PreventInfect Quality, Pricing, and Cost-Benefit Analysis

What is PreventInfect’s quality added compared to no treatment?

Over a decade ago The New England Journal of Medicine proposed that all articles published on new therapies should close with a cost/benefit analysis comparing its benefits and costs against the best selling alternative therapy. This initiative was squashed by the pharmaceutical industry that also used lobbying to prevent the Federal Drug Administration from requiring performance tests against the best-selling alternative rather than no treatment at all (a placebo). Today, it looks like the industry is finally caving to pressure to require such testing, and that this testing must form the basis for performance and quality claims in the marketing of the new drug. The following information is the result of a test of PreventInfect, a drug developed to help prevent infections in cancer patients whose immune systems have been weakened by chemotherapy:

Average cost of treatment of infection with PreventInfect treatment ($IPI) $5,000

1. What is PreventInfect’s quality added compared to no treatment? The average expected cost of care per patient with no treatment is $15,000 times the probability of getting the infection which is 0.4 and the answer is $6,000 plus the cost of no treatment which is zero! The average expected cost of care per patient with PreventInfect treatment is $5,000 times the probability of getting an infection with the treatment which is 0.1 and the answer is $500 plus the per patient cost of the PreventInfect treatment which is $2,000 so the total answer is $2,500.

Substituting in the metrics above:

= Cost without any treatment  – Cost using PreventInfect, in equation format

= ($Io* po) - ( $TPI + $IPI*pPI )

= $15,000*0.4 - $2,000 + $5,000*0.1

= $6,000 - $2,500

= $3,500

2. What are the cost savings in using PreventInfect compared to current best treatment?

3. Using quality added pricing, what is the highest price PreventInfect could charge, the price that any higher and there would be no substantial value in the customer switching from the next best alternative?

4. Does excluding the cost to the hospital of being sued for infecting a cancer patient who then dies understate or overstate the benefits and quality-added of PreventInfect? Should the pain and suffering of patients who get an infection be considered when selling the use of PreventInfect to the patients’ family? Should the pain and suffering of patients who get an infection be considered when selling the use of PreventInfect to health insurance companies? (write on back)

By excluding the costs to the hospital, it understates the benefits that are outlined on reducing the probability of Cancer infections among patients and on the quality-added for preventinfect. It is evident that the cost for the PreventInfect treatment is higher – $2,000 as compared to the current best treatment that goes for $1,200. When a patient is going for PreventInfect treatment, they are looking out for and expecting higher benefits and more quality to the treatment which means less deaths. By excluding the costs to the hospital on such an incidence, it understates the benefits that come with Preventinfect treatment.