Unlocking Pricing Power With Threshold Analysis: Conclusions From a Hypothetical Markov Model

OBJECTIVES: Early cost-effectiveness models are frequently based on limited data and are used to explore pricing expectations focusing on the incremental cost-effectiveness ratio (ICER). Threshold analysis is typically used to examine the impact on the ICER when changing one or more parameters over a range of values. This study aims to highlight how threshold analyses based on the maximum achievable price can better inform pricing.

METHODS: A hypothetical Markov model comparing a new intervention (TxA) to best supportive care (BSC) was constructed. TxA was assumed to have superior efficacy outcomes compared to BSC. A series of hypothetical outcomes (probability of progression, hospitalization and discontinuation) were varied in one- and two-way threshold analyses. The analysis output was the maximum achievable price for TxA to remain cost-effective using a £30,000 willingness-to-pay (WTP) threshold.

RESULTS: The maximum annual price for TxA in the base-case was £2,979 whilst maintaining cost-effectiveness using a £30,000 WTP threshold. One-way analyses showed hospitalization had minimal impact on the price, while discontinuation varied it from £1,236 to £4,992, and progression from £776 to £6,957. This suggested potential price increases of up to 68% (£2,013) and 134% (£3,978) for discontinuation and progression, respectively, could be missed. Two-way analyses indicated that varying progression and discontinuation simultaneously had the greatest impact, with prices ranging from £248 to £11,562. This suggested even greater price increases (up to £8,583, representing a percentage increase of 188%) could be missed when multiple parameters are varied simultaneously.

CONCLUSIONS: This study highlighted that threshold analyses based on price can demonstrate the maximum achievable price of a new treatment and conditions for potential price increases. Threshold analyses can identify key price-driving parameters and can guide further research to focus on more impactful parameters. Companies should conduct threshold analyses to ensure they do not miss higher pricing opportunities.