How Managed Entry Agreements can improve allocation in the public health system: a mechanism design approach

Shuli Brammli-Greenberg (), Ira Yaari, Elad Daniels and Ariella Adijes-Toren
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Shuli Brammli-Greenberg: Smokler Center for Health Policy Research, Myers-JDC-Brookdale Institute
Ira Yaari: Smokler Center for Health Policy Research, Myers-JDC-Brookdale Institute
Elad Daniels: Smokler Center for Health Policy Research, Myers-JDC-Brookdale Institute
Ariella Adijes-Toren: Ministry of Health

The European Journal of Health Economics, 2021, vol. 22, issue 5, No 4, 699-709

Abstract: Abstract The process of introducing a new health technology into a healthcare system is characterized by uncertainty and risk for those involved—pharmaceutical companies, payers, patients and the government. In view of the accelerated introduction of new technologies in recent years, mechanisms to reduce uncertainty are of growing interest. One example is the Managed Entry Agreement (MEA), which we explore using a mechanism design approach. We make use of the Israeli experience, in which pharmaceutical companies and health plans (i.e., payers) negotiate over the introduction of new technologies into the national Health Services Basket (HSB) with the Ministry of Health acting as a mediator. We use the framework of bargaining within a mechanism design framework to show that in the process of negotiation the parties, the pharmaceutical company (PC) and the health plan (HP), have independent private valuations and that a situation of common knowledge that gains from MEA exists is rare. Adding a mediator (i.e., the MEA team) to the mechanism, as in a direct-revelation mechanism, reduces the level of uncertainty for both sides (i.e., the PC and the HP), thus making it possible to meet the budget constraint while increasing value for patients and enhancing ex-post efficiency.

Keywords: Health technology; Uncertainty; Managed Entry Agreement; Mechanism design (search for similar items in EconPapers)
JEL-codes: D82 I11 I18 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10198-021-01284-2

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