VALUE
The following factors combine into the components of
risk and benefit, which then determine the overall value
of the medicine. The lower the risk and the greater
the benefit, the higher the value. Identifying and understanding
the various drivers of value for a new medication is
essential in setting the right price.
Negative Value Drivers:
- Risk—Risk is, in essence,
a composite of uncertainty and effort. It can be thought
of as the probability that the expected outcome of
product use will not be realized. Risk is a huge value
driver in that a reduction or increase in the risk
of the physician, patient, or payer can determine
the value of the product. Products that are too risky
will not be used, regardless of price, and products
that eliminate a large portion of the current risk
of treatment/nontreatment will be adopted at almost
any price.
- Effort—Effort can be viewed
as the obstacles for use of the product. Is the product
difficult to use (e.g., complex dosing or titration,
reimbursement barriers). Products that reduce effort
when compared with their competitive predecessors
have higher levels of value—brought about by
overcoming some of the negative aspects of competitive
products. Products that increase effort reduce the
overall value of the product.
- Uncertainty—There are several
sources of uncertainty in pharmaceutical markets.
Products that reduce uncertainty increase the overall
value of the product. Uncertainty can be associated
with a disease or a treatment. When using a product,
how certain can a customer be that the desired effect
will be realized (e.g., cure or relief versus failure)
or that an unwanted side effect will not occur? The
more certain a customer can be that the product will
work and won’t harm, the greater the value;
the less certainty in the outcome, the lower the value
will be.
Positive Value Drivers:
- Benefit—The benefit of a
new pharmaceutical product is judged along three positive
dimensions: current unmet needs, benefit, and the
criticality of the disorder for which the product
will be used. Each of these factors exerts a different
effect on the way in which the value of a product
is perceived. The ability of a product to address
currently unmet needs, either clinical or economic,
will enhance its value to the market. Products that
provide relief from previously untreatable disorders
will be granted higher perceived value than those
that offer little or no new clinical benefit. In these
cases, a “performance gap” exists between
the level of need and the treatments available. Products
filling this gap are more readily diffused into the
medical system.
- Criticality—A major consideration
for a decision maker when evaluating a new treatment
is the criticality of the disease state itself. For
example, sinusitis is less critical than stroke. Sinusitis
is often self-limiting, often heals itself, and is
seldom serious. Stroke, however, needs immediate attention
and is often fatal.
- Unmet Need—When decision
makers examine any new drug to determine where the
drug has value, they consciously and unconsciously
make comparisons with other treatments and consider
the level of satisfaction with current therapies within
that disease state. For example, in markets where
several options are already available, the unmet need
is very low, while in less crowded markets there is
a higher level of need. New products entering less
crowded markets naturally have greater value than
those entering crowded markets.
These factors cognitively interact to provide an “imperative
to treat” with a new agent. In markets with
high levels of unmet need or of high criticality,
decision makers may be willing to assume more risk
and uncertainty in prescribing new drugs. A result
of that interaction can be a faster uptake of new
drugs into the specified market. The more imperative
a disease is perceived, the higher the price point
the market will bear.
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