David's New Book

Thursday, December 5, 2013

The Cost-Benefit of Value-Based Pricing for Antibiotics

Several weeks ago, Brad Spellberg and John Rex published a fascinating analysis of cost and benefits of a pathogen-specific therapy for highly resistant infections.  They used carbapenem-resistant Acinetobacter baumannii as their case study. There are a couple of different ways of looking at this as I see it.  First – how much is a so-called Quality life adjusted year worth? Apparently, the number accepted by most is something like $50,000.  If that’s true, its hard to understand how cancer therapies that prolong life, frequently without much quality benefit, for a few months are worth up to $100,000.  But maybe I’m missing something.  That said – who decided that $50,000 is a correct price for a year of quality life? The other way of looking at this is based on overall cost savings to the healthcare system.

Based on these sorts of considerations, Spellberg and Rex clearly demonstrate that if therapy costs $10,000, the cost per quality life year is only $20,000 (much less than $50,000). At prices of $4-8000 per course there were clear savings in health care costs overall.  In a sensitivity analysis, the authors show (Table below - click to enlarge), that even costs of therapy as high as $30,000, depending on the excess mortality caused by these resistant infections and the efficacy of the new therapy in preventing mortality, the costs could still be below $50,000 per quality year of life.

As I have argued previously, costs of antibiotics like the example chosen by Spellberg and Rex will have to be high in order to provide sufficient return on investment for the companies that market these products.  Given the potential for this return on investment plus feasible regulatory pathways for getting to market, we can expect to see more and more large pharmaceutical companies like Sanofi and Roche getting back into the antibiotics field of research.  With this movement, the private investment in antibiotics will once again flourish.  So – overall – the development of these therapies is a win-win-win for patients, physicians, societies and private industry and their shareholders.