Abstract
In this article we analyze the problem of determining the price for new drugs in a market where stringent budget constraints on public expenditure exists and we suggest an innovative methodology to set drug prices. The market is characterized by asymmetry of information and a high proportion of investment in research and development, an element that must be taken into account because it is only through research that it is possible to obtain better drugs.
Our proposed method allows one to set the price of new drugs in different market contexts, that is, where less effective alternatives are already sold or in new markets. We also propose a unified methodology to evaluate the social value of drugs in different markets through the definition of a function of the cost per quality adjusted life year that society is willing to pay.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Capri S, Terranova L, Merlo FL, et al. and the members of GISF Italian Group for Pharmacoeconomic Studies. Guidelines for Economic Evaluations in Italy: Recommendations from the Italian Group of Pharmacoeconomic Studies. Drug Inf J. 2001; 35(3):189–201.
Levaggi R, Capri S. Economia Sanitaria. (Health Economics) Milan, Italy: Franco Angeli; 1999.
Levaggi R. Resources allocation and information: assymetry in the pharmaceutical expenditure. Rivista di Diritto Finanziario e Scienza delle Finanze. 1998; 57(1):155–172.
Laffont JJ, Tirole J. A Theory of Incentives in Procurement and Regulation. Cambridge, MA: The MIT Press; 1993.
Armstrong MS, Cowan S, Vickers J. Regulatory Reform. Cambridge, MA: MIT Press; 1994.
Gravelle H. Ex post value reimbursement for pharmaceuticals. Med Decision Making. 1998;18 suppl: S27–S38.
Tirole J. The Theory of Industrial Organization. Cambridge, MA: MIT Press; 1988.
Baron DP, Myerson RB. Regulating a monopolist with unknown costs. Econometrica. 1982; 50(3):911–30.
Loeb M, Magat WA. A decentralised method for utility regulation. J Law Economics. 1979;22:299–404.
Benzi G. New European pharmaceutical system and “drug value.” European Union Review. 1998;3:51–66.
Williams A, Kind P. The present state of play about QALYs. In A. Hopkins (ed) Measures of the quality of life. London, United Kingdom: Royal College of Physicians; 1992:21–34.
Zweifel P, Breyer F. Health Economics. Oxford, United Kingdom: Oxford University Press; 1997.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Capri, S., Levaggi, R. Pricing Policies in the Pharmaceutical Sector. Ther Innov Regul Sci 36, 453–464 (2002). https://doi.org/10.1177/009286150203600226
Published:
Issue Date:
DOI: https://doi.org/10.1177/009286150203600226