Economics of Innovation

Towse, A., Firth, I.  

Research Paper
June 2020

This year’s OHE lecture addresses the question: how should the world pay for a COVID-19 vaccine? Adrian Towse, Emeritus Director of OHE and Senior Research Fellow presents the challenges that we face in developing a COVID-19 vaccine,and suggests a mechanism for buying the vaccine on a global scale. This draft paper was published alongside the lecture but contains additional analysis, extensive footnotes and references. Comments and feedback are welcome.

The American Society of Health Economists (ASHEcon) announced Patricia Danzon as recipient of the 2020 Victor R. Fuchs Award. This is given to an economist making significant lifetime contributions to the health economics field. Professor Danzon is an internationally recognized expert in the fields of economics of health care, the biopharmaceutical industry, and insurance, including the medical malpractice area where she began her research.

OHE authors develop a supply and demand model of pharmaceutical markets to analyse the social welfare distribution between consumers (payers) and developers (industry) to set an optimal cost-effectiveness threshold (CET).

The COVID-19 pandemic has highlighted the necessity of finding health solutions in an unprecedentedly short length of time. However, the first treatments, tests and vaccines will only offer partial solutions. Competing follow-on technologies will offer better or complementary health benefits. It is essential that health systems do not put all of their eggs in one basket.

A move towards paying multiple prices for medicines (depending on what they are used for) could address a commonly cited problem in drug development and increase patient access. Our latest consulting report investigates whether key stakeholders are onboard.

In place of OHE’s 2020 Annual Lecture, Adrian Towse will give a webinar-lecture on June 25th on payment models for a COVID-19 vaccine.

He will be discussing options for funding the development and manufacture of a vaccine, reflecting on their strengths and weaknesses, considering what may happen with no regional or global collaboration. Analysis will consider the work of Gavi and others to construct a global vaccine market that delivers for all citizens.

Cole, A., Towse, A., Zamora, B.

Consulting Report
April 2020

Although the science underlying drug development has evolved, there has been little change in how we pay for them. As more and more medicines come to market with multiple indications (or even more importantly the unrealised potentialto treat multiple indications), the way we pay for those medicines becomes critical in making sure we can benefit from them. “Indication-based pricing” (IBP) permits price to vary according to indication and has been proposed to tackle this issue.

Research by OHE and the University of Washington into how uncertainty-related novel elements of value could be included in an Augmented Cost-Effectiveness Analysis has been published in Journal of Managed Care & Specialty Pharmacy (JMCP). The research discusses what has been or could be done to measure these elements and looks at empirical research to date.

A COVID-19 vaccine is needed now, but timelines (12-18 months) create large market risk. By the time a vaccine is ready, the crisis may have passed. A CGD Note explores three options: business as usual – which may lead to promotion of an inferior vaccine or fierce country competition for supply – and two models (cost- or value-based), with countries pre-committing to purchases meeting specified efficacy. The authors prefer a value-based model.

Adrian Towse presented evidence that transparency of process reduced corruption and improved competition. Evidence was, however, against price transparency for on-patent medicines. It will reduce access in low income countries. In generic markets, price transparency could improve efficiency, although it risks collusion by suppliers. There is therefore a case for buyers sharing, but not publishing, price data for off-patent medicines.

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