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An Optional Delinked Reward System: Making Pharmaceutical Innovation Work for Everyone

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  • Aidan Hollis

    (University of Calgary)

Abstract

Conflicts over pharmaceutical pricing are driven by the patients’ need for affordable medicines and the producer’s reward for the investments in developing innovative medicines. A single price cannot achieve both goals, as it will either obstruct access by patients or provide too low a return to investors. This has led to calls to “delink” the payment for innovation from the price paid for drugs, so that both goals can be met efficiently and without conflict. However, the details of how best to do that are unclear. This paper proposes a specific implementation for delinking the Optional Delinked Reward System (ODRS), which integrates ideas from numerous pharmaceutical reimbursement systems. The ODRS would allow firms to choose either to negotiate a sales price for a drug (as is the current practice in most countries) or to sell their drug at a low “generic” price with a supplementary “delinked” reward based on assessed health benefit. This model builds on recent innovations in drug reimbursement including the UK’s Antibiotic Subscription Pilot and the Pneumococcal Vaccine Advanced Market Commitment. The ODRS would ensure affordable and immediate access for patients and a fair reward for innovators.

Suggested Citation

  • Aidan Hollis, 2024. "An Optional Delinked Reward System: Making Pharmaceutical Innovation Work for Everyone," Applied Health Economics and Health Policy, Springer, vol. 22(2), pages 155-164, March.
  • Handle: RePEc:spr:aphecp:v:22:y:2024:i:2:d:10.1007_s40258-023-00860-2
    DOI: 10.1007/s40258-023-00860-2
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    References listed on IDEAS

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    1. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
    2. Sebastian Linde & Brandon Norton & Ralph Siebert, 2019. "The Effect of Bargaining Power Determinants on Pharmaceutical Prices," CESifo Working Paper Series 7988, CESifo.
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