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Bringing Financial Theory Into the Value Equation of Future Cutting-Edge Therapies


At ISPOR 2019, the concept of real option value—paying for treatment that might keep a patient alive long enough to try a future improved therapy—was discussed.

Real option value, as used in pharmaceutical assessment, applies a concept with origins in financial theory to estimate the value of a future therapy that is an improvement over available options. At a session at ISPOR 2019, a panel discussed the work of a researcher who recently published part of her dissertation on this topic in Value in Health.

Meng Li, PhD, a postdoctoral research fellow at the Leonard D. Schaeffer Center for Health Policy and Economics, wove her findings about the cost-effectiveness of ipilimumab using this concept into the presentation, called “Real Option Value For Drugs—Is It Really An Option?”

This novel concept was included as the seventh recommendation in last year’s ISPOR Task Force Report as a possible way that new drugs could be assessed for value. Using real option value gives executives flexibility in decision making. As opposed to financial options in the stock market, a real value option refers to tangible asset (like oil or real estate)—in this case, the future pharmaceutical therapy.

The idea is that paying for treatment that might keep a patient alive long enough to try the next treatment might be a decision worth considering; the issue is how to measure it and how to reward it.

Option value is more relevant today because technology to deliver curative therapies is speeding up, Li said. She cited earlier work on this topic, which forecasted future survival trends based on historical real-world survival trends were derived from Surveillance, Epidemiology, and End Results (SEER) Program data. A 2002 study looking at tyrosine kinase inhibitors (TKI) for chronic myelogenous leukemia (CML) came up with ex ante estimates of real option value of 9%.

In addition, she cited a 2017 study published in The American Journal of Managed Care®, which estimated a model to the case of nivolumab in renal cell carcinoma (RCC) and squamous and non-squamous non—small cell lung cancer (NSCLC). That study forecasted option values corresponding to 18%, 5%, and 10% of the conventional value (or standard treatment) of nivolumab, respectively.

In this present work, Li and fellow researchers incorporated future hypothetical improvements survival for metastatic melanoma due to advancements in therapy and compared it to a conventional method that used phase 3 efficacy data.

Using the real option value method, Li and her fellow authors identified drugs being studied in clinical trials at the time of ipilimumab’s 2011 approval, and estimated their likelihood and timing of approval, potential efficacy, and cost. An option value scenario accounts for increases in overall cancer treatment cost and unrelated medical cost.

In the option value scenario, using the SEER approach, the incremental quality-adjusted life-years (QALYs) gained and the incremental cost increased by 6.2% and 3.8%, respectively, whereas the incremental cost-effectiveness ratio (ICER) decreased by 2.3% compared with the conventional scenario.

Using a conventional approach, the incremental QALY gained and the incremental cost increased by 7.5% and 7.1%, respectively, whereas the ICER decreased by 0.40%.

In her presentation, Li noted payers may have concerns with this concept, including:

  • the potential for double counting
  • whether the uncertainty around estimation is being handled correctly
  • evidence on patient preferences
  • opportunity cost
  • whether the method creates another justification for a higher price
  • whether the price already exceeds value

One option to address payer concerns is to add an additional premium in case the future therapy works, according to moderator Adrian Towse, MA, MPhil, from the Office of Health Economics in the United Kingdom.

Jens Grueger, PhD, from the University of York and a former pharmaceutical industry executive, also raised another point. Will this actually work in clinical practice? For example, he said, if patients use current gene therapies, will they still have the option to benefit from retreatment later? Antibodies may have been created from the vectors that were used in the first treatment, he noted.

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