Pricing methods in outcome-based contracting: δ3: reference-based pricing

Nimer S. Alkhatib, Brian Erstad, Kenneth Ramos, Ali McBride, Sandipan Bhattacharjee, Marion Slack, Ivo Abraham

Research output: Contribution to journalArticlepeer-review

8 Scopus citations


Aims: Six Delta is a six-dimensional independent platform for outcome-based pricing/contracting. The third dimension (δ3) estimates prices on the basis of international drug price referencing methods. We describe this dimension’s methodology and present a proof-of-concept application to the treatment of non-small cell lung cancer (NSCLC) with EGFR mutation with osimertinib. Materials and methods: The reference-based pricing dimension utilizes a six-step method: (1) selecting foreign countries based on a set of four criteria (drug is available in the foreign country, price information is available in the foreign country, foreign countries are members within the organization for Economic Co-operation and Development, pricing methods in the foreign countries involve value assessment); (2) adjusting for exchange rates; (3) generating reference price (RP) scenarios; (4) adjusting with the medical inflation rate; (5) pooling all generated RP scenarios and calculating average and standard deviation (SD); (6) and Monte Carlo Simulation (MCS) to estimate the dimension-specific DSPReference. A proof-of-concept exercise with osimertinib in NSCLC was performed for two hypothetical outcome-based contracts: 1-year (2019–2020) and 2-year (2019–2021). Results: The United Kingdom and Canada met the four criteria. For the osimertinib 1-year contract price, the average of eight RP scenarios, adjusted for inflation by 0.44%, was $8,892 (SD = $2,606) for a 30-day prescription. MCS yielded a DSPReference estimate of $9,395 or −35.72% of the wholesale acquisition cost (WAC) of $14,616. For the 2-year contract, the average, adjusted for inflation by 0.72%, was $8,928 (SD = $2,610). MCS yielded a DSPReference estimate of $9,442 or −35.40% of the WAC of $14,616. Conclusions: We demonstrated that international price referencing methods can be integrated into our proposed Six Delta platform for outcome-based pricing/contracting.

Original languageEnglish (US)
Pages (from-to)1230-1236
Number of pages7
JournalJournal of Medical Economics
Issue number11
StatePublished - Nov 1 2020


  • Reference pricing
  • lung cancer
  • osimertinib
  • outcome-based-contracting
  • pricing methods

ASJC Scopus subject areas

  • Health Policy


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