Value-Based Pricing

OHE’s Dr Jorge Mestre-Ferrandiz is a visiting lecturer in the Department of Economics at City University London. As part of his 2013 activities, he recently gave a comprehensive lecture on the economics of the market for medicines in the UK. His presentation covers the key issues, from drug development through health technology assessment and market access.

Value based pricing (VBP) is increasingly common in health care systems worldwide. OHE continues to make important contributions to the debate about VBP approaches and application through its research, publications and participation in discussions. For example, Adrian Towse was invited to participate in a January conference on translation genomics—the conversion of genomic insights into clinically useful applications—where he discussed approaches to valuing genomic medicines.

With Prof Patricia Danzon of the Wharton School, University of Pennsylvania, OHE's Adrian Towse and Jorge Mestre-Ferrandiz have released an important working paper that addresses how to achieve efficient pricing for pharmaceuticals within and across countries.

The proposals from the UK Department of Health (DH) for value based pricing (VBP) include a process whereby higher prices would be granted to medicines that tackle the most burdensome diseases – i.e. those that are most severe or are associated with the greatest unmet need. The DH’s VBP consultation document defines unmet need in terms of the degree to which alternative treatments exist. Little empirical evidence is available, however, on whether the general public supports the use of this particular definition of unmet need as a basis for setting health care priorities. To address this gap in the evidence, Koonal Shah and Nancy Devlin of OHE completed a small exploratory study.

The OHE has been very active in conceptualising approaches incorporating a broader assessment of the elements of value (often called "value based pricing" or "VBP"), as its publications to date illustrate. During the last quarter of 2012, OHE has been active in discussions of VBP in a variety of forums.

Just out is an OHE Research Paper that examines the issues. The authors note that diagnostics not only facilitate health gain and cost savings, but also provide information to inform patients’ decisions on interventions and to clarify how their behaviour may affect their health in future.

The UK Department of Health’s value based pricing (VBP) Consultation Document proposes a process whereby higher prices would be granted to medicines that tackle diseases that produce the greatest burdens of illness – i.e. those diseases that are most severe or are associated with the greatest unmet need.

During the last quarter of 2011, OHE team members were involved in discussions and presentations in a range of forums, covering each of OHE's three areas of focus. This post reviews their activities.

This post reviews OHE's activities in September 2011 that contributed to advancing thought and stimulating innovative ideas in its three key research areas: financing and delivery of health care, HTA methods and processes, and the economics of the pharmaceutical and life sciences industries.

At the PPRI conference in Vienna on 29-30 September, 2011, Jorge Mestre-Ferrandiz presented a poster summarising the results of a literature review on risk sharing, flexible pricing, patient access schemes and performance-based reimbursement.

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