Guideline Modernization: Case Studies

Summary of Cases

  Treatment cost
(annual or full regimen)
Potential treatment population
(annual)
Potential annual revenues Profile Potential disease area
Case 1 $1K 500,000 $500M Treats a chronic condition
One approved indication
Has comparators
Very large treatment population
Diabetes, Mental health disorders
Case 2 $7K 100,000 $700M Treats a chronic condition
One approved indication
Substantial therapeutic benefit, no approved comparators
Large treatment population each year
AMD
Case 3 $20K 103,000 $2B Substantial therapeutic benefit to a less common chronic condition with a small treatment population
Moderate therapeutic benefit to a more common chronic condition with a large treatment population
DMARDs
Case 4 $50K 3,000 $150M One approved indication for 2nd line treatment of cancer
Several therapeutic alternatives exist
Small treatment population
Oncology
Case 5 $50K 200,000
(31,000)
$1.5B Provides cure for a serious condition
Large treatment population
If no rationing, all could be treated in 7 years
Hep C
Case 6 $300K 1,000 $300M Rare disease drug with one indication
Limited clinical significance
Small treatment population, high severity of illness, unmet need
EDRD

Acronyms

  • HIPC – Highest international price comparison
  • MIPC –Median international price comparison
  • LIPC – Lowest international price comparison
  • TCC – Therapeutic class comparison
  • MLP – Maximum list price
  • MAPP – Maximum average potential price
  • MRP – Maximum rebated price
  • NEAP – Non-excessive average price
  • HTA – Health Technology Assessment
  • QALY – Quality-adjusted life year gained
  • ICER – Incremental cost-effectiveness ratio
  • PV – pharmacoeconomic value
  • $/QALY – cost per quality adjusted life years gained
  • RWE – Real world evidence

Case 1 – Large population, therapeutic comparators

  • Treats a chronic condition
  • Has therapeutic comparators
  • One approved indication by Health Canada (HC)
  • Very large potential treatment population
    • Possible indications: diabetes, mental health disorders, etc.
  • Annual treatment cost (list price): $1,000*
  • Population with the condition: 500,000
  • Potential annual revenues based on the total treatment population: $500M
  • Category 1 due to market size

* Assumed a once-a-year dose for ease of calculations.

Case 1 – Application of the Proposed Guidelines

Factor Intro Period End of Year 1 End of Year 2 End of Year 3* End of Year 4 End of Year 5 End of Year 6
MLP (set by MIPC) $800 $785 $780 $750 $750 $750 $750
PV Threshold Price** N/A $640 N/A N/A N/A N/A N/A
Revenue at PV Price N/A $33M $50M $68M $75M $81M $91M
Market Size Adjustment *** N/A N/A 10% 30% N/A N/A N/A
MRP N/A $640 $627 $581 $581 $581 $581
Total revenue at MRP N/A $33M $49M $61M $68M $74M $82M

*MLP/MRP frozen.
**CADTH estimated ICER is $100K. PV threshold used is $60,000/QALY.
***A progressive discount applies to the total annual drug cost (revenue) at the cost-effective price, where each successive $10M above $40M is discounted by an additional 10%, up to a maximum of 50%. This $40M market size threshold has been used for demonstration purposes only.

Case 1 – Current vs New Proposed Guidelines

Original ex-factory Price $1,000
Current Guidelines Proposed Guidelines
Price Ceiling $1900 (assume top of TCC > MIPC)

Ex-factory price ceiling (MLP): $750

Rebated price ceiling (MRP): (frozen at year 3): $581

Tests used to set the Ceiling Midpoint of top of TCC and MIPC (moderate improvement) MLP: MIPC
MRP: 30% adjustment to PV price
Ceiling percent reduction from original price none MLP: 25%
MRP: 42%
Compliance assessment made against ATP (rebated price including free goods, but not PLAs) MLP: ex-factory price
MRP: ATP where rebates include PLAs

Case 2 – Large population, no therapeutic alternatives

  • Treats a chronic condition
  • One clinically significant approved indication
  • No therapeutic alternatives
  • Large treatment population
    • Potential disease areas: age-related macular degeneration (AMD).
  • Annual treatment cost (list price): $7K
  • Population with the condition: 100K in any given year
  • Potential annual revenues based on the total treatment population: $700M
  • Category 1 based on projected market size, no therapeutic alternatives

Case 2 – Application of the Proposed Guidelines

Factor Intro Period End of Year 1 End of Year 2 End of Year 3* End of Year 4 End of Year 5
MLP (set by MIPC) $6.7K $6.3K $6.0K $6.0K $6.0K $6.0K
PV Threshold Price** N/A $3,490 N/A N/A N/A N/A
Revenue at PV Price N/A $67M $97M $125M $80M $97M
Market Size Adjustment N/A 30% 50% N/A N/A N/A
MRP N/A $3,050 $2,525 $2,525 $2,525 $2,525
Total Revenue at MRP N/A $62M $79M $92M $70M $79M

*MLP/MRP frozen at year 3.
**CADTH estimated ICER is $100K. PV threshold used is $60K/QALY.

