Determining a Discount Rate for Pharmacoeconomic Evaluations in China: A Ramsey-Based Approach
Author(s)
Xin Guan, PhD1, Chen Jiang, BS2.
1Dr., China Pharmaceutical University, Nanjing, China, 2China Pharmaceutical University, Nanjing, China.
1Dr., China Pharmaceutical University, Nanjing, China, 2China Pharmaceutical University, Nanjing, China.
OBJECTIVES: This study aims to establish a theoretically grounded discount rate for pharmacoeconomic evaluations in China, drawing upon welfare economics principles.
METHODS: The Ramsey formula was employed to estimate the social time preference rate (STPR), recalculating China’s currently applied social discount rate. Time preference rate (ρ) and Elasticity of marginal utility of consumption (η) in China were derived from published literatures. Consumption growth rate per capita (g) in China was calculated using the Asian Development Bank’s projected economic growth rate (2026-2040) and Worldometer’s population growth forecasts (based on UN data). Variance of annual consumption growth (σ²) was estimated from historical economic volatility and published recommendations.
RESULTS: Time preference rate was 2%, elasticity of marginal utility of consumption (η) was 0.75. Consumption growth rate per capita (g) was 3.45%. Variance of annual consumption growth (σ²) was 0.19. Application of the Ramsey formula yielded a discount rate of 4.46% for China’s 2026-2040 period.
CONCLUSIONS: China Pharmacoeconomic Evaluation Guidelines 2020, which recommend a 5% discount rate, may overestimate societal time preferences given the nation’s declining economic growth trajectory. Based on projected macroeconomic trends, we propose revising the discount rate to 4.46% to enhance the accuracy of pharmacoeconomic assessments. This adjustment aligns welfare-theoretic principles with empirical observations of China’s consumption dynamics.
METHODS: The Ramsey formula was employed to estimate the social time preference rate (STPR), recalculating China’s currently applied social discount rate. Time preference rate (ρ) and Elasticity of marginal utility of consumption (η) in China were derived from published literatures. Consumption growth rate per capita (g) in China was calculated using the Asian Development Bank’s projected economic growth rate (2026-2040) and Worldometer’s population growth forecasts (based on UN data). Variance of annual consumption growth (σ²) was estimated from historical economic volatility and published recommendations.
RESULTS: Time preference rate was 2%, elasticity of marginal utility of consumption (η) was 0.75. Consumption growth rate per capita (g) was 3.45%. Variance of annual consumption growth (σ²) was 0.19. Application of the Ramsey formula yielded a discount rate of 4.46% for China’s 2026-2040 period.
CONCLUSIONS: China Pharmacoeconomic Evaluation Guidelines 2020, which recommend a 5% discount rate, may overestimate societal time preferences given the nation’s declining economic growth trajectory. Based on projected macroeconomic trends, we propose revising the discount rate to 4.46% to enhance the accuracy of pharmacoeconomic assessments. This adjustment aligns welfare-theoretic principles with empirical observations of China’s consumption dynamics.
Conference/Value in Health Info
2025-11, ISPOR Europe 2025, Glasgow, Scotland
Value in Health, Volume 28, Issue S2
Code
EE322
Topic
Economic Evaluation, Methodological & Statistical Research, Study Approaches
Topic Subcategory
Cost/Cost of Illness/Resource Use Studies
Disease
No Additional Disease & Conditions/Specialized Treatment Areas