Uncertainty and Cures: Discontinuation, Irreversibility, and Outcomes-Based Payments

Abstract

Payers are concerned that one-off “cures” bring great uncertainty with the consequential risk of incorrect adoption decisions, and significant budget impact from large one-off payments. Innovators worry about bias against “cures” in favor of repeat treatment, which is not in patients’ interests. We find that even in the absence of a difference in uncertainty of outcomes, adverse pay-offs differ. The greater financial risk associated with a cure is related to the issue of treatment discontinuation, driven by irreversibility. This paper uses a stylized example to illustrate the need to separate three different elements of the issue: (i) one-off versus repeat or ongoing treatment, (ii) duration of treatment effect, and (iii) the potential role of financial arrangements or risk sharing to mitigate the financial risk to the payer. It concludes that: (i) prevalence and discontinuation issues mean that the impact on the payer of an incorrect decision is greater with a one-off treatment than a repeat therapy; (ii) with evidence collection this risk diminishes over time (a form of CED or OWR); and (iii) financial arrangements or risk sharing can eliminate differences for the payer as between one-off and repeat therapy. The impact of (iii) also addresses payer concerns about budget impact.

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