The Real Option Value of Life And Innovation

Abstract

Background: Recent developments in healthcare value assessments have expanded the definition of value for medical technologies. The option value of a life-extending treatment is the opportunity of benefiting from future innovations during the extended life. This concept is particularly important in disease areas where the main goal of treatment is life extension and the rate of innovation is rapid. The objective of this dissertation is two-fold: (1) to examine real-world evidence on option value being considered in treatment decision-making, and (2) to develop a modeling approach for incorporating the real option value of life-extending treatments into cost-effectiveness analysis (CEA). Methods: In the first study, an interrupted time series analysis was conducted using a large administrative claims database to test whether the utilization of existing treatments changed after the disclosures of the then-investigational drug ipilimumab’s phase II and phase III results among metastatic melanoma patients from 2008 to 2011. A multinomial logistic regression was used to analyze the temporal probability of receiving antineoplastic systemic therapy, surgical resection of metastasis, or both, relative to no treatment, in the first three months following the first metastasis diagnosis. In the second study, I estimated the cost-effectiveness of ipilimumab in two scenarios: a conventional scenario, with a model constructed using the standard methods that rely on efficacy data directly from the phase III trial of ipilimumab, and an option value scenario, that incorporates future hypothetical improvements in mortality for metastatic melanoma due to innovations. I developed two approaches to incorporating option value. The first approach projects mortality improvements based on historical trends from the Surveillance, Epidemiology, and End Results Program registry. The second, alternative approach identifies drugs being studied in clinical trials at the time of ipilimumab’s approval on clinicaltrials.gov and estimates their likelihood and timing of approval, and potential efficacy and cost. I accounted for increases in overall cancer treatment cost and unrelated medical cost in the option value scenario. Results: In the first study, 1,846 metastatic melanoma patients were included. After adjusting for clinical and sociodemographic variables, as well as the underlying time trend, the disclosure of ipilimumab’s phase II result was associated with a nearly twofold immediate increase in the probability of receiving surgical resection of metastasis relative to no treatment, which was significant at 5% level. No significant effect was observed in the time trend. No significant effects were found for the announcement of phase III result. In the second study, in the option value scenario, using the SEER approach, the incremental QALY gained and the incremental cost increased by 6.3% and 3.8%, respectively, while the ICER decreased by 2.4%, compared to the conventional scenario. Using the clinicaltrials.gov approach, the incremental QALY gained and the incremental cost increased by 7.5% and 7.1%, respectively, while the ICER decreased by 0.4%, compared to the conventional scenario. Conclusion: This dissertation research provided the first empirical evidence of the impact of real option value in cancer treatment decision-making. It was also the first to incorporate option value in an ex ante CEA and estimated its potential impact on the cost-effectiveness of a treatment. Findings from this dissertation underscored the importance of accounting for option value when assessing the value of medical technologies.