Value based pricing for NHS drugs: an opportunity not to be missed?

Claxton, Karl; Briggs, Andrew; Buxton, Martin; Culyer, Anthony J.; McCabe, Christopher; Walker, Simon; Sculpher, Mark

doi:10.1136/bmj.39434.500185.25

Cited by 198 publications

(158 citation statements)

References 6 publications

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“…Specifically, this policy involves assessing the marginal clinical benefit of additional drugs through the impact on qualityadjusted life-years (QALYs). 5 Such a policy also has the advantage of reducing the arbitrariness of profit controls.…”

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confidence: 99%

Two Ideas To Increase Innovation And Reduce Pharmaceutical Costs And Prices

Jayadev

Stiglitz

2008

Health Affairs

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ABSTRACT:The pharmaceutical industry is undergoing a period of uncertainty. Profits are being squeezed by increasing costs and competitive pressures, and new drug production is slowing down. This Perspective reviews two policies that could assist in realigning incentives toward genuine innovation while also keeping drug spending growth under check. Value-based pricing can incentivize genuinely new discoveries and align research and development with social welfare. Public funding of clinical trials likewise can reduce both pharmaceutical costs and prices and direct research effort in a manner that is more socially productive than the current state of affairs. [Health Affairs 28, no. 1 (2009): w165-w168

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confidence: 99%

Two Ideas To Increase Innovation And Reduce Pharmaceutical Costs And Prices

Jayadev

Stiglitz

2008

Health Affairs

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“…To address this latter aspect, the results of the initial economic evaluation must first be translated into an estimate of the technology's maximum sales price by applying the principle of value-base pricing [26]. This estimate can then be fed into an appropriate product investment evaluation method, such as the one proposed by Girling et al [27], to determine whether the expected post-market cash flows are sufficiently large to warrant further investments to transform the current concept into a fully developed end product.…”

Section: Discussionmentioning

confidence: 99%

A method for the early health technology assessment of novel biomarker measurement in primary prevention programs

Postmus

Graaf

Hillege

et al. 2012

Statistics in Medicine

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Many promising biomarkers for stratifying individuals at risk of developing a chronic disease or subsequent complications have been identified. Research into the potential cost‐effectiveness of applying these biomarkers in actual clinical settings has however been lacking. Investors and analysts may improve their venture decision making should they have indicative estimates of the potential costs and effects associated with a new biomarker technology already at the early stages of its development. To assist in obtaining such estimates, this paper presents a general method for the early health technology assessment of a novel biomarker technology. The setting considered is that of primary prevention programs where initial screening to select high‐risk individuals eligible for a subsequent intervention occurs, for example, prevention of type 2 diabetes. The method is based on quantifying the health outcomes and downstream healthcare consumption of all individuals who get reclassified as a result of moving from a screening variant based on traditional risk factors to a screening variant based on traditional risk factors plus a novel biomarker. As these individuals form well‐defined subpopulations, a combination of disease progression modeling and sensitivity analysis can be used to perform an initial assessment of the maximum increase in screening cost for which the use of the new biomarker technology is still likely to be cost effective. Copyright © 2012 John Wiley & Sons, Ltd.

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“…Nevertheless, the opportunity cost and health shadow price identified in Pekarsky [5] assumes, like other authors proposing alternative threshold values based on displaced services [7][8][9][10][11][12] critiqued in Eckermann and Pekarsky [6], that new technology overall costs more and needs to show it is more effective than the technology it replaces. That is, show that, except under the highly restrictive and unrealistic conditions of perfect allocative and displacement efficiency, the appropriate threshold value in the SW quadrant is greater than the health shadow price, reflecting differences in opportunity costs.…”

Section: Kinky Thresholds Revisited: Opportunity Costs Differ In the mentioning

confidence: 99%

Kinky Thresholds Revisited: Opportunity Costs Differ in the NE and SW Quadrants

Eckermann

2014

Appl Health Econ Health Policy

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Historically, a kinked threshold line on the cost-effectiveness plane at the origin was suggested due to differences in willingness to pay (WTP) for health gain with trade-offs in the north-east (NE) quadrant versus willingness to accept (WTA) cost reductions for health loss with trade-offs in the south-west (SW) quadrant. Empirically, WTA is greater than WTP for equivalent units of health, a finding supported by loss aversion under prospect theory. More recently, appropriate threshold values for health effects have been shown to require an endogenous consideration of the opportunity cost of alternative actions in budget-constrained health systems, but also allocative and displacement inefficiency observed in health system practice. Allocative and displacement inefficiency arise in health systems where the least cost-effective program in contraction has a higher incremental cost-effectiveness ratio (ICER = m) than the most cost-effective program in expansion (ICER = n) and displaced services (ICER = d), respectively. The health shadow price derived by Pekarsky, (1n+1d−1m)−1, reflects the opportunity cost of best alternative adoption and financing actions in reimbursing new technology with expected incremental costs and net effect allowing for allocative (n < m), and displacement, inefficiency (d < m). This provides an appropriate threshold value for the NE quadrant. In this paper, I show that for trade-offs in the SW quadrant, where new strategies have lower expected net cost while lower expected net effect than current practice, the opportunity cost is contraction of the least costeffective program, with threshold ICER m. That is, in the SW quadrant, the cost reduction per unit of decreased effect should be compared with the appropriate opportunity cost, best alternative generation of funding. Consequently, appropriate consideration of opportunity cost produces a kink in the threshold at the origin, with the health shadow price in the NE quadrant and ICER of the least cost-effective program in contraction (m) in the SW quadrant having the same general shape as that previously suggested by WTP versus WTA. The extent of this kink depends on the degree of allocative and displacement inefficiency, with no kink in the threshold line strictly only appropriate with complete allocative and displacement efficiency, that is n = d = m. Publication DetailsS. Eckermann, "Kinky thresholds revisited: opportunity costs differ in the NE and SW quadrants", Applied Health Economics and Health Policy 13 1 (2015) Abstract: Historically, a kinked threshold line on the cost-effectiveness plane at the origin was suggested due to differences in willingness to pay (WTP) for health gain with tradeoffs in the north-east (NE) quadrant versus willingness to accept (WTA) cost reductions for health loss with trade-offs in the south-west (SW) quadrant. Empirically, WTA is greater than WTP for equivalent units of health, a finding supported by loss aversion under prospect theory. More recently, appropriate threshold values for health e...

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Value based pricing for NHS drugs: an opportunity not to be missed?

Cited by 198 publications

References 6 publications

Two Ideas To Increase Innovation And Reduce Pharmaceutical Costs And Prices

Two Ideas To Increase Innovation And Reduce Pharmaceutical Costs And Prices

A method for the early health technology assessment of novel biomarker measurement in primary prevention programs

Kinky Thresholds Revisited: Opportunity Costs Differ in the NE and SW Quadrants

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