Unlocking Established Products Patient and Societal Value in Additional Indications

Abstract

flows and the required cost of capital, can be used to validate the price of the new drug from a narrow investor's perspective. The free cash flow represent the sales from the pharmaceuticals, and cash necessary for capital expenditures represent the costs for research & development (R&D) and marketing. The cost of capital refers to the opportunity cost of making a specific investment, which is the rate of return required to persuade the investor to make a given investment. Conclusion: We propose a policy approach for the evaluation of innovative drugs by bridging concepts from health economics and business economic valuation. This approach may justify a drug price from an investor's perspective when the ICER exceeds the threshold and may be used in negotiations between governments and companies.