How to set a fair price for drugs?

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Health economist Peter Neumann has a proposal for how to curb rising prescription drug costs.

“Everyone wants lower drug prices,” says Neumann, a professor at Tufts University School of Medicine who directs the Center for the Evaluation of Value and Risk in Health (CEVR) at Tufts Medical Center. “But we would really like the prices to reflect the value of what the drugs offer. And that begs the question, how do you measure value and what does that mean? »

Neumann and his CEVR colleagues Joshua T. Cohen and Daniel A. Ollendorf address the issue of fair pricing in their new book The Right Price: A Value-Based Prescription for Drug Costs and in a recent article by New England Journal of Medicine. They argue that it is possible to measure the value of a drug to a patient and to society, and that these values ​​should inform drug pricing.

Neumann spoke with clumps now on value-based pricing and how it could help reduce drug costs.

clumps now: What’s wrong with current pharmaceutical prices?

Pierre Neumann: We pay a lot more than other countries for our medicines, and people are seeing the costs getting higher and higher. In some cases, we have very, very high prices for seemingly minimal clinical effects. Pharmaceutical companies are relatively free to set prices in the United States compared to many countries.

The problem with prescription drugs is that there is no market that works well. The patient cannot judge the value of an anticancer drug or a drug against an infectious disease or multiple sclerosis because it is complicated.

Are there ways to measure the value of a prescription drug?

We have analytical techniques and tools that help us judge the value of drugs. Cost-effectiveness analysis is a tool for estimating the consequences and costs of drug use in terms of clinical benefits and economic consequences – for example, if you are taking a drug for cancer, depression or asthma that helps you manage your condition, it may keep you out of the hospital or doctor’s office and we can consider these potential cost offsets. There are many questions about how to measure costs and benefits. But cost-effectiveness analysis provides a good starting point. And it can and should be used in value-based pricing exercises and negotiations.

How do you assess the projected clinical benefit of a drug for a patient?

Life expectancy is a concept with which we are familiar. An anti-cancer drug can prolong life by an average of six months. The question is, what is the quality of life during those six months? We can measure this – one way is on a scale of 0 to 1, where 0 is dead and 1 is perfect health and the numbers in between reflect the degree of impairment in terms of physical health, mental health, pain, ability cognitive, walking ability and so on. It sounds hard to do, and it can be, but these numbers are meant to be a guide. they are not meant to dictate decisions.

Is value-based pricing used in other countries?

It’s used most visibly in countries like the UK – they have an agency that conducts these kinds of analyzes and they use them to help establish reimbursement and coverage policy for new drugs and other health interventions .

Has the United States taken steps towards value-based drug pricing?

There is an institution called the Institute of Clinical and Economic Examination. It is a private, not-for-profit organization that performs these tests for new drugs and uses them to communicate information about what is an acceptable and fair price. They are doing a good job, but I think it would be even better if a public body took care of it. There is a good argument that information is a public good, as economists would say, and public goods are by definition by-produced by private markets and a better placed function in government. Disseminating this information more widely could help make drug pricing less opaque and ultimately fairer. It is important to recognize, however, that value-based pricing will not solve all affordability issues. We still need other changes in the system, such as reducing out-of-pocket expenses for patients.


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