1. The first step to drug pricing is secondary research. Components of this type of market research include the market size, the unmet need in the market, possible comparators and analogs, willingness to pay, and market trends. Analyze the ADHD market on these five aspects using information from the case only (no external research necessary) and determine whether Product X has a place in the ADHD market.
2. The second step to drug pricing is primary research. Identify the three most important stakeholders for Product X that you would choose to interview and describe what they would care about most in a new product. For this question, please use your knowledge of the stakeholders from the case, and the Pfizer article.
3. How strong is the evidence for efficacy and safety for Product X? For this question, look at the quality of the clinical trials of Product X and compare them to those of its comparators (use information from the case only). Explain your reasoning.

4. Based on the evidence from the case alone, what are the positive and negative differentiators of Product X compared to its comparators?

5. Using the provided pricing information, positive/negative attributes, and strength of evidence for Product X, estimate a pricing range (WAC onlyassume no rebates or discounts are given) with clear rationale. Provide a low, medium, and high price with an

"THE CASE"

ADHD

ADHD is a neurological functional or developmental disorder marked by a consistent pattern of two main characteristicsinattention and/or hyperactivity/impulsivity. Inattention is defined as lack of sustaining focus, persistence, and/or organization of tasks that is not due to defiance or problems in comprehension or understanding. Hyperactivity includes excessive movement, talking or fidgeting in inappropriate situations. Impulsivity, along with hyperactivity, means making spontaneous and quick decisions and actions without much thought given to long-term consequences. These decisions may potentially be harmful or demonstrate a desire for immediate rewards rather than delayed gratification. Inattention and hyperactivity/impulsivity are the key behaviors of ADHD. While it is possible to only have one of the behaviors, most children have the combined type of ADHD. In most children, symptoms begin with hyperactivity/impulsivity, with inattention occurring at a later time.

ADHD is one of the most commonly diagnosed conditions for children in the United States (Centers for Disease Control and Prevention [CDC], 2018). It is usually diagnosed after an evaluation by a licensed pediatrician, psychologist or psychiatrist using standard guidelines from the American Academy of Pediatrics or the American Psychiatric Association's Diagnostic and Statistical Manual of Mental Disorders (DSM). Clinicians often gather information on the patient's school teachers, caregivers, and parents. Several standardized rating scales are used to document and diagnose ADHD, some of which are frequently used as endpoints for clinical trials of drugs that treat the behaviors of inattention and/or hyperactivity/impulsivity. To receive a diagnosis, the behaviors must be chronic and must impair daily activities or hinder development. Symptoms can occur as early as age three, most commonly age seven (CDC, 2018), but most children are diagnosed in the elementary school years. In 2017, 2.9 million children aged 12 and younger took ADHD medication, comprising 29.2% of total revenue of the market (IBISWorld, 2017). It is most common for children under 12 to use extended-release ADHD drugs, such that they can avoid taking medication while at school. Over the next five years, this market segment is expected to remain stable (IBISWorld, 2017). A total of 1.8 million children aged 13 to 17 use ADHD drugs, making up 17.8% of total revenue in 2017. Prevalence of ADHD increases with age (CDC, 2018), and over the past five years this market segment has grown (IBISWorld, 2017).

There is no cure for ADHD and long-term treatments help alleviate the symptoms or behaviors. Treatments can include mediation, therapy, education, training, or a combination of all of these. The ADHD medication market has been rapidly growing since the early 2000s due to the significant increase in diagnoses (Getahun et al., 2013). There are two primary types of medications used to treat ADHD symptomsstimulants and non-stimulants. Stimulants, such as methylphenidate or amphetamines, are most commonly prescribed and work by increasing dopamine and norepinephrine, which are chemicals involved in pathways for thinking and attention. Stimulants are available both as short-acting and long-acting. Short-acting stimulants require more frequent dosing and although the risk decreases with the long-acting kind, stimulants have a high risk of dependence. Stimulants also come with a variety of side effects that can be long-lasting. Non-stimulants, such as atomoxetine, clonidine, and guanfacine, are much less common and are slower to take effect than stimulants. These are usually prescribed as second-line agents only if a stimulant is ineffective, or in combination with a stimulant to enhance effectiveness. Other medications such as tricyclic antidepressants (e.g., amitriptyline, desipramine, imipramine, nortriptyline), bupropion, selective serotonin reuptake inhibitors (e.g., escitalopram, sertraline), or venlafaxine may also be considered as second-line agents.

