Value Based Pricing of Pharmaceuticals in the US and UK: Does Centralized Cost Effectiveness Analysis Matter?

William S. Comanor (), Stuart O. Schweitzer, Jon M. Riddle and Frederic Schoenberg
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William S. Comanor: University of California, Los Angeles
Stuart O. Schweitzer: University of California, Los Angeles
Jon M. Riddle: Economic Associates
Frederic Schoenberg: University of California, Los Angeles

Review of Industrial Organization, 2018, vol. 52, issue 4, No 4, 589-602

Abstract: Abstract Increasingly, government policies directed towards limiting pharmaceutical prices have emphasized value-based criteria. This regulatory approach is most clearly formalized in the United Kingdom where the National Institute for Health and Clinical Excellence (NICE) was created within the British National Health Service (NHS), whose function is to apply cost-effectiveness analysis to new drugs. In contrast to Britain, there is no formal regulatory mechanism assuring cost-effectiveness in the United States. Instead, questions of cost effectiveness are left to market processes. In this paper, we examine the pricing implications of these alternate regimes. From our empirical analysis, we conclude that value-based pricing is enforced by both regulatory and market processes, and with similar outcomes.

Keywords: Drug prices; Value-based pricing; Cost-effectiviness analysis (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s11151-018-9616-1

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