Reflecting cross-country effects, public sector R&D and industrial policy objectives when setting pharmaceutical prices to reflect innovation effects
Theme 1: Empirical and conceptual work relating to medicines pricing
During EEPRU II we undertook research to develop a framework to assess the long-term implications of payment levels for new pharmaceuticals, taking into account the effects of pricing on innovation and, therefore, future health, and also the health opportunity costs associated with different pricing levels. This framework and the empirical evidence allowed for the estimation of an optimal share of the long-term value of new pharmaceuticals that should be assigned to manufacturers in order to further different health sectors or broader objectives. This work is described in detail here and summarised here, and a manuscript is being considered for publication.
An important consideration highlighted by this work is how pharmaceutical pricing policy design should appropriately account for the global innovation effects of national pricing policies. One approach is that countries unilaterally pay only for the dynamic benefits they receive. However, this would lead to low investment in innovation as the external benefits accruing to other countries are completely discounted. Another approach, as taken in our existing work, is to assume a global multilateral policy or that individual countries internalise all external effects on other jurisdictions. However, this represents a departure from the perspective applied for other policy evaluations across government, and the way in which it distributes the costs and benefits of innovation across jurisdictions is unclear. The existing work focused on private sector R&D as the primary driver of pharmaceutical innovation, and did not provide a detailed consideration of how industrial policy objectives might be appropriately reflected within pharmaceutical pricing policy.
We propose to develop the existing quantitative framework to assess different approaches for addressing the externality (benefits to other jurisdictions) associated with national-level pharmaceutical pricing policy, to incorporate the role of public sector contributions to R&D and therefore innovation when determining appropriate pharmaceutical pricing policy, and to assess how industrial policy objectives can be appropriately reflected when developing pharmaceutical pricing policy.
Aims
To assess how pharmaceutical pricing policy design can appropriately account for the global effects of national pricing policies under different policy objectives
To assess how pharmaceutical pricing policy design can appropriately account for public sector contributions to R&D under different policy objectives
To assess how pharmaceutical pricing policy design can appropriately account for industrial policy impacts under different policy objectives
Project Team
Beth Woods, Carlos Rojas Roque, Karl Claxton, Mark Sculpher
Contact
Beth Woods beth.woods@york.ac.uk