A few in the past have asked me, Mozz, seriously, why would insurers pay up to $6,000 USD and cover iPPS? That's way too much?! That's not only per patient BUT that's just for the initial course...Boosters, while they may not be at the same 12 or 6 course, it could be in addition to this on a yearly basis. Will these payer dudes really fork out so much for lil ol' us?
So tonight I thought I'd do the job of an entry level actuary...actually may be a few rungs below that...lets take a quick look at a high level to give you a sense of some of the considerations and indeed the numbers why it makes our case potentially compelling to the all important 'payers'.
DISCLAIMER
Lets get these out of the way
I'm not a statistician. This is only meant to be a very high level exercise as a complete illustrative There are many many factors to actually consider...all kinda of formulas and risk and chance comes into it.
Don't rely on just what I or any individual says, DYOR
BASIS
We need a place to start before we get to the grunt of the figures.... So some of my assumptions are as follows:
1) We eventually get approved for a DMOAD on the label 2) Assume we sell for $6000 USD with DMOAD. I only consider the initial cost. I don't take into consideration any other associated costs here 3) I assume for a single joint surgery there are two costs...$40 K 1,2 and a further $10 K for rehab and associated hospital and out patient costs that the insurer would need to cover as part of the joint replacement. I will err on the conservative and not consider the extra $10 K in costs. 4) The other fairly leap-frog assumption I have to make is exactly how many OA patients will experience the DMOAD effect, thus either avoiding or deferring joint surgery.
DEFFERAL
Its easy to wonder why a deferral of surgery is of any good to a payer. The payers like this as it is obviously delaying the cost...if you had a choice you'd rather postpone this impost. The other effect of this is that you don't have to come up with the money in today's dollars. That's worth something. Think DCF's and the like.
In my calc I haven't really factored this in....we could factor some amount of cash for this, but I will leave it at a basic level and this will add to my conservative analysis and only high level figures.
THE INPUTS
We already have a number of good data points to input. Things such as the ultimate approximate retail value ($6000 for a DMOAD classed product) which is a result from a longish study and question posed to KOL's that was blinded (the KOL's had no idea that the drug was iPPS and that the company was ours). We already have stats on how many joint replacements take place in the USA and approximately what percentage of various age profiles go through this.
"We also can estimate the prevalence of OA to be approximately 8% in people aged above 60." 3
We also need to know the average cost of a joint replacement which is also readily available. I've used a slightly conservative $40,000 USD and have assumed no other costs like rehab fees, revision surgery or out patient costs.
The hardest input is how many patients will actually achieve a DMOAD effect...ie completely avoiding surgery or at least deferring it. In this case, I have made the assumption it is circa 60%. Why this figure? Well I'm mainly relying on a few bits and pieces but the best evidence was supplied at our 005 and 008 studies. The stat were 4 :
"At Day 168, a 50% improvement in function was reported in 53.3% of twice-weekly iPPS compared to 22.1% of placebo (p=0.067)".
...and
"The proportions achieving ≥30% and ≥50% improvement in pain were 73% and 60%, respectively".5
We can also rely on other more structural evidence like the regression of BMLS which are certainly linked and correlated to the proregression of OA.
Objective MRI Data – Total Population (PPP) at Day 53 4:
The objective data end-point measuring Bone Marrow Edema Lesion (BML) Grade by MRI demonstrated that the number of subjects receiving iPPS treatment had a clinically meaningful reduction in the Grade of their BML compared to placebo. The iPPS group’s reduction was also statistically significant over placebo (P=0.03).
iPPS treatment also reduced BML Volume compared to placebo. iPPS-)34.2% vs placebo: (-) 3.6%. See Chart 4A.
iPPS treatment reduced BML Area by (-)25.3% in contrast to a (+)11.9% increase in the placebo group. See Chart 4B.
(See below for Charts)
The KEY stat for the all important link between BML's and OA progression is the following7:
"Patients with BME and OA have an increased risk of total knee replacement as opposed to OA and no marrow edema. Subjects who had BME of any pattern type were 8.95 times as likely to progress rapidly to TKA (knee replacement) when compared with subjects with no BME (p=0.016)".
