Based Strategy
Pricing & Access
Know-how
300 PhD’s Health Economists
on staff
Unique payer database
14 years of global pricing experience
Over 200 global consultants
Offices in over 60 countries
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Value-Based Pricing Introduction
Value-based pricing is a structured way of estimating price of a new asset based on its
perceived value (supported by evidence) by various stakeholders
The definition of value differs between various stakeholder groups. An understanding of
each groups’ perception of value is required to develop an evidence-based pricing
strategy
Value-Based Pricing
• Which stakeholder(s) are most influential for pricing decisions? Does this vary across markets?
• What are the interdependent relationships between stakeholders?
Who Matters?
• How do stakeholders place value on products (e.g. health economics, net price, cost reduction)?
• What are the pricing thresholds they will tolerate and how do you develop access, and revenue strategies around those?
What Matters to Them?
• What information and tools are needed to develop evidence based strategies to convince your stakeholders?
• How can you best integrate numerous unstructured data sets in a manner to derive value out of them?
How Do You Influence them?
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Our analytics offering allows us to tackle several business questions related to our clients’
global pricing strategy
Key Business Questions
Solutions
• Clear understanding of global stakeholder dynamics
• Proven methodology that can quantify and relay product-specific value
• Access to integrated and unique data sources
• Customizable dashboards and tools to capture and measure value
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Value-Based
Pricing
Revenue
Optimization
Payer Account
Segmentation
Payer Contracting
Strategy
• Triangulation of three
pricing inputs: 1.Value-based Price Appraisal
2.Reference Price
Benchmarking
3.Willingness-to-Pay
Assessment
• Qualitative sample size (n =
20 – 25
• Quantitative research with
key stakeholders (n = 75 –
400)
• Output
– Price/demand equation
– Pricing scenarios
– Preference/share
relationship
– Revenue-optimizing
pricing strategy
• Prioritizing market
opportunity with payers by:
– Size/Coverage
– Formulary tier design
– Cost-control mechanisms
– Competitive positioning
– Decision making process
• Developing revenue
maximizing contracting
strategy with:
1.Formulary Mapping
2.Contract and Utilization
Analysis
3.Scenario Cost Analysis
Approach to Pricing Four core pricing analytics verticals provide the pricing insights necessary to develop a
comprehensive Evidence-Based Global Pricing Strategy
Phase I – Initial Assessment Phase II – Refinement Phase III – Tactical
12-18 Months Before Launch 6-12 Months Before Launch 0-6 Months Before Launch
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VBP Framework Anchored by our health economic modeling capability, we are able to develop evidence-
based pricing recommendation that holds up to stakeholders’ scrutiny
Business Challenge
Inability to financially quantify a product’s value and determine its stakeholders’ substantiated pricing potential
Our Framework
Outcomes
Pricing potential predicated on estimated cost-benefit vis-à-vis comparable drugs, past experience with reference
products, and willingness to pay in the marketplace
Triangulation of three evidence-based methodologies:
1. Health Economic Price Appraisal:
- Formulates a pricing range based on a health
economic appraisal of product benefits measured by a
variety of metrics including cost-savings and cost-
effectiveness potential
2. Reference Price Benchmarking:
- Assesses the pricing structure of comparable products
including an evaluation of real-world dosing (contracts
including risk-sharing deals also considered)
3. Willingness-to-Pay Assessment:
- Utilizes qualitative feedback from key decision makers
to understand price expectations and thresholds vis-à-
vis current competitors and comparables
Health-Economic Analysis
Value-based Pricing
Recomm.
Willingness-to-Pay
Assessment
Value-Based Pricing Framework
Reference
Price
Benchmarking
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Health-Economic Analysis
Value-based Pricing
Recomm.
Willingness-to-Pay
Assessment
Reference Price
Benchmarking
3. VBP Framework:
VBP Approach Leveraging a unique framework and all encompassing process-oriented approach to
convert therapeutic area and market-specific insight into actionable pricing for clients
Existing Client
Pricing Work
HTAs
Secondary
Research
1. Pricing Insight: 2. Components Analysis:
Comp.
