The dynamics of pharmaceutical regulation and R&D investments

Rosella Levaggi, Michele Moretto and Paolo Pertile

No 13/2013, Working Papers from University of Verona, Department of Economics

Abstract: The paper uses a real option approach to investigate the potential impact of performance-based risk-sharing agreements for the reimbursement of new drugs in comparison with standard cost-effectiveness thresholds. The results show that the exact definition of the risk-sharing agreement is key in determining its economic effects. In particular, despite the concerns expressed by some authors, the incentive for a firm to invest in R&D may be the same or even greater than under cost-effectiveness thresholds, if the agreement is sufficiently mild in defining the conditions under which the product is not (fully) reimbursed to the firm. In this case, patients would benefit from earlier access to innovations. The price for this is less value for money for the insurer at the time of adoption of the innovation.

Keywords: pharmaceutical regulation; real options; R&D; risk-sharing (search for similar items in EconPapers)
JEL-codes: C61 I18 L51 (search for similar items in EconPapers)
Pages: 36
Date: 2013-08
New Economics Papers: this item is included in nep-com, nep-cse, nep-ind, nep-ino and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The Dynamics of Pharmaceutical Regulation and R&D Investments (2017)
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