Academic Literature

Pharmaceutical Products and Their Value: Lessons Learned and the Path Ahead

Value-based pricing has emerged as an alternative to prices determined by what the market will bear. But which agreements are truly "value-based"?
Originally published on 03/29/2021 in Value in Health

The central premise of value-based pricing is that the monetary value of a treatment's benefits can be characterized by using rigorous analytic methods.

Payers would use this information to negotiate to or below the ceiling established by this estimate, in exchange for removing financially motivated restrictions and encouraging use of high-value treatments.

However, most agreements touted by manufacturers and health plans as "value-based" are actually based on the outcome of the drug or a form of long-term financing, neither of which realign prices to their value to patients, the health care system, or society. More direct approaches to promote "value" while balancing access include a competitive acquisition program (CAP), where a third-party vendor contracts with a payer to negotiate for discounts without the provider markups.

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