Introduction

  • Brita A. K. Pekarsky
Chapter
First Online:

Abstract

New drug reimbursement is a high stakes game and price is the mechanism whereby the new drug’s innovative surplus is apportioned between consumers and producers. Some countries use the results of cost-effectiveness analyses to inform the pricing decision. These countries express the result of a cost-effectiveness analysis as a price per effect and compare it to a decision threshold; a price above which the regulator will consider rejecting the new drug. Typically, if a decision threshold is lower that the firm’s preferred price (FPP) and there is a possibility of rejection, a firm will mount an evidence based case as to why the final drug price should not be below the threshold. There is a plethora of texts and guidelines available to regulators and health economic analysts on the methods of cost-effectiveness analyses of new drugs and the choice of decision thresholds. There are few, if any, formal texts available to guide regulators as to the optimal response to the claim that prices below the FPP are not in the population’s best interest because the benefits of cost saving today are offset by the loss of future health due to less innovation. This chapter introduces four rules and four tools which, if applied by regulators, will maximise the present value of the population’s health. A key theme is introduced: a strategy used by firms in the new drug reimbursement game is the threat that lower prices are not in the interest of the population.

Keywords

Drug Price Decision Threshold Health Budget Economic Rent Pharmaceutical Innovation 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
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Copyright information

© Springer International Publishing Switzerland 2015

Authors and Affiliations

  • Brita A. K. Pekarsky
    • 1
  1. 1.University of South AustraliaAdelaideAustralia

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