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Country Basket Dynamics

Academy > Research
Figure 1: System Dynamics approach to calculate a new Swiss reimbursement price using random inputs

Background
Reimbursement price estimation of a new product remains a challenge. The granted price of a new drug is dependent from internal price referencing (IPR) and external price referencing (EPR = country basket). IRP and ERP are both dependent on valuation of the new product (extend of additional benefit = innovation premium). Corresponding ERP and IPR are normally declining over time.

Objectives
Make a reimbursement estimation for a new Swiss drug launch according to the extended country basket (9 countries) with the new Swiss EPR/IPR-ruling (2:1; 5%). Compare results of a fix and a random model over a period of 3 years.

Methodology
A system dynamics approach has been used with fictive drug prices and launch sequences.  

Fix model:
Using pre-defined launch date and initial price for each country. Estimation of country specific price erosion over time. Using current currency exchange rates for CHF and an innovation premium 10%.

Random model:
Using pre-defined launch dates and only initial price for each country. Currency exchange rates, innovation premium and price cuts (EPR & IPR) are subject to random functions and Monte Carlo-Simulation.

Results
Figure 2:
Price estimates with the random model in 3 years (Q2 2018). With a probability of around 50% the reimbursed price will be between CHF 175-185.

Table 1:
Swiss reimbursement price estimation for a fictive new drug depending on time and model approach.

Discussion
System Dynamics may be a suitable approach to calculate and estimate future drug prices. Other influence factors (network thinking–approach) can be added to the model with the possibility to run and display subgroup analysis.

Key Benefit
With the Random Model only launch dates and initial prices are needed which may be a more efficient way to work on scenarios.

Limitation
This is a feasibility study with fictive data. Validation with real life data will be required to confirm the results.
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