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Value-based pricing for pharmaceuticals: Its role, specification and prospects in a newly devolved NHS

Author

Listed:
  • Karl Claxton

    (Centre for Health Economics and Department of Economics and Related Studies, University of York, UK)

  • Mark Sculpher

    (Centre for Health Economics, University of York, UK)

  • Stuart Carroll

    (Chairman Bow Group Health and Education Policy Committee)

Abstract

In December 2010, the Government launched its consultation on its plans to change the way medicines are priced in the UK. By 2014, a system of ‘value-based pricing’ (VBP) will replace the current Pharmaceutical Price Regulation Scheme (PPRS), which is a voluntary agreement between the Department of Health (DH) and the pharmaceutical industry whereby companies negotiate profit rates from drug sales to the National Health Service (NHS) every 5 years utilising price and profit controls. The concept of VBP emerged from the Office of Fair Trading (OFT) report in 2007, which recommended that prices of individual pharmaceutical products should reflect their 'clinical and therapeutic value to patients and the broader NHS'. The introduction of VBP provides an opportunity to found pharmaceutical pricing and access to new health technologies on sound principles; reflective of social values and the reality of a budget constrained NHS. This requires: clarity on key issues of principle and social value; as well as critical details of how it will be implemented and operate. This Research Report describes a potential framework for VBP in the type of devolved NHS envisioned in recent government reforms. It also considers some of the critical features of VBP arrangements which need to be appropriately specified if the potential benefits are to be realised.

Suggested Citation

  • Karl Claxton & Mark Sculpher & Stuart Carroll, 2011. "Value-based pricing for pharmaceuticals: Its role, specification and prospects in a newly devolved NHS," Working Papers 060cherp, Centre for Health Economics, University of York.
  • Handle: RePEc:chy:respap:60cherp
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    File URL: http://www.york.ac.uk/media/che/documents/papers/researchpapers/CHERP60_value_based_pricing_for_pharmaceuticals.pdf
    File Function: First version, 2011
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    References listed on IDEAS

    as
    1. Palmer, Stephen & Smith, Peter C., 2000. "Incorporating option values into the economic evaluation of health care technologies," Journal of Health Economics, Elsevier, vol. 19(5), pages 755-766, September.
    2. Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, vol. 94(4), pages 813-835, September.
    3. David E. Bloom & David Canning & Jaypee Sevilla, 2001. "The Effect of Health on Economic Growth: Theory and Evidence," NBER Working Papers 8587, National Bureau of Economic Research, Inc.
    4. Karl Claxton & Simon Walker & Steven Palmer & Mark Sculpher, 2010. "Appropriate Perspectives for Health Care Decisions," Working Papers 054cherp, Centre for Health Economics, University of York.
    5. Martin, Stephen & Rice, Nigel & Smith, Peter C., 2008. "Does health care spending improve health outcomes? Evidence from English programme budgeting data," Journal of Health Economics, Elsevier, vol. 27(4), pages 826-842, July.
    6. Stephen Martin & Nigel Rice & Peter C Smith, 2008. "The link between health care spending and health outcomes for the new English Primary Care Trusts," Working Papers 042cherp, Centre for Health Economics, University of York.
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    Cited by:

    1. Levaggi, Rosella, 2014. "Pricing schemes for new drugs: A welfare analysis," Social Science & Medicine, Elsevier, vol. 102(C), pages 69-73.
    2. Bhardwaj, Ramesh, 2015. "Restraining High and Rising Cancer Drug Prices: Need for Accelerating R&D Productivity and Aligning Prices with Value," MPRA Paper 63405, University Library of Munich, Germany.
    3. Kristensen, Søren Rud & Siciliani, Luigi & Sutton, Matt, 2016. "Optimal price-setting in pay for performance schemes in health care," Journal of Economic Behavior & Organization, Elsevier, vol. 123(C), pages 57-77.
    4. Livio Garattini & Alessandro Curto & Nick Freemantle, 2016. "Pharmaceutical Price Schemes in Europe: Time for a ‘Continental’ One?," PharmacoEconomics, Springer, vol. 34(5), pages 423-426, May.

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