helps to optimise the value of innovation

How to determine a correct price for innovation?

Added on 27/05/2021

What is innovation? There is no unified definition available. But an even more difficult issue is how to determine a correct price for innovation. In this blog we like to give you some information about the workflow of a succesfull market access dossier.

How to determine a correct price for innovation?

Added on 27/05/2021

What is innovation? There is no unified definition available. But an even more difficult issue is how to determine a correct price for innovation. In this blog we like to give you some information about the workflow of a succesfull market access dossier.

 
 

What is innovation?

According to Wikipedia:

“Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services. ISO TC 279 on innovation management proposes in the standards, ISO 56000:2020 to define innovation as “a new or changed entity creating or redistributing value“. However, many scholars and governmental organizations have given their own definition of the concept.” “It is also often viewed as taking place through the provision of more-effective products, processes, services, technologies, […] or business models that innovators make available to markets, governments and society.”

So, no unified definition is available. But an even more difficult issue is how to determine a correct price for innovation.

Of course, there are many factors that can be taken into account that determine whether your innovation can really offer added value. This also applies, of course, to health-related innovations, your (and, coincidentally, our) area of expertise. Is it an innovation with added value (therapeutic effectiveness) or rather a ’me too’-product?

All parameters (both technically related and clinical variables) can play a role in determining a price incentive, whereby your investment must be in line with what society (social security) and/or the end customer (healthcare insurer, hospital, patient) is willing to pay for the innovative step..

In any case, you need to test against the current clinical practice in the area where your innovation is positioned. If there is nothing yet and the medical need is high, you may have a potential blockbuster. If a wide therapeutic arsenal is already available, your innovation will have to be convincing enough to win over the market enough to recover your costs.

However, before you put your innovation on the market, you should take at least 1 hurdle. A price agreement with the government. You need to convincingly show the government that your innovation will actually bring added value once you are on the market – whether or not it is reimbursed. Your clinical trial data is the engine of this potential success, and clinical experts are the catalyst. These experts can help you position your product to offer it specifically where the therapeutic need is greatest. For example, this can be a subgroup of your intended audience. The advantage of a subgroup is that, despite a limitation of the formulated target group, you may opt to charge a higher price because of your focus on those patients who will benefit the most. In this way, both your company and the government can contribute to the use of financial resources where an optimal cost-benefit balance sheet is in force.

We agree with you, your innovation has every interest in getting to the market as soon as possible (your patent does not last forever). Your ‘market access’ file must therefore be built up with the necessary care so that the assessor (the government) is convinced after a critical analysis of the data, without you having to repeatedly submit new files. We recommend that you transparently explain the details of your clinical file. Follow the government guidelines when building your file and rely on expertise.

Avoid uncertainty where possible, and explain uncertainty where necessary. To determine the potential financial impact due to uncertainty, you can use several approaches. You can study the influence of 1 key variable at a time (deterministic), or vary all parameters simultaneously within a set (confidence) interval (probabilistic). It will undoubtedly benefit you in the event of possible inclusion in government contracts (managed entry agreements).

Summarising: if you have a robust strategic plan, you already are very close to success. A solid dataset combined with a portion of healthy logic and supporting mathematics is the key to optimal market access conditions.

We wish you every success in achieving your goal, contributing to a healthier world that will benefit everyone.

Would you like us to explain another subject in this way? Let us know via info@hebias.be.

See you soon,

Your HEBIAS team.