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Reimbursement and value‐based pricing: stratified cost‐effectiveness analysis may not be the last word

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  • Neil Hawkins
  • David A. Scott

Abstract

During recent discussions, it has been argued that stratified cost‐effectiveness analysis has a key role in reimbursement decision‐making and value‐based pricing (VBP). It has previously been shown that when manufacturers are price‐takers, reimbursement decisions made in reference to stratified cost‐effectiveness analysis lead to a more efficient allocation of resources than decisions based on whole‐population cost‐effectiveness analysis. However, we demonstrate that when manufacturers are price setters, reimbursement or VBP based on stratified cost‐effectiveness analysis may not be optimal. Using two examples – one considering the choice of thrombolytic treatment for specific patient subgroups and the other considering the extension of coverage for a cancer treatment to include an additional indication – we show that combinations of extended coverage and reduced price can be identified that are advantageous to both payers and manufacturers. The benefits of a given extension in coverage and reduction in price depend both upon the average treatment benefit in the additional population and its size relative to the original population. Negotiation regarding trade‐offs between price and coverage may lead to improved outcomes both for health‐care systems and manufacturers compared with processes where coverage is determined conditional simply on stratified cost‐effectiveness at a given price. Copyright © 2010 John Wiley & Sons, Ltd.

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  • Neil Hawkins & David A. Scott, 2011. "Reimbursement and value‐based pricing: stratified cost‐effectiveness analysis may not be the last word," Health Economics, John Wiley & Sons, Ltd., vol. 20(6), pages 688-698, June.
    • Handle: RePEc:wly:hlthec:v:20:y:2011:i:6:p:688-698
    DOI: 10.1002/hec.1625
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    References listed on IDEAS

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    Cited by:

    1. Wettstein, Dominik J. & Boes, Stefan, 2022. "How value-based policy interventions influence price negotiations for new medicines: An experimental approach and initial evidence," Health Policy, Elsevier, vol. 126(2), pages 112-121.
    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. Daniel Gallacher & Nigel Stallard & Peter Kimani & Elvan Gökalp & Juergen Branke, 2022. "Development of a model to demonstrate the impact of National Institute of Health and Care Excellence cost‐effectiveness assessment on health utility for targeted medicines," Health Economics, John Wiley & Sons, Ltd., vol. 31(2), pages 417-430, February.
    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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