Value-based tiered pricing for universal health coverage: an idea worth revisiting.

Karl Claxton,Rachel Silverman,Kalipso Chalkidou,Prashant Yadav

doi:10.12688/gatesopenres.13110.3

Karl Claxton, Rachel Silverman + Show 2 more

Open Access

https://doi.org/10.12688/gatesopenres.13110.3

Copy DOI

Abstract

The pricing of medicines and health products ranks among the most hotly debated topics in health policy, generating controversy in richer and poorer markets alike. Creating the right pricing structure for pharmaceuticals and other healthcare products is particularly important for low- and middle-income countries, where pharmaceuticals account for a significant portion of total health expenditure; high medicine prices therefore threaten the feasibility and sustainability of nascent schemes for universal health coverage (UHC). We argue that a strategic system of value-based tiered pricing (VBTP), wherein each country would pay a price for each health product commensurate with the local value it provides, could improve access, enhance efficiency, and empower countries to negotiate with product manufacturers. This paper attempts to further understanding on the potential value of tiered pricing, barriers to its implementation, and potential strategies to overcome those.

Highlights

Any reports and responses or comments on the article can be found at the end of the article
This context requires rethinking the current model of pharmaceutical pricing—and, we argue, an important role for value-based tiered pricing (VBTP), a system of pricing where each country pays a price commensurate with local value
In low- and middle-income countries (LMICs), these conditions are rarely met in practice (Yadav, 2010)

Summary

21 Feb 2020 report report version 1

Any reports and responses or comments on the article can be found at the end of the article. The pressure to adopt new health technologies creates significant opportunity costs and is likely to crowd out or prevent investment in other more cost effective interventions, though wat exactly gets displaced is much harder to assess as opposed to populations and things that are not covered (e.g. Kenya and GeneXpert (Callaway, 2017; Muchangi, 2019); Senegal offering free access to trastuzumab, which has in turn been shown not be cost-effective in most African settings (Gershon et al, 2019); or the recent listings in the WHO Essential Medicines List of expensive products for cancer and autoimmune diseases, including erlotinib and adalimumab, with incremental cost effectiveness ratios in the order of hundreds of thousands of dollars, in the hope generic versions will materialise (Hill et al, 2016; WHO, 2019—page 222); or dialysis in LMICs absorbing large chunks of small and strained budgets (van der Tol et al, 2019), whilst countries such as Kenya are foregoing financing essential products such as family planning commodities which are currently wholly financed throughdevelopment assistance monies) This context requires rethinking the current model of pharmaceutical pricing—and, we argue, an important role for value-based tiered pricing (VBTP), a system of pricing where each country pays a price commensurate with local value. Under the current IP model, private companies pay upfront for pharmaceutical R&D (though they often benefit from public sector investments in basic scientific research and early stage R&D); they later recoup their upfront investments and

In Brief

Production cost and economies of scale:

Findings

Complexity in administering the product: