Value-Based Differential Pricing: Efficient Prices for Drugs in a Global Context

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dc.contributor.authorDanzon, Patricia. M
dc.contributor.authorTowse, Adrian
dc.contributor.authorMestre-Ferrandiz, Jorge
dc.date2023-05-17T14:38:52.000
dc.date.accessioned2023-05-22T12:07:04Z
dc.date.available2023-05-22T12:07:04Z
dc.date.issued2015-03-01
dc.date.submitted2016-06-14T10:43:49-07:00
dc.description.abstractThis paper analyzes pharmaceutical pricing between and within countries to achieve second-best static and dynamic efficiency. We distinguish countries with and without universal insurance, because insurance undermines patients' price sensitivity, potentially leading to prices above second-best efficient levels. In countries with universal insurance, if each payer unilaterally sets an incremental cost-effectiveness ratio (ICER) threshold based on its citizens' willingness-to-pay for health; manufacturers price to that ICER threshold; and payers limit reimbursement to patients for whom a drug is cost-effective at that price and ICER, then the resulting price levels and use within each country and price differentials across countries are roughly consistent with second-best static and dynamic efficiency. These value-based prices are expected to differ cross-nationally with per capita income and be broadly consistent with Ramsey optimal prices. Countries without comprehensive insurance avoid its distorting effects on prices but also lack financial protection and affordability for the poor. Improving pricing efficiency in these self-pay countries includes improving regulation and consumer information about product quality and enabling firms to price discriminate within and between countries.
dc.identifier.urihttps://repository.upenn.edu/handle/20.500.14332/2707
dc.legacy.articleid1066
dc.legacy.fields10.1002/hec.3021
dc.legacy.fulltexturlhttps://repository.upenn.edu/cgi/viewcontent.cgi?article=1066&context=hcmg_papers&unstamped=1
dc.source.beginpage294
dc.source.endpage301
dc.source.issue85
dc.source.issue3
dc.source.journalHealth Care Management Papers
dc.source.journaltitleHealth Economics
dc.source.peerreviewedtrue
dc.source.statuspublished
dc.source.volume24
dc.subject.otherdifferential pricing
dc.subject.otherICER thresholds
dc.subject.othervalue-based pricing
dc.subject.otherHealth Economics
dc.subject.otherInsurance
dc.subject.otherOther Public Health
dc.titleValue-Based Differential Pricing: Efficient Prices for Drugs in a Global Context
dc.typeArticle
digcom.identifierhcmg_papers/85
digcom.identifier.contextkey8725366
digcom.identifier.submissionpathhcmg_papers/85
digcom.typearticle
dspace.entity.typePublication
upenn.schoolDepartmentCenterHealth Care Management Papers
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