IDEAS home Printed from https://ideas.repec.org/a/spr/aphecp/v18y2020i3d10.1007_s40258-019-00541-z.html
   My bibliography  Save this article

Value-Based Pricing Alternatives for Personalised Drugs: Implications of Asymmetric Information and Competition

Author

Listed:
  • Rosella Levaggi

    (University of Brescia)

  • Paolo Pertile

    (University of Verona)

Abstract

The market for new drugs is changing: personalised drugs will increase the heterogeneity in patients’ responses and, possibly, costs. In this context, price regulation will play an increasingly important role. In this article, we argue that personalised medicine opens new scenarios in the relationship between value-based prices, regulation and industry listing strategies. Our focus is on the role of asymmetry of information and competition. We show that, if the firm has more information than the payer on the heterogeneity in patients’ responses and it adopts a profit-maximising listing strategy, the outcome may be independent of the choice of the type of value-based price. In this case, the information advantage that the manufacturer has prevents the payer from using marginal value-based prices to extract part of the surplus. However, in a dynamic setting where competition by a new entrant is possible, the choice of the type of value-based price may matter. We suggest that more research should be devoted to the dynamic analysis of price regulation for personalised medicines.

Suggested Citation

  • Rosella Levaggi & Paolo Pertile, 2020. "Value-Based Pricing Alternatives for Personalised Drugs: Implications of Asymmetric Information and Competition," Applied Health Economics and Health Policy, Springer, vol. 18(3), pages 357-362, June.
    • Handle: RePEc:spr:aphecp:v:18:y:2020:i:3:d:10.1007_s40258-019-00541-z
    DOI: 10.1007/s40258-019-00541-z
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40258-019-00541-z
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s40258-019-00541-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Karl Claxton & Mark Sculpher & Stuart Carroll, 2011. "Value-based pricing for pharmaceuticals: Its role, specification and prospects in a newly devolved NHS," Working Papers 060cherp, Centre for Health Economics, University of York.
    2. Giuseppe Carone & Christoph Schwierz & Ana Xavier, 2012. "Cost-containment policies in public pharmaceutical spending in the EU," European Economy - Economic Papers 2008 - 2015 461, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Margherita Neri;Adrian Towse;Martina Garau, 2018. "Multi-Indication Pricing (MIP): Practical Solutions and Steps to Move Forward," Briefing 002084, Office of Health Economics.
    4. Rosella Levaggi & Paolo Pertile, 2016. "Pricing policies when patients are heterogeneous: a welfare analysis," Working Papers 17/2016, University of Verona, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Chris Sampson’s journal round-up for 1st June 2020
      by Chris Sampson in The Academic Health Economists' Blog on 2020-06-01 11:00:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. So-Young Ha & Dong-Won Kang & Hye-In Jung & Eui-Kyung Lee & Mi-Hai Park, 2022. "Value-Based Pricing and Budget Impact Analysis for Multi-Indication Drugs: A Case Study of Immunotherapies," IJERPH, MDPI, vol. 19(7), pages 1-10, March.
    2. 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.
    3. Joan Costa‐Font & Rosella Levaggi, 2020. "Innovation, aging, and health care: Unraveling “silver” from “red” herrings?," Health Economics, John Wiley & Sons, Ltd., vol. 29(S1), pages 3-7, October.
    4. Levaggi, Laura & Levaggi, Rosella, 2024. "Competition, value-based prices and incentives to research personalised drugs," Socio-Economic Planning Sciences, Elsevier, vol. 93(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Levaggi, Rosella, 2014. "Pricing schemes for new drugs: A welfare analysis," Social Science & Medicine, Elsevier, vol. 102(C), pages 69-73.
    2. Gregory J. Critchley & Gregory S. Zaric, 2019. "The impact of pharmaceutical marketing on market access, treatment coverage, pricing, and social welfare," Health Economics, John Wiley & Sons, Ltd., vol. 28(8), pages 1035-1051, August.
    3. Birg, Laura, 2019. "Parallel imports and manufacturer rebates: Evidence from Germany," University of Göttingen Working Papers in Economics 363, University of Goettingen, Department of Economics.
    4. Bhardwaj, Ramesh, 2015. "Restraining High and Rising Cancer Drug Prices: Need for Accelerating R&D Productivity and Aligning Prices with Value," MPRA Paper 63405, University Library of Munich, Germany.
