Economics of Industry

Towse, A., Hernandez-Villafuerte, K. and Shaw, B.
Consulting Report
May 2018

This OHE Consulting Report reviews “Estimated costs of production and potential prices of medicines for the World Health Organization Essential Medicines List” (Hill et al., 2018) in which the authors argue for “greater transparency in drug pricing” and propose generating estimates of the cost of manufacturing essential medicines to inform negotiations on drug pricing.

OHE Consulting produces a report critiquing a paper by Hill et al. (2018) on estimated costs of production for the WHO Essential Medicines List.

OHE Consulting has produced a report summarising the literature on indication-based pricing and how it has been applied in the U.S. and 5 European countries.

Towse, A., Cole, A., and Zamora, B.
Consulting Report
May 2018

The notion that the price of a medicine should be linked in some way to value it generates for patients and the health system is generally accepted. Yet, how can this be achieved, when increasingly medicines are being developed that derive patient benefit across many different indications? Indication-based pricing (IBP) has been proposed as a way to tackle this issue, permitting price to vary according to indication and – critically – according to value.

This OHE Consulting report, funded by AstraZeneca, provides an overview of the key literature that has contributed to this debate, and of how IBP has been implemented – in its various forms – to date in the U.S., France, Germany, Italy, Spain and the UK.

IBP increases the potential number of patients who can benefit from a medicine and thus most economists regard it as efficient. It also sends the right signals for R&D investment. Differences of opinion remain, however, as to whether IBP is in the interests of payers. IBP may lead to some prices being higher than with a uniform price, as well as some prices being lower. The value at which prices are currently set in a single-price system will impact on the consequences of a move to a multiple-price system. A number of US payers see the potential for IBP to increase price competition in some indications, and the NHSE in England has used contracting by genotype in Hep C drug procurement to increase competition and help it get lower prices.

The literature evaluated as part of this report demonstrates that most of the debate is in the realms of theory, with little evidence in practice. The barriers are numerous. These include legal or regulatory hurdles, data collection problems, as well as contractual or financial flow issues.

OHE is on RePEc: find publications from the Office of Health Economics in Research Papers in Economics.

In this paper, Sir Geoffrey Owen and Dr Michael Hopkins discuss ‘The UK Biotech Sector and Brexit: Past Performance and Future Prospects’.

Owen. G and Hopkins, M.

Seminar Briefing
April 2018

This seminar briefing examines (1) why the UK has not produced large biotech firms that develop drugs, similar to those in the United States (US), (2) why the UK biotech firms that do exist have not brought blockbuster drugs to the market and (3) what the implications are for industrial strategy after Brexit. These remarks are based primarily on research we completed for our recent book, Science, the State and the City (Owen and Hopkins, 2016), with some additions and specific observations about the potential effects of Brexit.

OHE has authored numerous papers on personalised medicine with contributions to value frameworks, innovations in pricing and cost effectiveness analyses.

Mestre-Ferrandiz, J., Berdud, M., and Towse, A.

Consulting Report
January 2018

The CRA Report has an underlying assumption that the EU is as globally competitive in generics and biosimilars as it is in innovative products. There is no evidence to support this. The correct industrial strategy for the EU may well be to focus on the development, manufacture and export of innovative products, rather than on lower value generics where EU global competitiveness appears to be weaker.

The CRA report makes estimates of effect using a number of assumptions, data and calculations that we do not find to be correct or which are not explained. Until these anomalies are addressed, our view is that the CRA analysis is not a fit basis for an impact assessment to guide policy.

This report explores the consequences of the exit of the United Kingdom (UK) from the European Union (EU) on public health in the UK and in the EU.

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