Dynamic Cost-Effectiveness: A More Efficient Reimbursement Criterion

Lundin Douglas () and Ramsberg Joakim ()
Additional contact information
Lundin Douglas: Swedish Competition Authority
Ramsberg Joakim: Swedish Pharmaceutical Benefits Board

Forum for Health Economics & Policy, 2008, vol. 11, issue 2, 17

Abstract: Basing drug reimbursement on cost-effectiveness provides too little incentives for R&D. The reason for this is that cost-effectiveness is concerned with immediate value for money. But since the price of a drug usually declines over time, the drug might well provide value for money as seen over its entire life cycle, even though its price during patent protection is too high to warrant reimbursement according to the cost-effectiveness decision rule. We show in a theoretical model that welfare could be improved if decision-makers took a longer perspective and initially allowed higher prices than immediate value for money can motivate. We also discuss the real world relevance of applying dynamic cost-effectiveness.

Keywords: cost-effectiveness; R&D; drugs; reimbursement (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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DOI: 10.2202/1558-9544.1120

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