    5. Kristensen, Søren Rud & Siciliani, Luigi & Sutton, Matt, 2016. "Optimal price-setting in pay for performance schemes in health care," Journal of Economic Behavior & Organization, Elsevier, vol. 123(C), pages 57-77.
    6. Salas-Vega, Sebastian & Shearer, Emily & Mossialos, Elias, 2020. "Relationship between costs and clinical benefits of new cancer medicines in Australia, France, the UK, and the US," Social Science & Medicine, Elsevier, vol. 258(C).
    7. Folkert Groot & Stefano Capri & Jean-Claude Castanier & David Cunningham & Bruno Flamion & Mathias Flume & Harald Herholz & Lars-Åke Levin & Oriol Solà-Morales & Christoph J. Rupprecht & Natalie Shale, 2017. "Ethical Hurdles in the Prioritization of Oncology Care," Applied Health Economics and Health Policy, Springer, vol. 15(2), pages 119-126, April.
    8. Sabine Vogler & Valérie Paris & Alessandra Ferrario & Veronika J. Wirtz & Kees Joncheere & Peter Schneider & Hanne Bak Pedersen & Guillaume Dedet & Zaheer-Ud-Din Babar, 2017. "How Can Pricing and Reimbursement Policies Improve Affordable Access to Medicines? Lessons Learned from European Countries," Applied Health Economics and Health Policy, Springer, vol. 15(3), pages 307-321, June.
    9. Han, Euna & Chae, Su-Mi & Kim, Nam-Soon & Park, Sylvia, 2015. "Effects of pharmaceutical cost containment policies on doctors’ prescribing behavior: Focus on antibiotics," Health Policy, Elsevier, vol. 119(9), pages 1245-1254.
    10. Mujaheed Shaikh & Afschin Gandjour, 2019. "Pharmaceutical expenditure and gross domestic product: Evidence of simultaneous effects using a two‐step instrumental variables strategy," Health Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 101-122, January.
    11. Kaiser, Ulrich & Mendez, Susan J. & Rønde, Thomas & Ullrich, Hannes, 2014. "Regulation of pharmaceutical prices: Evidence from a reference price reform in Denmark," Journal of Health Economics, Elsevier, vol. 36(C), pages 174-187.
    12. Birg, Laura, 2018. "Parallel Imports and Manufacturer Rebates," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181646, Verein für Socialpolitik / German Economic Association.
    13. Dubas-Jakóbczyk, K. & Albreht, T. & Behmane, D. & Bryndova, L. & Dimova, A. & Džakula, A. & Habicht, T. & Murauskiene, L. & Scîntee, S.G. & Smatana, M. & Velkey, Z. & Quentin, W., 2020. "Hospital reforms in 11 Central and Eastern European countries between 2008 and 2019: a comparative analysis," Health Policy, Elsevier, vol. 124(4), pages 368-379.
    14. Brekke, Kurt R. & Holmås, Tor Helge & Straume, Odd Rune, 2015. "Price regulation and parallel imports of pharmaceuticals," Journal of Public Economics, Elsevier, vol. 129(C), pages 92-105.
    15. Michaeli, Daniel Tobias & Mills, Mackenzie & Kanavos, Panos, 2022. "Value and price of multi-indication cancer drugs in the USA, Germany, France, England, Canada, Australia, and Scotland," LSE Research Online Documents on Economics 115720, London School of Economics and Political Science, LSE Library.
    16. Sabine Vogler, 2019. "Fair prices for medicines? Exploring competent authorities’ and public payers’ preferences on pharmaceutical policies," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(3), pages 443-469, August.
    17. Birg, Laura, 2019. "Reference pricing and parallel imports: Evidence from Germany," University of Göttingen Working Papers in Economics 362, University of Goettingen, Department of Economics.
    18. Wasem, Jürgen & Weegen, Lennart & Bauer, Cosima & Walendzik, Anke & Grande, Frederic & May, Uwe, 2015. "Regulatorische Handhabung der selektiven Erstattung von Arzneimitteln in den ausgewählten Ländern England, Niederlande, Frankreich und Schweden," IBES Diskussionsbeiträge 211, University of Duisburg-Essen, Institute of Business and Economic Studie (IBES).
    19. Vogler, Sabine & Zimmermann, Nina & de Joncheere, Kees, 2016. "Policy interventions related to medicines: Survey of measures taken in European countries during 2010–2015," Health Policy, Elsevier, vol. 120(12), pages 1363-1377.
    20. Martin Kenneally & Brenda Lynch, 2018. "Ageing, health status and coverage rate effects on community prescription costs in Ireland," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(5), pages 687-695, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:aphecp:v:18:y:2020:i:3:d:10.1007_s40258-019-00541-z. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.