WHEN MEDICINES ARRIVE OUT OF ORDER: SEQUENTIAL EVALUATION AND STRATEGIC CONFLICT IN PHARMACEUTICAL FUNDING
Author(s)
Zachary Tirrell, BA1, Sean Lybrand, MPH2, Bonny Parkinson, BEc, MSc, PhD3.
1PhD candidate, Macquarie University, Sydney, Australia, 2Macquarie University, Sydney, Australia, 3Centre for the Health Economy, ASHBURY, Australia.
1PhD candidate, Macquarie University, Sydney, Australia, 2Macquarie University, Sydney, Australia, 3Centre for the Health Economy, ASHBURY, Australia.
OBJECTIVES: Pharmaceutical price negotiations involve payers seeking value for money and manufacturers constrained by global pricing strategies, yet neither side can fully observe the other’s constraints. We characterise the strategic dynamics that arise when medicines for the same indication arrive sequentially and companies face multiple rounds of negotiation.
METHODS: We develop a game-theoretic framework modelling pharmaceutical funding decision-makers and companies as strategic actors under bilateral information asymmetry. Companies face floor prices arising from international reference pricing networks that payers cannot observe; payers face uncertainty about whether unfavourable pricing reflects genuine global constraints or strategic positioning. The framework is illustrated using Australia’s Pharmaceutical Benefits Scheme.
RESULTS: Sequential medicine arrival creates path dependence, as each funded medicine establishes the comparator for subsequent entrants, generating conditions under which strategic rejection may be welfare-maximising. Multi-round resubmission functions as an information revelation mechanism, where escalating submission costs progressively distinguish constrained from flexible companies. Confidential pricing and pragmatic evaluation pathways emerge as institutional responses that resolve structural conflicts when floor prices exceed locally acceptable levels.
CONCLUSIONS: Modelling funding as a sequential game under bilateral information asymmetry generates testable predictions about submission timing, pathway selection, and pricing patterns across rounds. It offers practical guidance on when standard cost-effectiveness submission is futile and when strategic rejection serves population health rather than merely delaying access.
METHODS: We develop a game-theoretic framework modelling pharmaceutical funding decision-makers and companies as strategic actors under bilateral information asymmetry. Companies face floor prices arising from international reference pricing networks that payers cannot observe; payers face uncertainty about whether unfavourable pricing reflects genuine global constraints or strategic positioning. The framework is illustrated using Australia’s Pharmaceutical Benefits Scheme.
RESULTS: Sequential medicine arrival creates path dependence, as each funded medicine establishes the comparator for subsequent entrants, generating conditions under which strategic rejection may be welfare-maximising. Multi-round resubmission functions as an information revelation mechanism, where escalating submission costs progressively distinguish constrained from flexible companies. Confidential pricing and pragmatic evaluation pathways emerge as institutional responses that resolve structural conflicts when floor prices exceed locally acceptable levels.
CONCLUSIONS: Modelling funding as a sequential game under bilateral information asymmetry generates testable predictions about submission timing, pathway selection, and pricing patterns across rounds. It offers practical guidance on when standard cost-effectiveness submission is futile and when strategic rejection serves population health rather than merely delaying access.
Conference/Value in Health Info
2026-09, ISPOR Asia Pacific 2026, Bangkok, Thailand
Value in Health, Volume 55, Issue S1
Code
HTA15
Topic
Health Technology Assessment
Topic Subcategory
Decision & Deliberative Processes
Disease
No Additional Disease & Conditions/Specialized Treatment Areas