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Social and Behavioral Sciences

Differential pricing

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Value-Based Differential Pricing: Efficient Prices For Drugs In A Global Context, Patricia. M. Danzon, Adrian Towse, Jorge Mestre-Ferrandiz Mar 2015

Value-Based Differential Pricing: Efficient Prices For Drugs In A Global Context, Patricia. M. Danzon, Adrian Towse, Jorge Mestre-Ferrandiz

Health Care Management Papers

This paper analyzes pharmaceutical pricing between and within countries to achieve second-best static and dynamic efficiency. We distinguish countries with and without universal insurance, because insurance undermines patients' price sensitivity, potentially leading to prices above second-best efficient levels. In countries with universal insurance, if each payer unilaterally sets an incremental cost-effectiveness ratio (ICER) threshold based on its citizens' willingness-to-pay for health; manufacturers price to that ICER threshold; and payers limit reimbursement to patients for whom a drug is cost-effective at that price and ICER, then the resulting price levels and use within each country and price differentials across countries are ...