The Impact of Therapeutic Reference Pricing on Innovation in Cardiovascular Medicine

Desmond Sheridan and Jim Attridge ()

PharmacoEconomics, 2006, vol. 24, issue 2, 35-54

Abstract: Therapeutic reference pricing (TRP) places medicines to treat the same medical condition into groups or ‘clusters’ with a single common reimbursed price. Underpinning this economic measure is an implicit assumption that the products included in the cluster have an equivalent effect on a typical patient with this disease. ‘Truly innovative’ products can be exempt from inclusion in the cluster. This increasingly common approach to cost containment allocates products into one of two categories — truly innovative or therapeutically equivalent. This study examines the implications of TRP against the step-wise evolution of drugs for cardiovascular conditions over the past 50 years. It illustrates the complex interactions between advances in understanding of cellular and molecular disease mechanisms, diagnostic techniques, treatment concepts, and the synthesis, testing and commercialisation of products. It confirms the highly unpredictable and incremental nature of the innovation process. Medical progress in terms of improvement in patient outcomes over the long-term depends on the cumulative effect of year after year of painstaking incremental advances. It shows that the parallel processes of advances in scientific knowledge and the industrial ‘investment-innovative cycle’ involve highly developed sets of complementary capabilities and resources. A framework is developed to assess the impact of TRP upon research and development investment decisions and the development of therapeutic classes. We conclude that a simple categorisation of products as either ‘truly innovative’ or ‘therapeutically equivalent’ is inconsistent with the incremental processes of innovation and the resulting differentiated product streams revealed by our analysis. Widespread introduction of TRP would probably have prematurely curtailed development of many incremental innovations that became the preferred ‘product of choice’ by physicians for some indications and patients in managing the incidence of cardiovascular disease. Copyright Adis Data Information BV 2006

Date: 2006
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DOI: 10.2165/00019053-200624002-00005

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