Commonly Used ADHD Medications

Brand Name

Vyvanse (Lisdexamfetamine)

Vyvanse is a prescription medicine manufactured by Shire indicated for the use of treatment of ADHD in patients six years and above, and for the treatment of moderate to severe binge-eating disorder in adults. It is a first-in-class stimulant drug with a unique mechanism of action that allows for a slower absorption rate leading to a long-lasting effect. Vyvanse comes in two forms, a capsule and a chewable tablet, both of which can be orally administered to patients once a day, preferably in the morning (Food and Drug Administration [FDA], 2007). At a 30-day price of USD 270.60 and an annual wholesale acquisition cost (WAC, manufacturer's list price without any rebates or discounts) of USD 3,030.72 (IBM Micromedex RED BOOK, n.d.), Vyvanse had sales of over USD 1.9 billion in 2017, making it one of Shire's highest selling drugs.

Vyvanse was approved by the FDA in 2007. Its approval for the pediatric population between six and 17 years was based on two double-blind, randomized, placebo-controlled, parallel-group studies with 290 patients between the ages of six and 12, and 314 patients between the ages of 13 and 17. Both studies were conducted over four weeks. The patients met DSM-IV criteria for ADHD (either the combined type or the hyperactive/impulsive type). The primary efficacy outcome for the first study was change in total score from baseline to endpoint in investigator ratings on the ADHD Rating Scale using DSM-IV criteria, known as ADHD-RS-IV (DuPaul, Power, Anastopoulos, & Reid, 1998). ADHD-RS-IV is a parent- and teacher-reported rating scale on the severity of symptoms of ADHD. The scale measures the symptoms of ADHD according to the diagnostic criteria of the DSM-IV and includes two separate subscales to assess both inattention and hyperactivity/impulsivity. This scale is frequently used by clinicians to screen, diagnose, or evaluate treatment of ADHD. The 18-item questionnaire requires teachers or parents to record frequency of symptoms on a four-point Likert scale. For the 6-12 age group, a second study with 129 patients assessed investigator ratings on the Swanson, Kotkin, Agler, M-Flynn, and Pelham (SKAMP) Scale (Swanson, 1992) deportment scores across all seven assessments conducted at 1.5, 2.5, 5.0, 7.5, 10.0, 12.0, and 13.0 hours post-dose. SKAMP is the most commonly used measure to assess ADHD-related impairment associated with specific context-bound ADHD classroom behaviors. It is a 10-item scale, of which six ask about attention (example: getting started on assignments) and four ask about deportment (example: remaining quiet according to rules). This second study used the deportment scores at various time points as the primary clinical endpoint.

Additionally, a 52-week long-term safety and efficacy trial was also conducted to assess change in total score in investigator ratings on ADHD-RS-IV and Clinical Global Impression (CGI; Guy, 1976). CGI is a clinician's overall impression of the patient's clinical improvement. Once the treatment has started (either placebo or drug), the clinician compares the patient's overall clinical condition every week on a seven-point scale ranging from very much improved to very much worse since the initiation. Several secondary clinical endpoints such as Conner's Parent Rating Scales (CPRS; Conners, 1970), duration of effect, and CGI improvement were also taken into consideration. CPRS is a parent's rating of their child's behavior and includes questions that help screen for ADHD.

Several adverse effects were noted during the trials including psychiatric issues, cardiovascular problems, and insomnia, especially after discontinuation of the drug. Oral formulations of stimulants like Vyvanse have also been associated with long-term suppression of growth in pediatric patients, loss of appetite, weight loss, elevations in pulse, and blood pressure. Like all other stimulants, there is potential for abuse of and dependence on Vyvanse but due to its slow-acting mechanism, the risk for abuse is lower than for fast-acting stimulants such as amphetamine.

Strattera (Atomoxetine)

Strattera is a prescription medicine manufactured by Eli Lilly and Company, and, like Vyvanse, is indicated for the treatment of ADHD including distractibility, impulsivity, and hyperactivity in children, teens, and adults (ages six and above). It was advertised in 2002 as the first non-stimulant medication to be approved for this purpose. At a 30-day WAC of USD 395.40 and an annual WAC of USD 4,428.48 (IBM Micromedex RED BOOK, n.d.), Strattera had annual sales of over USD 500 million in 2016 in the United States. Strattera lost its patent protection and pediatric exclusivity in May 2017, allowing way for generics.

