Drug pricing models, no ‘one-size-fits-all’ approach: a systematic review and critical evaluation of pricing models in an evolving pharmaceutical landscape

Evert A. Manders (), Sibren den Berg, Saco J. Visser and Carla E. M. Hollak ()
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Evert A. Manders: Platform at Amsterdam University Medical Center
Sibren den Berg: Platform at Amsterdam University Medical Center
Saco J. Visser: Platform at Amsterdam University Medical Center
Carla E. M. Hollak: Platform at Amsterdam University Medical Center

The European Journal of Health Economics, 2025, vol. 26, issue 4, No 12, 683-696

Abstract: Abstract Access to new medicines is crucial for patients but increasingly sparks discussion due to high prices. Simultaneously, the growing emphasis on specialized products and uncertainty surrounding the long-term effectiveness of new drug classes brought to the market underscore the need for innovative pricing approaches. A systematic literature review of pharmaceutical pricing models, accompanied by a critical appraisal, was conducted to offer insights contributing to novel approaches balancing sustainable pharmaceutical innovation with affordability and accessibility for patients. Six different pricing models are identified: value based pricing, basic cost-based pricing, and four more comprehensive pricing models incorporating numerous elements: the cancer-drug-pricing model, AIM model, (Nuijtens) discounted cash flow, and the real-option rate of return method. Although there are many similarities among the models, each has unique assumptions for implementation. For instance, all models except for the standard incremental cost-effectiveness ratio and basic cost-based pricing consider the number of eligible patients and the remaining patent period. Only the AIM model and the Nuijtens discounted cash flow model use lump sums. Both the latter and the real-option rate of return method explicitly include the cost of capital as a major cost-based component. Recognizing the diverse applications of each model highlights the need for more differential and dynamic pricing tailored to the characteristics and therapeutic areas of each drug. Additionally, the study underscores the importance of cost transparency in achieving this goal. Consequently, these findings can help stakeholders develop sustainable and affordable drug pricing mechanisms that address the complexities of the ever-changing pharmaceutical landscape.

Keywords: Drug pricing; Drug costs; Drug pricing models; Affordability; Innovation (search for similar items in EconPapers)
JEL-codes: I18 I19 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10198-024-01731-w

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