Economics of Innovation

Berdud, Drummond and Towse (2020) propose a method for establishing a reasonable price for an orphan drug. Assuming prices for drugs are set according to incremental value, they propose adjustments to a payer’s ‘normal’ cost-effectiveness threshold (CET) for non-orphan drugs to ensure orphan drug developers achieve no more than the industry-wide rate of return. Adjustments are calculated for differences in R&D costs and population sizes.

Barros, P.

Seminar Briefing
August 2020

The issue of rising prescription drug prices is a concern in every country. Dozens of policy initiatives and hundreds of research projects over last the fifty years have attempted to find solutions to pricing that provide an appropriate balance between the cost to health care systems and incentives for R&D. To name but a few, these include reference pricing, managed entry agreements, price-volume agreements, rebates, and risk sharing. The ultimate solution, however, remains elusive.


Towse, A. and Firth, I.

July 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 paper was published alongside the lecture but contains additional analysis, extensive footnotes and references. Comments and feedback are welcome.

This year’s OHE lecture addressed the question: how should the world pay for a COVID-19 vaccine? The paper by Adrian Towse and Isobel Firth accompanying the lecture is now published. It builds on work undertaken with Kalipso Chalkidou, Rachel Silverman and Ganesh Ramakrishnan from the Center for...

Berdud. M., Ferraro. J., Towse. A.

Consulting Report
July 2020

This paper presents a supply and demand model of pharmaceutical markets to analyse the relationship between the value of the Cost-Effectiveness Threshold (CET) and the distribution of the health and economic value of new medicines between consumers (payers) and developers (life science industry). As a novelty, the model incorporates a bargaining process and bargaining power distributed between the payer and the developers, which has an impact on the distribution of the health and economic value of new medicines between the two parties.

Brassel, S., Cookson, G.

Consulting Report
June 2020

In the 2017 Industrial Strategy, the Government committed to increasing investment in UK Research and Development to the OECD-average of 2.4% of Gross Domestic Product (GDP) by 2027, with a longer-term goal of reaching 3% to put the UK in the upper quartile. Whilst there is universal agreement that increasing R&D investment in the UK is a worthy goal, there is an ongoing discussion over how best to achieve it.

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.


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