Healthy Skepticism Library item: 13902

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: Journal Article

García-Alonso MD, García-Mariñoso B.
The strategic interaction between firms and formulary committees: effects on the prices of new drugs.
J Health Econ 2008 Mar; 27:(2):377-404
http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V8K-4R8HHNP-1&_user=10&_rdoc=1&_fmt=&_orig=search&_sort=d&view=c&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=591ff51f314409b4bdd7bac4adbca31e

Abstract:

We study the strategic interaction between the pricing decisions of a pharmaceutical firm and the reimbursement decisions of a government agency which grants reimbursement rights to patients for whom new drugs are most cost-effective. If the reimbursement decision precedes pricing, the agency only reimburses some patients if the drug’s private and public health benefits diverge. This is, there are consumption externalities and the variable cost of the drug exceeds the alternative’s. Contrarily, if the firm can commit to a price before reimbursement, a strategic effect implies that by setting a sufficiently high price, the firm can make the agency more willing to reimburse than without commitment.

Keywords:
Cost-Benefit Analysis Decision Making, Organizational Drug Industry* Drugs, Investigational/economics* Humans Models, Econometric Pharmacy and Therapeutics Committee* Reimbursement Mechanisms United States