Development of a model to demonstrate the impact of National Institute of Health and Care Excellence cost‐effectiveness assessment on health utility for targeted medicines

Advances in medical technology have led to a better understanding of heterogeneity of diseases and patients, and to the development of targeted medicines. This development is beneficial to society but can come at an increased cost to pharmaceutical manufacturers due to the costs associated with developing and manufacturing a diagnostic test. For such medicines, the conventional pricing structure, where a therapy is approved if it is deemed cost‐effective, may not appropriately incentivize targeted drug development. We model the decision‐making processes for both the healthcare provider and the pharmaceutical manufacturer, capturing their main priorities, and populate it with information from a recent appraisal by the National Institute of Health and Care Excellence. Healthcare providers prefer a stratified drug to be developed for a subgroup of the population when the drug is on average effective in the subgroup but with a detrimental effect in the complement. Whilst pharmaceutical manufacturers' preferences are similar, regions of disagreement exist. We show how preferences can be aligned by either penalizing the development of a non‐stratified drug or rewarding the development of a stratified drug. The cost and position of alignment depends on the true value of health to the healthcare provider, among other parameters.