Ex post Value Reimbursement for Pharmaceuticals

Hugh Gravelle

Medical Decision Making, 1998, vol. 18, issue 2_suppl, S27-S38

Abstract: The paper examines the welfare properties of an ex post value regulation scheme in which a pharmaceutical firm's revenue varies with the social value of its product. The mechanism, which is a variant of that proposed by Loeb and Magat, leads to efficient investment in research and development (R&D), production, consumption, and pro motion under certain market and technologic conditions. The mechanism's attractive simplicity is lost when account is taken of the rivalrous nature of R&D, the fact that drugs can be complements or substitutes, the excess cost of taxes needed to finance the mechanism, and the multinational character of most pharmaceutical firms. Key words: pharmaceuticals; reimbursement; pharmacoeconomics; price regulation; public policy. (Med Decis Making 1998;18 suppl:S27-S38)

Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:sae:medema:v:18:y:1998:i:2_suppl:p:s27-s38

DOI: 10.1177/0272989X98018002S06

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