Economics of Industry

This paper is based on a symposium held at the Imperial College of Science and Technology by the Office of Health Economics in 1972.

The cost of R&D for a successful new medicine has been an important policy issue at least since the 1960s. Cost estimates matter not just because of intellectual curiosity or for industry understanding of its performance, but because they are a key aspect of the international debate about the reasonableness of pharmaceutical prices and the magnitude of the long-term investments involved.

Interest is growing in schemes that involve “paying for pills by results”, that is, “paying for performance” rather than merely “paying for pills”.  Despite its intuitive appeal, this approach is highly controversial and is disliked by many health care providers, policy makers, and pharmaceutical companies.

Recent reforms to the National Health Service (NHS) in England include important changes in the regulation of prices for new medicines. From January 2014, the existing Pharmaceutical Pricing Regulation Scheme (PPRS) will be replaced by “value based pricing” (VBP) for branded medicines sold to the NHS. This will apply only to new medicines; those marketed before 2014 will continue to be governed by the PPRS.

Antimicrobial resistance (AMR) to drugs is a natural and unavoidable consequence of treating infectious diseases.  A growing global public health threat, AMR reduces the chances of successfully treating patients with infectious diseases, thereby increasing the probability of complications, morbidity and mortality. The World Health Organization estimates that infectious diseases are the third leading cause of death in the European Union.

Antimicrobial resistance (AMR) is becoming a major global public health threat and has begun to command attention from European and US policy makers. An initial focus on monitoring AMR and conserving existing treatments by cutting down on misuse has been complemented by moves towards addressing the paucity of new drugs in the R&D pipeline of the pharmaceutical industry.

This publication reports on a seminar intended to encourage further thought about the distinguishing characteristics of the market for biosimilars and the implications of these for potential savings.

Economists and regulatory experts from the US and Europe were invited to describe their research and offer their perspectives about what can be expected in the near- and medium-term.  The publication includes updated insights that take account of changes since the seminar, including more recent analyses of potential market impact.