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(POC) Diagnostics for C. Difficile, Carbapenem-Resistant Enteroba

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(POC) Diagnostics for C. Difficile, Carbapenem-Resistant Enteroba CONTRACT NO. HHSP233201500055I TASK ORDER NO. HHSP23337001T ECONOMIC INCENTIVES FOR THE DEVELOPMENT OF RAPID POINT-OF-CARE (POC) DIAGNOSTIC DEVICES FOR C. DIFFICILE, CARBAPENEM-RESISTANT ENTEROBACTERIACEAE (CRE), AND NEISSERIA GONORRHOEAE FINAL REPORT Submitted to: Hui-Hsing Wong, M.D., J.D. U.S. Department of Health and Human Services Office of the Assistant Secretary of Planning and Evaluation 200 Constitution Ave., SW Washington, DC 20201 Submitted by: Aylin Sertkaya Daniel Ertis Nyssa Ackerley Calvin Franz Eastern Research Group, Inc. 110 Hartwell Avenue Lexington, MA 02421 www.erg.com October 25, 2018 Final Report October 25, 2018 TABLE OF CONTENTS TABLE OF CONTENTS .......................................................................................................................... I LIST OF TABLES AND FIGURES ........................................................................................................... III ACKNOWLEDGMENTS ....................................................................................................................... V DISCLAIMER ...................................................................................................................................... V LIST OF ACRONYMS .......................................................................................................................... VI EXECUTIVE SUMMARY .................................................................................................................... VII 1 INTRODUCTION .....................................................................................................................1 1.1 C. Difficile Infection (CDI) .................................................................................................... 1 1.1.1 Background ............................................................................................................ 1 1.1.2 Current C. difficile Diagnostics on the Market ....................................................... 2 1.1.3 Cost of CDI ............................................................................................................. 2 1.2 CRE Infection ....................................................................................................................... 5 1.2.1 Background ............................................................................................................ 5 1.2.2 Current CRE Diagnostics on the Market ................................................................ 6 1.2.3 Cost of CRE Infection ............................................................................................. 8 1.3 N. gonorrhoeae Infection (NGI) .......................................................................................... 8 1.3.1 Background ............................................................................................................ 8 1.3.2 Current NG Diagnostics on the Market ................................................................. 9 1.3.3 Cost of NGI ........................................................................................................... 10 2 STUDY OBJECTIVE ................................................................................................................ 10 3 METHODOLOGY ................................................................................................................... 10 3.1 Modeling Private Returns (Private ENPV) ......................................................................... 11 3.2 Modeling Social Returns (Social NPV) ............................................................................... 12 4 FINDINGS .............................................................................................................................13 4.1 Private Returns ................................................................................................................. 13 4.1.1 Baseline ENPV ...................................................................................................... 15 4.1.2 Threshold ENPV Needed for Development ......................................................... 16 4.2 Social Returns ................................................................................................................... 19 4.3 Comparative Analysis Results ........................................................................................... 21 4.4 Incentive Analysis Results ................................................................................................. 22 4.4.1 Tax Incentives ...................................................................................................... 24 4.4.2 Modifications to the Clinical Study Process and FDA Review Standards ............. 25 4.4.3 R&D Phase, Clinical Phase, and FDA Application Phase Cash Prize Awards ........ 25 4.4.4 CMS Reimbursement Incentives .......................................................................... 26 5 CONCLUSIONS ..................................................................................................................... 27 6 REFERENCES ...................................................................................................................... R-1 i Final Report October 25, 2018 APPENDIX A: TECHNICAL APPENDIX ................................................................................................ A-1 A.1 PRIVATE EXPECTED NET PRESENT VALUE (ENPV) MODEL PARAMETERS AND ASSUMPTIONS A-1 A.1.1. Real Opportunity Cost of Capital (ROCC) ........................................................................ A-1 A.1.2. R&D Costs ....................................................................................................................... A-3 A.1.3. Clinical Research Costs .................................................................................................... A-3 A.1.4. FDA 510(k) and CLIA Waiver Submission Costs .............................................................. A-4 A.1.5. Phase Durations .............................................................................................................. A-4 A.1.6. Phase Success Probabilities ............................................................................................ A-5 A.1.7. Costs of Supply Chain Activities ...................................................................................... A-6 A.1.8. Total Product Life ............................................................................................................ A-6 A.1.9. Product Launch Success Probability ............................................................................... A-6 A.1.10. Timing for Competitor Entry and Expected Percentage Reduction in Revenues due to Competition .................................................................................................................... A-7 A.1.11. Development Threshold for Peak-year Sales .................................................................. A-7 A.1.12. Reimbursement Level per Test ....................................................................................... A-8 A.1.13. Technology Adoption ...................................................................................................... A-8 A.1.14. Market Size Estimates ..................................................................................................... A-9 A.1.14.1 CDI Market Size ............................................................................................ A-9 A.1.14.2 CRE Infection Market Size ........................................................................... A-11 A.1.14.3 NGI Market Size .......................................................................................... A-13 A.2 SOCIAL BURDEN OF ILLNESS PARAMETERS AND ASSUMPTIONS ........................................ A-19 A.2.1. Real Annual Social Rate of Discount ............................................................................. A-19 A.2.2. Value of a Statistical Life (VSL) in 2016 ......................................................................... A-19 A.2.3. Value of a Statistical Life Year (VSLY) in 2016 ............................................................... A-20 A.2.4. Total Number of Cases per Year ................................................................................... A-20 A.2.5. Health Outcomes .......................................................................................................... A-20 A.2.5.1 CDI Health Outcomes ........................................................................................ A-20 A.2.5.2 CRE Infection Health Outcomes ........................................................................ A-23 A.2.5.3 NGI Health Outcomes ....................................................................................... A-24 ii Final Report October 25, 2018 LIST OF TABLES AND FIGURES Table E - 1. ENPV of Developing Rapid POC Diagnostics for C. difficile, CRE, and N. gonorrhoeae Infections ............................................................................................................................................. viii Table E - 2. Value of Lost Morbidity and Mortality in the United States from C. difficile, CRE, and N. gonorrhoeae Infections in 2016 ............................................................................................................ ix Table 1. Summary of C. difficile Test Methods from 2010 – 2018 ............................................................... 4 Table 2. Hospital
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