4
Comp.
5
Comp
2
Comp.
6
Comp.
3
Comp.
1
4. Value-Based
Pricing:
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VBP Equation Overview Foundational components will be segregated into quantitative and qualitative components
which will inform the pricing equation to derive a product’s value proposition
• OS, PFS, ORR
• % patients alive at Year 1 / 2
• Route of Administration /
Dosage Frequency
• Maintenance of QoL
• Adverse Events
• Treatment Duration (Mos)
• Affordability
• Unmet Need
• Competition
• Novelty
• Time to Launch
Cost of Comparator + [(Clinical Differentiation x Evidence) x Market Forces)]
Foundational Additive
• Trial Design Results
• Trial Type
• Trial Size
• Biomarker Test
Certainty
• Cost of selected
comparator
• HECON Models
So
urc
e
Co
mp
on
en
ts
• HECON Models
• Quantitative Web Survey
• Qualitative Interviews • Qualitative Interviews
VBP
Range =
Illustrative - Oncology
• $’s • % premium or discount • % premium or discount • % premium or discount
Un
it
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VBP and Market Access
VBP model outputs allow the user to understand the probability of coverage at a specific
cost by specific payer market type
Payer handling of specific assets will differ by market type as each market’s approach to
product evaluation is driven by different factors
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
$15,000 $30,000 $45,000 $60,000 $75,000 $90,000 $105,000 $120,000
Pro
bab
ilit
y o
f C
overa
ge a
t L
evel
Annual Cost of Therapy
Low Restrict High Restrict No Coverage
Free Markets
• Multiple-payer market; discrete
decision making
• Specialty tiers and co-insurance
• Shifting burden of cost onto patient
Germany
UK
US
HTA Markets
• Single-payer market; HTA-based
decision making
• Favorable handling if achieve break-
even threshold of £30,000
• National vs. local decision makers
Innovative Markets
• Single-payer market; innovation-driven
decisions
• Justify clinical benefits to de-anchor
from generic price
• National vs. local decision makers
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Comp.
4
Comp.
5
Comp
2
Comp.
6
Comp.
3
Comp.
1
Mutually Exclusive Attributes:
Limited number of components
included in conjoint exercise for
each product profile.
Future Market Scenarios:
Future market scenarios created using an experimental design to vary component values for
each new product. Respondents rate their WTP and access restrictions for each product profile as
compared to SOC.
Conjoint/Discrete Choice Analysis:
Profiles are assessed via conjoint
analysis to generate each
component’s importance & its
contribution towards price and
access
Several different profiles for
each new product
Conjoint / Discrete
Choice Analysis
Market Research Analytics Overview A conjoint-based discrete choice exercise elucidates how multiple components interplay to
drive price acceptance and access restrictions
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Preliminary VBP Model The VBP model will calculate component values based on primary research and populate
a preliminary VBP equation
--Illustrative--
2. User to select
component values based
on asset under
consideration
1. User to select
indication,
country, and
comparator
3. VBP ranges and
premium/discount
automatically populated
based on selection
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Illustrative Analytic Outputs The visualization afforded by outputs will enable easier understanding of stakeholder
perception of various components
To assess the relationship between components and variables towards calculating the value-based price
To analyze impact of price increase on coverage / approval decisions (relative to SOC)
To display sensitivity analysis & relative component importance
Price Access Relationship
– Efficiency Curves
Tornado Diagram – Sensitivity Analysis
Water Fall Charts – Component’s
contribution to price
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Case Studies
14
Brand Strategy
Market AccessMarket Intelligence
Outcomes
Research
Development Launch Prep Peak
Commercial
Submission Launch
Mature
Product & Portfolio Strategy
Clinical TransformationOutsourcing StrategyClinical Analytics
R&DRegulatory Strategy
R&D CompliancePharmacovigilance
Quality Systems Optimization
Regulatory
& Quality
Process Optimization
IT Strategy and Implementation
Change Management
Program Management
GOVERNANCE & QUALITY ASSURANCE
RISK MANAGEMENT
Quintiles’ Consulting Capabilities The definition of value differs between various stakeholder groups. An understanding of
each groups’ perception of value is required to develop an evidence-based pricing
strategy
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Case Study:
