Advanced Search

Should Financial Incentives be Used to Differentially Reward 'Me-Too' and Innovative Drugs?

Contents:

Author Info

  • Brita Pekarsky
Registered author(s):

    Abstract

    Strategies to change the existing mix of innovative and 'me-too' drugs are intended to increase societal value of a given investment in R&D by providing an incentive for firms to invest in drugs that are more likely to be clinically innovative. How can financial incentives be used to change this mix? Will a strategy have its intended consequence or will it have the unintended outcome of reducing the rate at which the population burden of disease is reduced? The perspective of this review is a country such as Australia, Canada or the UK that has universal health insurance and a drug reimbursement process that is informed by economic evidence. A review of the literature was performed and the views of both the proponents and the opponents of such strategies and the mechanisms by which they could be implemented were summarized. The debate is based largely on hypothesized responses by firms to changes in incentives rather than empirical evidence. The main point of contention is whether a changed mix of new molecular entities (NMEs) increases or decreases the total amount of clinical innovation launched each year. The argument presented in this article is that, despite the limited empirical evidence, it is possible to improve our assessment of the likely costs and consequences of a proposed strategy by appealing to economic theory and observations about the reimbursement process. First, the empirical evidence supporting the view that changing a mix of drugs will improve clinical innovation is based on the average launched drug, not the marginal innovative drug otherwise not developed, and therefore could be misleading. Second, the dynamic and complex nature of evidence of clinical innovation will reduce the feasibility of using contractually based mechanisms to implement such a strategy. Also, a single country is unlikely to have an impact on R&D decisions, and variation in the per capita economic value of new drugs would make multi-jurisdiction contracts with one firm difficult to implement. Third, the quality of evidence of the clinical innovation of the lead drug could be reduced if there are fewer or no follow-on drugs. Finally, the existing inefficiencies in the process of displacement to finance new technologies from a capped budget reduces the efficiency with which any additional potential clinical innovation from NMEs will be translated to reduced population burden of disease. The article concludes that it is possible that such a strategy could be costly to implement, and the impact on global burden of disease uncertain in both direction and magnitude. This is likely to be the case even if the average clinical innovation content of innovative NMEs is higher than for me-too NMEs and the mechanisms designed to change the mix of NMEs are effective. Other options to improve the effectiveness with which pharmaceutical clinical innovation reduces burden of disease should be explored, including improved efficiency of both firm R&D and the process of disinvestment to finance new technologies.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://PharmacoEconomics.adisonline.com/pt/re/phe/pdfhandler.00019053-201028010-00001.pdf
    Download Restriction: Pay per view
    File URL: http://PharmacoEconomics.adisonline.com/pt/re/phe/fulltext.00019053-201028010-00001.htm
    Download Restriction: Pay per view

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Springer Healthcare | Adis in its journal PharmacoEconomics.

    Volume (Year): 28 (2010)
    Issue (Month): 1 ()
    Pages: 1-17
    Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
    Handle: RePEc:wkh:phecon:v:28:y:2010:i:1:p:1-17

    Contact details of provider:
    Web page: http://pharmacoeconomics.adisonline.com/

    For corrections or technical questions regarding this item, or to correct its listing, contact: (Dave Dustin).

    Related research

    Keywords:

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:wkh:phecon:v:28:y:2010:i:1:p:1-17

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dave Dustin).

    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.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.