Health Care Management Papers

Document Type

Journal Article

Date of this Version

12-2013

Publication Source

The Economists' Voice

Volume

10

Issue

1

Start Page

39

Last Page

43

DOI

10.1515/ev-2013-0027

Abstract

The high price of some cancer drugs has recently come under attack by the medical profession. We examine the reasons behind the pricing strategies of cancer drugs. On the one hand, prices should reflect value and research demonstrates that the health benefits from novel cancer drugs have been enormous in terms of additional years of life patients can now enjoy. This provides some justification for the high price tag of these drugs. On the other hand, drug pricing is also a product of a hidebound reimbursement system that does a poor job in letting prices adjust to new information about value. Regulators set thresholds for cost-effectiveness, which establishes not only a price ceiling but also a price floor. Manufacturers often price drugs high at launch in efforts to recoup their initial investment, but a more efficient system would allow prices to both rise and fall over time. Removing distortions in the reimbursement system is crucial to ensuring continued success in saving lives.

Keywords

health, prescription drugs, pricing, value

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Date Posted: 27 November 2017