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Estimating the shares of the value of branded pharmaceuticals accruing to manufacturers and to patients served by health systems

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  • Beth Woods
  • Aimée Fox
  • Mark Sculpher
  • Karl Claxton

Abstract

Previous studies have estimated that patients served by health systems accrue 59‐98% of the value generated by new pharmaceuticals. This has led to questions about whether sufficient returns accrue to manufacturers to incentivize socially optimal levels of R&D. These studies have not, however, fully reflected the health opportunity costs imposed by payments for branded pharmaceuticals. We present a framework for estimating how the value generated by new branded pharmaceuticals is shared. We quantify value in net health effects and account for benefits and health opportunity costs in the patent period and post‐patent period when generic/biosimilar products become available. We apply the framework to 12 National Institute for Health and Care Excellence appraisals and show that realized net health effects range from losses of 160%, to gains of 94%, of the potential net health benefits available. In many cases, even in the long run, the benefits of new medicines are not sufficient to offset the opportunity costs of payments to manufacturers, and approval is expected to reduce population health. This cannot be dynamically efficient as it incentivizes future innovation at prices which will also reduce population health. Further work should consider how to reflect these findings in reimbursement policies.

Suggested Citation

  • Beth Woods & Aimée Fox & Mark Sculpher & Karl Claxton, 2021. "Estimating the shares of the value of branded pharmaceuticals accruing to manufacturers and to patients served by health systems," Health Economics, John Wiley & Sons, Ltd., vol. 30(11), pages 2649-2666, November.
  • Handle: RePEc:wly:hlthec:v:30:y:2021:i:11:p:2649-2666
    DOI: 10.1002/hec.4393
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    References listed on IDEAS

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    1. Rodrigo Camejo & Clare McGrath & Marisa Miraldo & Frans Rutten, 2014. "Distribution of health-related social surplus in pharmaceuticals: an estimation of consumer and producer surplus in the management of high blood lipids and COPD," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(4), pages 439-445, May.
    2. Drummond, Michael F. & Sculpher, Mark J. & Claxton, Karl & Stoddart, Greg L. & Torrance, George W., 2015. "Methods for the Economic Evaluation of Health Care Programmes," OUP Catalogue, Oxford University Press, edition 4, number 9780199665884.
    3. Rodrigo Refoios Camejo & Clare McGrath & Marisa Miraldo & Frans Rutten, 2014. "Erratum to: Distribution of health-related social surplus in pharmaceuticals: an estimation of consumer and producer surplus in the management of high blood lipids and COPD," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(4), pages 447-447, May.
    4. Peter Lindgren & Bengt Jönsson, 2012. "Cost–effectiveness of statins revisited: lessons learned about the value of innovation," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 13(4), pages 445-450, August.
    5. Becky Pennington & Monica Hernandez-Alava & Stephen Pudney & Allan Wailoo, 2019. "The Impact of Moving from EQ-5D-3L to -5L in NICE Technology Appraisals," PharmacoEconomics, Springer, vol. 37(1), pages 75-84, January.
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    1. Beth Woods & James Lomas & Mark Sculpher & Helen Weatherly & Karl Claxton, 2024. "Achieving dynamic efficiency in pharmaceutical innovation: Identifying the optimal share of value and payments required," Health Economics, John Wiley & Sons, Ltd., vol. 33(4), pages 804-819, April.

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