Value-Based Pricing For Pharmaceuticals In The Trump Administration image

Health Affairs Blog, April 27, 2017
Rachel E. Sachs (Academic Fellow Alumna), Nicholas Bagley, and Darius Lakdawalla

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From the article:

Everyone seems to agree: Drug prices are too damn high. Scandalous prices for new drugs and enormous price hikes on old drugs have focused public ire on the pharmaceutical industry. A bipartisan consensus has emerged that something must be done to tackle drug prices.

There’s less consensus, however, about what that something ought to be. Allowing Medicare to negotiate drug prices is one popular possibility; outright price controls are also under discussion. But with Republicans in control of both Congress and the White House, neither appears to be on the policy agenda. But one market-friendly alternative, “value-based pricing,” may hold more promise. Many different groups—from drug companies to patient advocates to policy shops—would like to pivot away from a pricing model that links sales revenue to volume. Instead, they would like to explore paying for prescription drugs based on how well they work.

What Is Value-Based Pricing?

Value-based pricing is an umbrella term, encompassing a number of different possible payment arrangements. At its administratively simplest, a company could link the single price it charges for a given drug to an assessment of how well it works. More sophisticated versions of value-based pricing in the marketplace would allow insurers and patients to receive rebates from drug manufacturers if a drug failed to work, an arrangement known as “outcome-based pricing.” Another variant would involve “indication-based pricing,” in which drug companies charge different prices for the same drug when it is used to treat different conditions. [...]

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bioethics biotechnology fda health care finance health care reform health law policy pharmaceuticals public health rachel sachs regulation