Very simply, you have BME's, you have an almost 9 fold increase in rapid progression of TKA. My point here is that it is very plausible, in my opinion that a full 60% or so of patients with early stage or even medium stage OA could potentially stave off surgery completely or at the very least defer it. I will again be conservative and dial this back to 30% (Scenario 1)...but I also give you a 50% (Scenario 2).
THE CALC
So why would a payer do it? Cover us...what's in it for them? Our drug wont just sell for $42 for the entire course of 6 or 12...it's $6000 potentially and that's USD...its a fair whack and on top of this, its potentially in OA, not some niche indication...the numbers are significant...and on top of that, there is real potential of a number of off label additional indications.
Well that's what my back of envelope calcs aim to show.
I present two scenarios to compare...I use a 30% conservative approach (scenario 1) and a 50% approach in scenario 2.
Scenario 1 - 30% of population DMOAD
Scenario 2 - 50% of population DMOAD
Let's take the more conservative approach (Scenario 1), 30% of all patients that try iPPS will not have to have surgery.
So we must say that all 8 out of 100 people (ie 8%) will have a joint replacement which would thus cost 8 x $40 K = $320 K (Blue shaded figures above).
Enter the Magical iPPS.
This has the effect of lets say 30% (Scenario 1) of them not needing this surgery. This SAVES the insurers 2.5 x $40K. (8 people x 30% is approx 2.5)...it also means that they still need to fork out $40 K for the remaining 5.5 patients which costs them $220 K. BUT also in addition ALL 8 of them need to have their iPPS covered which is 8 x $6000, ie $48,000.
SO the total net saving for the 2.5 out of the 8 that now DO NOT NEED surgery is $52K
Right....it goes to $112,000 saving if we say that its actually 50% of the patients that take iPPS. While that (ie 50%) might sound a tad high, you could possibly see a scenario like this playing out after a number of years AFTER IPPS is allowed to be sold. The Docs themselves will get wind of it and start prescribing it earlier, or as Paul has said, as a First Line treatment, specially with that DMOAD badging in tow. This is one of the key reasons that PAR is spending the time effort and of course time to get this!
Once we have that NDA there will be some months of chatting and negotiation with the insurers, specially in the USA....How many Insurers do you guess are in the USA?
5 Major ones? Maybe a few minor ones too?
Try 900 plus9.
The figures of savings for these guys multiply out significantly if we become first line...Once governments and private payers understand how much they are actually saving in hospital admissions...well, you get the idea.
Sure there might be a bit of speculation and pie in the sky here...but even going conservative could be quite lucrative for them...and for us!
TAKE IT UP ONE JUST MORE NOTCH...
The next logical step for me is, to now make the jump....
(Pool_Lord, notice no R*cket's in this post, still too early for that....)
Now we multiply this percentage out to the full OA population but don't worry, I will discount it heavily to be conservative and to factor in that just because we have raw magic and it is safe, doesn't mean everyone (and their.. err...canine) will take it!
Here are my workings:
31,000,000 OA patients in USA, let's bring that right back to just 10%
3,100,000
Divide this by 100 to group them into 100's and multiply it by the percentage prevalence of approx 8% for joint replacements.
That's 248,000
Now we multiply this out by the savings (Yellow box above) in scenario 1...that's $12.89 Billion.
Is it worth it for the payers to cover us fully???
Oh I think so.
Even if I'm still being too aggressive and missing out on some details, you can half it and say its a $6B USD savings...maybe that's over a few years...However a couple of factors that sway it back my way are:
1) Europe? You'd need to at least factor that in
2) Rest of World
3) Other indications...
Yeah the eventual OA Global Deal could really be quite lucrative.
PAR? Show them these figures...I have a feeling they already have a full book of notes on this sorta insurancy stuff!
My thoughts
Not advice
Remember - It's a whole heap more complex than this...illustrative purposes only!
-)34.2%
(20min delay)
