Health-based pharmaceutical pay-for-performance risk-sharing agreements

Health-based pharmaceutical pay-for-performance risk-sharing agreements

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Article ID: iaor2014458
Volume: 65
Issue: 4
Start Page Number: 588
End Page Number: 604
Publication Date: Apr 2014
Journal: Journal of the Operational Research Society
Authors: , ,
Keywords: pharmacy, UK, risk pooling, payment
Abstract:

Many new drugs, such as biologics and cancer drugs, are very costly. However, their effectiveness outside of clinical trial settings is often uncertain at the time they gain market approval. This uncertainty may reflect a lack of real‐world outcomes data, as opposed to clinical trials data, for a typical patient population. A risk‐sharing agreement is a contract between a drug manufacturer and a healthcare payer to help manage uncertainties regarding the cost and effectiveness of those drugs. In this paper, we model a risk‐sharing agreement in which a proportion of total sales is rebated. We model disease progression using a continuous time Markov chain with uncertain transition rates. We examine the performance of this risk‐sharing agreement from the manufacturer’s perspective and investigate the conditions under which the manufacturer will make a profit. We illustrate with a numerical model parameterized using data from a Phase 2 clinical trial of an oncology drug that was subjected to a risk‐sharing agreement in the UK.

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