24. Price Threshold

Price Threshold Analysis allows you to identify the maximum price where its treatment would be considered cost-effective. In other words, what is the maximum price for a product where the ICER for the new strategy would be equal to the WTP threshold.

 

Cost-effectiveness analysis identifies an ICER between two strategies based on the average cost and average effectiveness of each strategy. This can be used to identify the optimal strategy given a Willingness-to-Pay (WTP) value.

Price Threshold Analysis identifies the maximum price that could be charged for a product while keeping that product's strategy cost-effective. Specifically, it adjusts the price up or down until it reaches the precise value where the ICER is equal to the WTP value.

• If the ICER for the new product strategy is above the WTP, Price Threshold Analysis will reduce the price.

• If the ICER for the new product strategy is below, the WTP, Price Threshold Analysis will increase the price.

TreeAge Pro’s tool allows you to run a single analysis to identify the maximum price under multiple model scenarios (sets of inputs) and for multiple WTP values.

We will use the Health Care tutorial example model Markov_PriceThreshold.trex and Markov_PriceThreshold_Discount.trex throughout this section as we go through the process.