IDEAS home Printed from https://ideas.repec.org/a/wly/hlthec/v34y2025i4p780-790.html
   My bibliography  Save this article

Value‐Based Pricing for Drugs With Uncertain Clinical Benefits

Author

Listed:
  • Boshen Jiao
  • Yuli Lily Hsieh
  • Meng Li
  • Stéphane Verguet

Abstract

Policymakers can use cost‐effectiveness analysis to set value‐based prices (VBP) for new pharmaceuticals. However, the uncertainty of investigational drug benefits complicates this pricing strategy. Such complexity stems from decision‐makers' risk aversion and the potential change in the estimated value with emerging evidence. The recent surge in drugs approved via the Accelerated Approval (AA) pathway in the U.S. has made incorporating uncertainty into VBP crucial. We propose to estimate risk‐adjusted VBP (rVBP) for drugs with uncertain benefits via integrating value of information and expected utility theory. Our approach involves two assessment points: an initial assessment with existing evidence; and a reassessment with new evidence that reduces uncertainty. This approach enables decision‐makers to set rVBP in the initial assessment such that the expected utility, from the exisiting evidence, aligns with the benchmark uncertainty. We evaluate two benchmarks: one with no uncertainty, and one with a decision‐maker's acceptable uncertainty level. We show in a case study of a hypothetical AA drug that rVBP may be lower than traditional VBP, especially under high risk aversion or low acceptable uncertainty. Our methodology adjusts VBP to account for uncertainty, supporting decision‐makers in balancing timely market access with the risks associated with uncertainty in the benefits of new pharmaceuticals.

Suggested Citation

  • Boshen Jiao & Yuli Lily Hsieh & Meng Li & Stéphane Verguet, 2025. "Value‐Based Pricing for Drugs With Uncertain Clinical Benefits," Health Economics, John Wiley & Sons, Ltd., vol. 34(4), pages 780-790, April.
  • Handle: RePEc:wly:hlthec:v:34:y:2025:i:4:p:780-790
    DOI: 10.1002/hec.4932
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/hec.4932
    Download Restriction: no

    File URL: https://libkey.io/10.1002/hec.4932?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
    ---><---

    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:wly:hlthec:v:34:y:2025:i:4:p:780-790. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/5749 .

    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.