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Oft, Vbp: Qed?

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  • Karl Claxton

Abstract

The report by the Office of Fair Trading (OFT) on the UK pharmaceutical price regulation scheme (PPRS) recommends the reform of the current scheme, which is a combination of profit and price controls, to one where price is based on the health benefits offered by a pharmaceutical. On closer examination some of the more commonly expressed concerns about these proposals do not seem to be well founded. In principle, the OFT's recommendations may contribute to allocative and dynamic efficiency in the NHS. However, there are some dangers and the details of how it will be implemented are crucial. For example, value‐based pricing with an inappropriate threshold for cost‐effectiveness, or an inappropriate pricing structure, could lead to technologies being adopted at prices where their benefits, in terms of health outcome, do not offset the health displaced elsewhere in the NHS, a situation in which the NHS is damaged rather than improved by innovation. A failure to account for uncertainty and the value of evidence in negotiating prices and coverage could also undermine the evidence base for future NHS practice. Whatever view is taken, the OFT report will inevitably shape the scope of future policy debates about value, guidance, price and innovation. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Karl Claxton, 2007. "Oft, Vbp: Qed?," Health Economics, John Wiley & Sons, Ltd., vol. 16(6), pages 545-558, June.
    • Handle: RePEc:wly:hlthec:v:16:y:2007:i:6:p:545-558
    DOI: 10.1002/hec.1249
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    References listed on IDEAS

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    1. Aaron A. Stinnett & John Mullahy, 1998. "Net Health Benefits," Medical Decision Making, , vol. 18(2_suppl), pages 68-80, April.
    2. Office of Health Economics, 2007. "The Economics of Health Care," For School 001490, Office of Health Economics.
    3. Aaron A. Stinnett & John Mullahy, 1998. "Net Health Benefits: A New Framework for the Analysis of Uncertainty in Cost-Effectiveness Analysis," NBER Technical Working Papers 0227, National Bureau of Economic Research, Inc.
    4. Stephen Martin & Nigel Rice & Peter C Smith, 2007. "The Link Between Health Care Spending and Health Outcomes: Evidence from English Programme Budgeting Data," Working Papers 024cherp, Centre for Health Economics, University of York.
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    1. Katherine Payne, 2009. "Fish and chips all round? Regulation of DNA‐based genetic diagnostics," Health Economics, John Wiley & Sons, Ltd., vol. 18(11), pages 1233-1236, November.
    2. Ulf Persson & Michael Willis & Knut Ödegaard, 2010. "A case study of ex ante, value-based price and reimbursement decision-making: TLV and rimonabant in Sweden," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 11(2), pages 195-203, April.
    3. Adrian Towse, 2007. "If it ain't broke, don't price fix it: the OFT and the PPRS," Health Economics, John Wiley & Sons, Ltd., vol. 16(7), pages 653-665, July.
    4. Rick A Vreman & Thomas F Broekhoff & Hubert GM Leufkens & Aukje K Mantel-Teeuwisse & Wim G Goettsch, 2020. "Application of Managed Entry Agreements for Innovative Therapies in Different Settings and Combinations: A Feasibility Analysis," IJERPH, MDPI, vol. 17(22), pages 1-20, November.
    5. Gregory S. Zaric, 2008. "Optimal drug pricing, limited use conditions and stratified net benefits for Markov models of disease progression," Health Economics, John Wiley & Sons, Ltd., vol. 17(11), pages 1277-1294, November.
    6. Pedro Pita Barros, 2011. "The simple economics of risk‐sharing agreements between the NHS and the pharmaceutical industry," Health Economics, John Wiley & Sons, Ltd., vol. 20(4), pages 461-470, April.
    7. Nadia Benomar & Joanne Castonguay & Marie-Hélène Jobin & François Lespérance, 2017. "Politiques favorables à l’innovation en santé," CIRANO Project Reports 2017rp-02, CIRANO.
    8. Gandjour, Afschin & Chernyak, Nadja, 2011. "A new prize system for drug innovation," Health Policy, Elsevier, vol. 102(2), pages 170-177.
    9. Michael Drummond & Adrian Towse, 2019. "Is rate of return pricing a useful approach when value-based pricing is not appropriate?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(7), pages 945-948, September.
    10. Levaggi, Rosella, 2014. "Pricing schemes for new drugs: A welfare analysis," Social Science & Medicine, Elsevier, vol. 102(C), pages 69-73.
    11. Omer Ben-Aharon & Oren Shavit & Racheli Magnezi, 2017. "Does drug price-regulation affect healthcare expenditures?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(7), pages 859-867, September.
    12. Rosella Levaggi & Paolo Pertile, 2016. "Pricing policies when patients are heterogeneous: a welfare analysis," Working Papers 17/2016, University of Verona, Department of Economics.
    13. Simeon Thornton, 2007. "Drug price reform in the UK: debunking the myths," Health Economics, John Wiley & Sons, Ltd., vol. 16(10), pages 981-992, October.
    14. Ulf Persson & Johanna Svensson & Billie Pettersson, 2012. "A New Reimbursement System for Innovative Pharmaceuticals Combining Value-Based and Free Market Pricing," Applied Health Economics and Health Policy, Springer, vol. 10(4), pages 217-225, July.
    15. Salas-Vega, Sebastian & Shearer, Emily & Mossialos, Elias, 2020. "Relationship between costs and clinical benefits of new cancer medicines in Australia, France, the UK, and the US," Social Science & Medicine, Elsevier, vol. 258(C).

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