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Review of Industrial Organization

, Volume 52, Issue 4, pp 589–602 | Cite as

Value Based Pricing of Pharmaceuticals in the US and UK: Does Centralized Cost Effectiveness Analysis Matter?

  • William S. Comanor
  • Stuart O. Schweitzer
  • Jon M. Riddle
  • Frederic Schoenberg
Article

Abstract

Increasingly, government policies directed towards limiting pharmaceutical prices have emphasized value-based criteria. This regulatory approach is most clearly formalized in the United Kingdom where the National Institute for Health and Clinical Excellence (NICE) was created within the British National Health Service (NHS), whose function is to apply cost-effectiveness analysis to new drugs. In contrast to Britain, there is no formal regulatory mechanism assuring cost-effectiveness in the United States. Instead, questions of cost effectiveness are left to market processes. In this paper, we examine the pricing implications of these alternate regimes. From our empirical analysis, we conclude that value-based pricing is enforced by both regulatory and market processes, and with similar outcomes.

Keywords

Drug prices Value-based pricing Cost-effectiviness analysis 

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  • William S. Comanor
    • 1
    • 2
  • Stuart O. Schweitzer
    • 1
  • Jon M. Riddle
    • 3
  • Frederic Schoenberg
    • 1
  1. 1.University of California, Los AngelesLos AngelesUSA
  2. 2.University of California, Santa BarbaraSanta BarbaraUSA
  3. 3.Economic AssociatesLos AngelesUSA

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