Strattera's approval in the pediatric population was based on five clinical trials in outpatients with ADHD: four 6-9-week trials and one maintenance trial in pediatrics. The four acute trials were randomized, double-blind, placebo-controlled, and used ADHD-RS-IV total score including hyperactive/impulsive and inattentive subscales as the primary endpoint. In the first eight-week trial, 297 adolescents aged eight to 18 received varying doses of Strattera in the early morning and late evening. The second six-week study recruited 171 patients aged six to 16, while two identical nine-week studies recruited a total of 291 children aged seven to 13 to look at the combined effect of Strattera and methylphenidate, a generic drug, on the primary endpoint. The longer maintenance trial was conducted in 292 children and adolescents between six and 15 years of age to measure continuous improvement through treatment, and used CGI scores and ADHD-RS-IV parent and investigator scores as primary endpoints.

In addition to common adverse events such as nausea, vomiting, fatigue, decreased appetite, abdominal pain, and somnolence, Strattera has more serious warnings and precautions including suicide ideation, serious liver injury, and cardiovascular events such as sudden death, stroke, and heart attacks.

Generics

Amphetamine XR

Amphetamine XR is the active ingredient in Adderall XR, a central nervous system long-acting stimulant that is indicated for the treatment of ADHD. Teva, Actavis (acquired by Allergan), Barr, and Impax Pharmaceuticals all manufacture and sell amphetamine XR in the United States. Amphetamine XR, just like Adderall XR, comes with several severe warnings from the FDA, such as possibility of cardiovascular events, increase in blood pressure, psychiatric adverse events, long-term suppression of growth, seizures, and visual disturbance. Amphetamine XR is available at a low WAC of USD 1,648.16 and a 30-day WAC of USD 147.16 (IBM Micromedex RED BOOK, n.d.).

Methylphenidate

Methylphenidate is the active ingredient in Ritalin, an off-patent drug originally marketed by Novartis, and Concerta, also an off-patent drug manufactured by Janssen. Both drugs have the same active ingredient, methylphenidate. The main difference between Ritalin and Concerta is in their formulations, their dosage, and how long their effects last in the body. While Ritalin is an immediate-release formulation that peaks in concentration at two to four hours, Concerta is an extended-release version and its concentration peaks at around six to 10 hours. Methylphenidate is available in both forms. Several generic companies manufacture the fast-release Ritalin version, while fewer manufacture the slow-release Concerta version as Concerta only lost its patent in 2017. Methylphenidate is considered a blockbuster generic and has over USD 1 billion annual sales in the United States. Methylphenidate, like amphetamine, comes with a long list of adverse effects including suppression of growth and possibility of cardiovascular events. The extended-release version of methylphenidate is available at a 30-day WAC of USD 133.50 and an annual WAC of USD 1,495.20 (IBM Micromedex RED BOOK, n.d.).

Product X

Product X is a non-stimulant, has a novel mechanism, and is regarded as a first-in-class product. It is aimed at improving attentional functioning and related symptoms in children diagnosed with ADHD. Specifically, Product X is indicated for treatment of inattention in pediatric patients (ages 6-18) with ADHD. Early clinical studies have demonstrated better outcomes in patients that do not respond to other treatments. A Phase III clinical trial was conducted over four weeks per the study design shown inTable 1below. The treatment period was 28 days. All patients completing the core phase were eligible to enter a 56-day extension period.

Table 1. Phase III Clinical Trial Design for Product X
Description	Multi-center, double-blind, randomized placebo-controlled trial
Comparator	1:1 randomization versus placebo
Sample	Children aged 8 to 12 (n=300)
	Product X Trial Design
Key Inclusion Criteria	Key Exclusion Criteria
Confirmed diagnosis of ADHD per MINI-Kid as defined by DSM-V Currently off of stimulants OR poorly controlled on stimulants and willing to wash-out ADHD Rating Scale score > 28 without medication Test of Variables of Attention (TOVA) - Attention Performance Index (API) < 1.8	Comorbid psychiatric diagnosis Intellectual disability, or color blindness

Clickicon downloadhere for EXCEL

Clickicon downloadhere for CSV

Clickicon download (opens in new window)here for PDF

Source: Amarpreet Chawla

The primary objective of the trial was to measure change in the Test of Variables of Attention (TOVA; Greenberg & Waldmant, 1993) endpoint from day 0 to day 84. The TOVA is a computerized continuous performance test used primarily to assess attention and impulsivity. The test contains computer games that are easy to administer to children and adults. The secondary endpoints were ADHD-RS-IV, CGI-I, and other computerized tests such as Cambridge Neuropsychological Testing Automated Battery (CANTAB; Luciana, 2003; Luciana & Nelson, 2002), which measures cognitive function, the parent questionnaire of the Behavior Rating Inventory of Executive Function (BRIEF; Gerard, Gioia, Isquith, Kenworthy, & Kenworthy, 2000), an 86-item scale that measures different aspects of executive function, and the Impairment Rating Scale (IRS; Fabiano et al., 2006), a multidimensional measure that assesses functioning across various domains. Trial outcomes are presented inTable 2.