Preliminary Value-based Pricing Strategy
Background Background
Duration: 20 Weeks
Situation: The client sought to develop an evidence based
pricing opportunity assessment framework that will support overall
pricing development process by understanding the drivers and
barriers to pricing and market access in multiple markets
1. The Quintiles Global Consulting (QGC) team conducted HTA assessment, primary stakeholder and secondary research:
i. Reviewed historical HTA’s to identify the decision driving components and threshold values
ii. Conducted a market and indication specific quantitative survey to understand individual attributes’ importance and contribution to overall premium
2. QGC triangulated a pricing framework via three perspectives to develop a value-based pricing model in MS excel
i. An analogue assessment for reference price benchmarking
ii. A primary research willingness-to-pay assessment
iii. A health economic analysis
Approach
Benefits to Client 1. Review and analysis of the HTA decision rationale and
indication level thresholds, pricing drivers and their sensitivity to price
2. Quantification of clinical value components and market conditions that impact the overall price premium
3. Preliminary pricing range established using a flexible evidence-based excel model that is pre-populated with stakeholder’s feedback and can be adjusted as product profile and market conditions evolve in future
4. A process map to optimally incorporate and “operationalize” the value-based pricing approach and framework
Quintiles Consulting Team
Primary Market Research Secondary Market
Research
Pricing Methodology
KOLs Payer
HTA Expert Q Internal Experts
Pharmaco-economic and
Academic Papers
Analyst and Industry Reports
Value Based Pricing Model and Strategy
Recommendations
Health-
Economic
Analysis
Value-based
Pricing
Recom. Reference
Price
Benchmarking
Willingness-to-
Pay
Assessment
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Case Study: Value Based Pricing & Market Access Strategy
Background Background Approach
Benefits to Client
Quintiles Consulting Project Team
Primary Research Secondary Research
Value-based
Pricing Model
Market Access Strategy and Value Story
Physicians
Payers
Duration: 12 Weeks
Situation: The client sought a pricing estimation and an
understanding of the drivers and barriers to formulary access and
use for multiple IV anti-infectives in preclinical development
1. The Quintiles Eidetics and Quintiles Global Consulting (QGC) group s worked collaboratively
i. Eidetics conducted a quantitative survey to investigate the effect of product attributes on perceptions and use
ii. QGC input questions into the Eidetics survey and utilized the output to guide their research and recommendations
2. QGC conducted research in a comprehensive and structured manner:
i. Assessed the anit-infectives pricing and reimbursement landscape including market access barriers and value drivers for competitors and market comparables
ii. Calculating a value-based price predicated on its estimated cost-benefit vis-à-vis comparable drugs in the marketplace
1. Understanding of the hospital formulary decision-making process for IV anti-infectives
2. Insights into the drivers and barriers to access, restrictions and use for their products
3. An assessment of the thresholds / trade-offs of product attributes (efficacy, safety, cost , etc) driving access and use
4. Insights from analogous products, primary willingness-to-pay research, and from our treatment cost pricing model
5. Pricing recommendations from an evidence-based framework that can be adapted with new inputs as circumstances develop
Model Structure
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Background Background Structure
Benefits to Client
Case Study:
Global Pricing Reimbursement for Phase 2NCE
1. Understanding KOL opinion of four proposed Phase 3 trials in different cancer settings with different combinations of therapies and competitor compounds and clinical trials. Related assessment of the client’s compound’s efficacy and side effect data and remaining unmet needs, treatment algorithms for these different settings and patients, including the necessity and value of biomarkers, genetic testing and patient segmentation by responders and non-responders
2. Understanding of how pricing reimbursement decision makers treat new targeted therapies for cancer, including how pricing is set, how formulary inclusion, exclusion decisions are made and how these decisions are likely to change in the next few years
3. Development and application of Quintiles’ value-based pricing model to assess the pricing flexibility the client would have under different scenarios of efficacy and side effects for its own and competitors’ compounds in light of new compounds coming to the market and existing compounds com ing off patent
