Methodology on value based pricing?

Dear all,
I just posted below question on linkedin and would be delighted to hear your opinion.

"There is an increasing debate around the introduction of value based pricing systems for pharmaceuticals in certain markets, some more detailed and methodological while others are very fluffy and vague. What in your opinion would be a fair and sound methodological concept for the establishment of value based pricing for both industry and health authorities/society?"

1 comment:

Daniel Grima said...

Hi Ulf, I missed the chance to comment on this question on Linked-in.

I noticed in Linked-In people have different definitions of value-based pricing means. In my experience (HE researcher)it means pricing that reflects value for money. As such the methodology for value-based pricing should reflect what payers use for making funding decisions = cost-effectiveness. The reasoning fior value based pricing is that in restrictive markets (UK, Cda etc,.) the market uptake for a product will not follow a smooth price/demand curve but instead demand will have thresholds (cost-effectiveness) where formulary/guideline/co-pay restrictions are applied. It is important to identify these thresholds and the prices at these thresholds.

So we build a simple CEA model and look at pricing at CEA thresholds ($20K, 50K, 100K per QALY). The most appropriate threshold depends on the clinical need and value of the product. But overall, it gives a range for price that reflects how the product will be assessed by payers. We have applied this in over a dozen products including a number of rare diseases therapies.