Case 2 – Current vs New Proposed Guidelines

Original ex-factory Price $7,000
Current Guidelines Proposed Guidelines
Price Ceiling $6000

Ex-factory price ceiling (MLP): $6000

Rebated price ceiling (MRP): $2525

Tests used to set the Ceiling

MIPC MLP: MIPC
MRP: cost effectiveness adjusted for market size
Ceiling percent reduction from original price 14% MLP: 14%
MRP: 64%
Compliance assessment made against ATP (rebated price, rebates include free goods, but not PLAs) MLP: ex-factory price
MRP: ATP where rebates include PLAs

Case 3 – Two indications with different therapeutic benefits and prevalence rates

  • Treats 2 chronic conditions
    • Condition 1 (first indication): estimated 3,000 people in Canada, first in class, brings significant therapeutic improvement over standard of care
    • Condition 2 (subsequent indication): Estimated 100,000 people in Canada, Therapeutic alternatives available, brings slight or no therapeutic improvement
  • No therapeutic alternatives for condition 1, therapeutic alternatives for condition 2
  • Annual treatment cost: $20K
  • Potential annual revenues based on the total treatment population: $2B
  • Category 1 based on projected market size.

Case 3 – Application of the Proposed Guidelines (first indication)

 Factor Intro Period End of Year 1 End of Year 2* End of Year 3** End of Year 4 End of Year 5 End of Year 6
MLP (set by MIPC) $19K $18K $17K $17K $17K $17K $17K
PV Threshold Price *** N/A $9,975 N/A N/A N/A N/A N/A
Revenue at PV Price N/A $99M $143M $195M $249M $304M $362M
Market Size Adjustment N/A 40% 50% 50% N/A N/A N/A
MRP N/A $7,580 $6,329 $5,835 $5,835 $5,835 $5,835
Revenue at MRP N/A $80M $102M $128M $163M $199M $237M

*MLP frozen based on 7 countries.
**MRP frozen after 3 years.
*** ICER threshold used is $60K/QALY.

Case 3 – Application of the Proposed Guidelines (second indication)

Several therapeutic resulting in median TCC $6,000; LIPC = $14K

 Factor Intro Period End of Year 1 End of Year 2* End of Year 3** End of Year 4 End of Year 5 End of Year 6
MIPC $19K $18K $17K $17K $17K $17K $17K
PV Threshold Price *** N/A N/A N/A N/A N/A N/A N/A
MLP=higher of LIPC and median TCC $14K $13 $12.5 $12.5 $12.5 $12.5 $12.5
Revenue at MLP $72M $137M $201M $237M $348M $426M $507M
Market Size Adjustment N/A 20% 30% 40% N/A N/A N/A
MRP $6,000 $5,627 $4,680 $3,712 $3,712 $3,712 $3,712
Revenue at MRP $31M $59M $75M $81M $103M $126M $151M

Case 3 –Current vs New Proposed Guidelines

Original ex-factory Price $20,000
Current Guidelines Proposed Guidelines
Price Ceiling
Indication 1
$19,000 Ex-factory price ceiling (MLP): $17,000

Rebated price ceiling (MRP):
$7,580

Price Ceiling
Indication 2
$19,000 Ex-factory price ceiling (MLP): $14,000

Rebated Price ceiling (MRP): $5,627

Tests used to set the Ceiling MIPC MLP: MIPC for condition 1
LIPC for condition 2
MRP: lower of MLP or med TCC adjusted for market size for condition 2
Ceiling percent reduction from original price None MLP: 10%; 26%
MRP: 60%; 70%
Compliance assessment made against ATP (rebated price, rebates include free goods, but not PLAs) MLP: ex-factory price
MRP: ATP where rebates include PLAs

Case 4 – 2nd line oncology medicine

  • One clinically significant approved indication
  • Several therapeutic alternatives exist
  • Low 5-year survival rates
  • Small treatment population: 3,000
  • Annual treatment cost: $50,000
  • Potential annual revenues based on the total treatment population: $150M
  • Category 1 based on projected market size, annual treatment cost above GDP/capita

Case 4 – Application of the Proposed Guidelines

 Factor Intro Period End of Year 1 End of Year 2 End of Year 3* End of Year 4 End of Year 5 End of Year 6
MLP (set by MIPC) $47.5K $45K $42.5K $40K $40K $40K $40K
PV Threshold Price** N/A $25K N/A N/A N/A N/A N/A
Revenue at PV Price N/A $10M $15M $19M $25M $30M $36M
Market Size Adjustment*** N/A MIPC MIPC MIPC MIPC MIPC MIPC
MRP N/A $45K $42.5K $40K $40K $40K $40K
Revenue at MRP N/A $14M $20M $26M $33M $40M $47M

*MLP/MRP frozen.
**CADTH estimated ICER is $250K. PV threshold used is $60K/QALY.
***Positive market size adjustment owing to small market size – lower of MIPC, 2xPV Threshold price

