The impact of pharmaceutical marketing on market access, treatment coverage, pricing, and social welfare

Gregory J. Critchley and Gregory S. Zaric

Health Economics, 2019, vol. 28, issue 8, 1035-1051

Abstract: Pharmaceutical spending in the United States, Canada, and the EU is growing. Public payers cover a large portion of these costs and have responded by instituting various pricing and access policies to limit their expenditure. One challenge that public payers face is additional demand induced by a manufacturer's marketing effort. We use a game theoretic approach to study the impact of pharmaceutical marketing on six practical pricing and access policies: negotiated pricing, open pricing, controlled pricing, a listing process, a risk‐sharing arrangement, and a value‐based pricing with risk‐sharing arrangement. We find that all non‐value‐based policies result in either restricted access or suboptimal treatment coverage. We find that marketing is the highest in the first‐best setting where all decisions are made by a social planner. We also find that the value‐based pricing with risk‐sharing arrangement is preferred by the manufacturer and from a societal perspective whereas no policy is universally preferred by a health care payer. A value‐based pricing with risk‐sharing arrangement always results in zero net monetary benefit for a health care payer. Therefore, considering non‐value‐based arrangements, we find that a negotiated pricing policy, a controlled pricing policy, or a risk‐sharing arrangement may be socially preferred.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:28:y:2019:i:8:p:1035-1051

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