Drug Pricing, Patient Welfare, and Cost-Effectiveness Analysis



Cost-effectiveness analysis (CEA) is becoming more important in shaping healthcare benefit packages worldwide. The area in which CEA is applied most is in the context of new and often expensive medicines. The incremental cost-effectiveness of a new medicine is usually compared with a single threshold to determine whether it is eligible for reimbursement. Given that new medicines are often prescribed for multiple indications, the cost-effectiveness of a medicine can vary widely between indications for many reasons. In addition to the fact that health benefits and healthcare use depend on patient and disease characteristics, differences in drug pricing depending on indication can also contribute to such differences in cost-effectiveness from a payer’s perspective. Although some theoretical models suggest that different prices for different indications might be welfare improving, the article by Jiang et al suggests that this is not necessarily the case. They argue that indication-specific pricing could lower patient welfare, which, if true, raises several important questions for health policy. Here, we will focus on some implications that are relevant for applying CEA in practice that are closely related to the theoretical underpinnings of CEA.


Pieter van Baal Pedro Pita Barros

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