Case 4 – Current vs New Proposed Guidelines

Original ex-factory Price $50,000
Current Guidelines Proposed Guidelines
Price Ceiling $45K (assume top of TCC < MIPC) Ex-factory price ceiling (MLP): $40K

Rebated price ceiling (MRP): (frozen at year 3): $40K

Tests used to set the Ceiling Midpoint of top of TCC and MIPC (moderate improvement) MLP: MIPC
MRP: Lower of MIPC, 2xPV threshold price
Ceiling percent reduction from original price 10% MLP: 20%
MRP: 20%
Compliance assessment made against ATP (rebated price including free goods, but not PLAs) MLP: ex-factory price
MRP: ATP where rebates include PLAs

Case 5 – Curable condition, large treatment population

  • Provides cure for a common and serious condition
  • Large treatment population: estimated 200,000 Canadians are living with the condition
    • All could be treated in seven years assuming no rationing
  • As of 2018, the health care system cost associated with the condition is estimated at $10 billion annually.
  • Annual treatment cost of $50K (based on the manufacturer’s suggested list price)
  • Potential annual revenues based on the total treatment population: $1.5B
  • Category 1 based on projected market size, annual treatment cost above GDP/capita

Case 5 – Application of the Proposed Guidelines

 Factor Intro Period End of Year 1 End of Year 2* End of Year 3** End of Year 4 End of Year 5 End of Year 6
MLP (set by MIPC) $48K $45K $43K $43K $43K $43K $43K
PV Threshold Price*** N/A $50K N/A N/A N/A N/A N/A
Revenue at PV Price N/A $1.5B $1.5B $1.5B $1.5B $1.5B $1.5B
Market Size Adjustment**** N/A 50% 50% 50% 50% 50% 50%
MRP N/A $25K $24K $23K $23K $23K $23K
Total revenue at MRP N/A $770M $740M $708M $708M $708M $708M

*MLP frozen based on 7 countries.
**MRP frozen.
***CADTH estimated ICER is $50K, below PMPRB PV threshold
****Maximum market size adjustment of 50%. Assuming competitor entry in Year 6.

Case 5 – Current vs New Proposed Guidelines

Original ex-factory Price $50,000
Current Guidelines Proposed Guidelines
Price Ceiling $48K (assume top of TCC < MIPC) Ex-factory price ceiling (MLP): $43K

Rebated price ceiling (MRP): (frozen at year 3): $25K

Tests used to set the Ceiling Higher of top of TCC and MIPC (substantial improvement) MLP: MIPC
MRP: 50% adjustment to PV price
Ceiling percent reduction from original price 4% MLP: 14%
MRP: 50%
Compliance assessment made against ATP (rebated price including free goods, but not PLAs) MLP: ex-factory price
MRP: ATP where rebates include PLAs

Case 6 – Rare disease drug

  • Rare disease drug with one indication
  • Limited clinical significance (moderate improvement over placebo) but offers hope for the first time for a severe condition with high burden of illness and high unmet need.
  • Small treatment population: 1,000 Canadians diagnosed with the condition, 2% increase per year.
    • One in every 4,000 children born are affected by the condition.
  • Annual treatment cost: $300,000
  • Potential annual revenues based on the total treatment population: $300M
  • Category 1 based on projected market size, annual treatment cost above GDP/capita

Case 6 – Application of the Proposed Guidelines

 Factor Intro Period End of Year 1 End of Year 2 End of Year 3* End of Year 4 End of Year 5 End of Year 6
MLP (set by MIPC) $240K $240K $240K $240K $240K $240K $240K
PV Threshold Price** N/A $60K N/A N/A N/A N/A N/A
Revenue at PV Price N/A $3.0M $6.1M $9.4M $12.7M $19.9M $23.6M
Market Size Adjustment*** N/A 2xPV 2xPV 2xPV 2xPV 2xPV 2xPV
MRP N/A $120K $120K $120K $120K $120K $120K
Total revenue at MRP N/A $6.0M $12.2M $18.7M $25.4M $39.8M $47.2M

*MLP/MRP frozen.
**CADTH estimated ICER is $300K-700K, depending on population and severity. Assume 80% price reduction required to meet PMPRB PV threshold of $60K/QALY.
***Positive market size adjustment owing to small market size – lower of MIPC, 2xPV Threshold price.

Case 6 – Current vs New Proposed Guidelines

Original ex-factory Price $300,000
Current Guidelines Proposed Guidelines
Price Ceiling $240K Ex-factory price ceiling (MLP): $240K

Rebated price ceiling (MRP): (frozen at year 3): $120

Tests used to set the Ceiling Midpoint of top of TCC and MIPC (moderate improvement, no comparators) MLP: MIPC
MRP: 2xPV price
Ceiling percent reduction from original price 20% MLP: 20%
MRP: 60%
Compliance assessment made against ATP (rebated price including free goods, but not PLAs) MLP: ex-factory price
MRP: ATP where rebates include PLAs
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