Table 2. Trial Outcomes for Phase III Clinical Trials for Product X

Outcomes at Day 28
Primary endpoint	TOVA - API	Clinically meaningful improvement in sustained attention and impulsivity. API was statistically significantly greater in the active treatment group vs. placebo group.
Secondary endpoints	CANTAB- spatial working memory	Statistically significant improvement
ADHD-RS IV- measure of ADHD symptoms	Improvement (trending)
CGI-I- global functioning improvement	Statistically significant improvement
IRS- impairment/function in school/non-school settings	No difference between active treatment and placebo
Compliance/adherence	90% patients on active treatment followed protocol criteria <3% dropout in both active treatment and placebo groups
Safety	A good safety profile: no treatment-emergent adverse events. Few to no side effects after use.
Outcomes at Day 56 and 84 (study extension data)
Endpoint	Parent-reported outcomes	Statistically significant improvement
Other data
Durability of response	In a small retrospective pilot study of Product X in children with sensory processing disorders, parent-reported improvements in attention behaviors were demonstrated and sustained for nine months.

Pricing a Pharmaceutical Product

The price of a drug is the one variable that charts a balance between its quality, access, and affordability. Price signifies value and the definition of value differs between various stakeholder groups (Charter et al., 2017;Figure 1). In developing an evidence-based pricing strategy, it is crucial that decision-making pathways and incentives of multiple stakeholders be taken into account.

In particular the following six stakeholders are central to any pricing discussions: patients; government/regulators; employers; payer and health technology assessment (HTA) bodies; provider and hospitals; and manufacturers. We see this approach as a win-win solutionin keeping these stakeholders in perspective, manufacturers can offer a solution to the underlying stakeholders and mitigate their concerns about rising prices.

Patients who need to maintain health are the vanguards for affordability of care. Patients are the forefront of making the benefit/risk tradeoff decisions about the price of the drug.

Government and regulators are concerned about maintaining the balance between drug quality and cost to the overall health system. Regulatory bodies can put pressure on drug prices by conducting comparative effectiveness studies and issuing health system regulations and guidelines.

Employers are increasingly becoming a central and sophisticated stakeholder, especially as more employers act as payers. They have an increasing discretion to decide procedure and drug coverage with levers to shift more costs to workers. Employers are concerned about worker productivity and wellness, potential decreased adherence to drugs with increasing prices, and management of the disease process and its prevention. In pricing a drug, it is thus important to consider the return on investment (ROI)-based decision criteria of employers.

In response to pressure due to rising healthcare costs, payers and their HTA bodies have redirected their focus on value, causing changes in care management, value-based payment programs, insurance plans, and bundled payment models. Healthcare agencies worldwide routinely use centralized assessments to make informed decisions concerning reimbursement of medicines and other health technologies. These HTAs can impact a product's value and pricing potential. HTAs can also help to identify the key attributes that matter to these agencies. The approval or rejection decisions for drugs in the same therapeutic area can provide guidance for payer system preferences and evidence thresholds. Tracking decisions by various HTA bodies can provide information on key assessment information such as outcome measures, clinical and economic outcomes, and final recommendations (Chawla et al., 2016). Based on these assessments, payers can add restrictions to access to drugs by patients and demand a reduction in the total cost of care, as well as add some assurance of certainty to their budget impact as they balance care across the population.

The provider and hospital typically need to manage within a budget, and as such prioritize financial efficiency and viability. In purchasing drugs that are administered within the hospital, balance of quality and treatment costs are important considerations.

Lastly, the manufacturer that is incentivized to develop evidence for the drug looks to reimbursement commensurate with the value of the drug. The price is the reward for innovation and is the key mechanism for ROI of drug development.

Figure 1. Key Stakeholder Groups for Pharmaceutical Pricing

Launch Price Determination

Tactically, pricing a drug entails three key steps: secondary market research followed by primary market research, and finally quantitative modeling (Figure 2). While primary market research with stakeholders helps validate and fill in the gaps found in secondary market research, the quantitative modeling helps round up the qualitative insights from previous steps into a specific price point.

