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Ex post Value Reimbursement for Pharmaceuticals

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  • Hugh S.E. Gravelle

Abstract

The paper examines the welfare properties of an ex post value regulation scheme in which a pharmaceutical firm's revenue varies with the social value of its product. The mechanism, which is a variant of that proposed by Loeb and Magat, leads to efficient investment in research and development (R&D), production, consumption, and pro motion under certain market and technologic conditions. The mechanism's attractive simplicity is lost when account is taken of the rivalrous nature of R&D, the fact that drugs can be complements or substitutes, the excess cost of taxes needed to finance the mechanism, and the multinational character of most pharmaceutical firms. Key words: pharmaceuticals; reimbursement; pharmacoeconomics; price regulation; public policy. (Med Decis Making 1998;18 suppl:S27-S38)

Suggested Citation

  • Hugh S.E. Gravelle, 1998. "Ex post Value Reimbursement for Pharmaceuticals," Medical Decision Making, , vol. 18(2_suppl), pages 27-38, April.
    • Handle: RePEc:sae:medema:v:18:y:1998:i:2_suppl:p:s27-s38
    DOI: 10.1177/0272989X98018002S06
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    References listed on IDEAS

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    1. Adrian Towse, 1997. "Guidelines for the Economic Evaluation of Pharmaceuticals: Can the UK learn from Australia and Canada?," Monograph 000423, Office of Health Economics.
    2. Drummond, Michael & Jonsson, Bengt & Rutten, Frans, 1997. "The role of economic evaluation in the pricing and reimbursement of medicines," Health Policy, Elsevier, vol. 40(3), pages 199-215, June.
    3. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, April.
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    Cited by:

    1. Ben van Hout & Jolian McHardy & Aki Tsuchiya, 2015. "Patent Purchase as a Policy for Pharmaceuticals," Working Papers 2015007, The University of Sheffield, Department of Economics.
    2. Rosella Levaggi & Paolo Pertile, 2020. "Which valued‐based price when patients are heterogeneous?," Health Economics, John Wiley & Sons, Ltd., vol. 29(8), pages 923-935, August.
    3. Levaggi, Laura & Levaggi, Rosella, 2024. "Competition, value-based prices and incentives to research personalised drugs," Socio-Economic Planning Sciences, Elsevier, vol. 93(C).
    4. Rosella Levaggi & Paolo Pertile, 2021. "A reply to “Who would benefit from average value‐based pricing?”," Health Economics, John Wiley & Sons, Ltd., vol. 30(9), pages 2284-2286, September.
    5. Rosella Levaggi & Paolo Pertile, 2016. "Pricing policies when patients are heterogeneous: a welfare analysis," Working Papers 17/2016, University of Verona, Department of Economics.

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