4. Client was advised that two of the proposed clinical trials were not viable, that two of the proposed trials were reasonable, and that a few other trials should be considered. The client also received a complete understanding of the pricing reimbursement range and flexibility for their NCE in its market/competitive situation
Company: Large Pharmaceutical Company
Situation:
Client had a targeted breast cancer therapy that had finished Phase 2. The client
asked Quintiles to conduct research and develop a value-based pricing model to help
guide the pricing reimbursement decisions for the compound assuming that four
proposed Phase 3 clinical trials would be carried out. The project goals were to:
• Conduct secondary and primary research on this portion of the breast cancer market with respect to key clinical and pricing reimbursement characteristics
• Assess the clinical relevance and validity of the four proposed Phase 3 clinical trials as represented by the reactions of key opinion leader in oncology to those trials
• Analyze and compare the efficacy and side effects of the client’s NCE to other NCEs that would come to the market at the same time, and to existing therapies that would go off patent
• Collect data and interpret data on pricing reimbursement aspects, unmet needs, the burden of disease , and ancillary HC costs created or eliminated by the company’s NCE compared to competitor compounds,
• Develop value-based pricing (VBP) model: compute probability of failure against primary ORR endpoint; cost/benefit or side effect/efficacy tradeoff for PFS endpoint to determine various pricing reimbursement scenarios for the NCE
Quintiles Consulting Project Team
Primary
Research
Secondary
Research
Value-Based
Pricing Model
Critical Assessment of initial development phase and
Scenario Analysis of Pricing Reimbursement Options for NCE
KOL
Oncologists
Payers &
Influencers
Existing &
Product
Pipeline
Patient
Population,
Unmet Needs
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Case Study: Quantitative Linked Model Pricing Optimization
Background Approach
Benefits to Client
Background Client: Major Biopharmaceutical Company
Situation: Client had novel compound and MOA coming
into a class with an entrenched market leader. While clinical
trials were still ongoing, there was a need to develop pricing
prior to the trial results. By developing scenario-based
alternatives, efficient commercialization progress regardless of
the eventual outcome would be enabled. Key Questions
included:
• How payers react to potential price scenarios and potential
price premiums for PRODUCT X?
• How physicians react to PRODUCT X’s price in the context
of patient out-of-pocket cost , cost/day, and potential tier
status?
• How likely patients will be to fill a prescription for
PRODUCT X based on out-of-pocket cost / tier status?
• The identification of key endpoints and drivers that will make
PRODUCT X favorable and competitive by market
• An understanding of what will most impact PRODUCT X’s
opportunity potential by stakeholder type
• A measure of how each stakeholder influences and is
influenced by the other based on different price and product
profile scenarios
• Price demand curves suitable for revenue optimization and
other economic models - with confidence intervals for the
market estimates
The final linked model and Preference Share SimulatorTM includes input from all three major
customer groups in the US.
User Inputs:• MD Conversion-to-Ongoing-Use
Factor• Clinical performance settings• Price
Preference
Shares
PatientMCO
MD
The resulting preference share provides a multi-faceted view of
PRODUCT X potential.
Sample: Total N = ~500
• Countries:
• US
• UK
• Germany
• France
• Italy
Approach:
Quantitative linked model to demonstrate how the stakeholders
interact and achieve demand at each potential price point.
Model allowed client to set revenue optimizing pricing for each
potential outcome of their clinical trials.
• Respondents:
• Payers
• PCPs
• CARDs
• Patients
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Contact Information
Please contact any of the individuals below if you have any questions regarding the
materials presented here
Quintiles Consulting & Market Intelligence Services
www.quintiles.com/consulting
Mridul Malhotra, Pricing Director (Market Access)
+1-862-368-9799
John Doyle, Managing Director (Market Access)
+1-212-686-8642
Brian Griner, Chief Methodologist (Market Intelligence)
+1-908-300-4391
Brad Perkins, Senior Director of Business Development (Market Intelligence)
+1-585-943-8499