The secondary market research involves comprehensive searches of the literature, syndicated industry reports, market reports, and HTA bodies. Critical analysis is undertaken of five components: the patient population that the drug is targeting; competitors and their potential reaction to the drug price; market differentiation of the drug vs. comparators; the larger market trend; and the manufacturers' capabilities to defend the drug price and scale its market access at that price. Specifically, secondary market research helps assess how the market access arena is evolving: the market size (epidemiology); the unmet need in the market; possible comparators and analogs; what pricing/willingness to pay can be expected based on different target product profiles; baseline price range to test in the market; and finally the market trends.

Following secondary research, primary research is undertaken to validate findings from the secondary research. Ideally conducted with all the stakeholders identified above, primary research helps to contextualize the evidence, enrich the findings, and plug any gaps identified in the secondary research. Specifically, primary market research allows assessment of the strength of available evidence of the drug and any gaps in it; perception of the drug's comparative benefits over the comparator; price sensitivity among the stakeholders and, in the case of payers, an estimate of the restrictions that may be imposed on the access of the drug; and, finally, reviews that mock the assessments of the value analysis committee or pharmacy and therapeutics committee.

While secondary and primary market research help establish a baseline from a pricing range, quantitative modeling may be undertaken to compute the contribution of each product attribute to stakeholders' willingness to pay, the potential impact of the drug price on the practice economics of the stakeholder, and the manufacturer's ROI. The potential impact can be monetary where it results in cost differentials or health gain that results in alternative satisfaction for the user versus a comparator. Specifically, based on an estimated price range, the impact to the budget of the customer may be computed via a proforma. Such a proforma may be accompanied by a dossier that lays out the complete value proposition of the drug, including clinical, economic, and humanistic aspects. Furthermore, the tradeoff analysis between patients' willingness to pay and prescription numbers will result in further defining the pricing range. Finally, having arrived at a narrow price range, this may be juxtaposed against the revenue impact of the drug launch. The drug is now ready to be listed at a final launch price. Drug prices may be further adjusted through the drug's life cycle; however, that discussion is beyond the scope of this case study.

Figure 2. Key Steps in Pricing a Pharmaceutical Product

Secondary Market Research - Pharmaco-economic and Academic Papers

Analyst and Industry Reports

Primary Market Reserch - Payers, KOLs, Patients

Quantitive Modeling - Economic Model, Forecasting Model

Value-Based Pricing

Healthcare is shifting away from a metric-driven and incentive-based system towards one that rewards value-based behaviors. Value-based pricing is central to the new value-based literacy. It is a structured approach to estimating the price of a new asset based on its perceived value by various stakeholders. There are four components to value-based pricingthe comparator or reference, the positive differential value and the negative differential value of the new drug relative to the comparator, and the strength of evidence.

The comparator or reference may be a direct brand name competitor, trial comparator, a product identified by stakeholders during research, generics approved for the same indication, or a non-pharmaceutical treatment such as surgery or therapy. This comparator serves as the reference price and is often the standard of care for the condition in question. This approach enables the manufacturer to understand the interplay between price and market performance from a historical perspective by analyzing market analogs. For instance, this exercise can reveal why certain products maintained a price premium while others did not. Alternatively, reference price benchmarking can be used to predict the price and market uptake of a new product in relation to analogs' sales performance. While relatively straightforward, this pricing methodology is particularly enlightening, allowing the manufacturer to analyze historical events to estimate a price and future performance.

Once comparators have been identified, the positive and negative differentials and stakeholders' willingness to pay for those differentials can be determined. Differentiators could include a change in dose, mode of administration, efficacy on primary clinical, economic, and humanistic endpoints, or adverse events. There are several methodologies that can be used to ascertain stakeholders' willingness to pay for a specific drug, including direct price questioning and questioning that probes around limits of price acceptability. A more robust methodology of assessing willingness to pay is using van Westendorp's Price Sensitivity Meter (PSM). The PSM is based on the premise that there is a range of prices bounded by a maximum willingness to pay and a minimum below which the product is deemed too inexpensive.

Finally, the strength of evidence lends credibility to the claims of positive differentiating values and is determined by the strength of methods utilized to collect the evidence: trial or study type, size, and design (Doyle, Hawryluk, Niemira, & Wood, 2018). Evidence is typically prioritized from high to low levels as randomized control trial, meta-analysis, real-world evidence, systematic review, case control studies, and case reports.

As such, a reasonable launch price can be determined using the following formula:

Perceivedvalueofdrug=(priceofcomparatordifferentiation)strengthofevidence

The management at Exodus is determined to come up with a value-based launch price for Product X keeping the various comparators and stakeholders in mind. Given the evidence at hand, what should that price be?