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When are Pharmaceuticals Priced Fairly? An Alternative Risk-Sharing Model for Pharmaceutical Pricing

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Abstract

The most common solutions to the problem of high pharmaceutical prices have taken the form of regulations, price negotiations, or changes in drug coverage by insurers. These measures for the most part transfer the burden of drug expenditures between pharmaceutical companies and payers or between payers. The aim of this study is to propose an alternative model for the relationship between the main stakeholders (the pharmaceutical companies, third party payers, and the public) involved in the price setting and purchasing of pharmaceuticals, one that encourages a more cooperative approach. We draw from principles of ethics and health economics and apply them to the context of the pharmaceutical industry. The model prioritises two objectives, (1) to make drugs financially accessible to the patients who need them, and (2) to keep pharmaceutical companies viable and profitable. It is centered around the sharing of financial risk between the main stakeholders, which we describe as ‘enlightened risk sharing’. After establishing the foundations of this model, we expand on the type of policies that can follow these principles with current day examples.

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Authors and Affiliations

  1. Department of Health Research Methods, Evidence, and Impact, McMaster University Faculty of Health Sciences, 1280 Main Street West, Hamilton, ON, L8S 4L8, Canada

    Fanor Balderrama, Lisa J. Schwartz & Christopher J. Longo

  2. Department of Health Policy and Management, DeGroote School of Business, McMaster University, 4350 South Service Road, Burlington, ON, L7L 5R8, Canada

    Christopher J. Longo

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  1. Fanor Balderrama
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  2. Lisa J. Schwartz
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  3. Christopher J. Longo
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Correspondence to Fanor Balderrama.

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Balderrama, F., Schwartz, L.J. & Longo, C.J. When are Pharmaceuticals Priced Fairly? An Alternative Risk-Sharing Model for Pharmaceutical Pricing. Health Care Anal 28, 121–136 (2020). https://doi.org/10.1007/s10728-020-00394-x

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