Value-Based Pricing

Besieged by public sentiment on pricing, drug industry leaders have conceded that its current transactional-model is no longer sustainable. Manufacturers seems eager to embrace a “value-based system” where innovation is fairly rewarded and companies are encouraged to invest back into R&D.

This sounds great in principle, but it breaks down in practice. Despite industry seeming content on using the phrase in response to the pricing controversy - there has not being a single application of value-based pricing in any major health system worldwide.

UK’s NICE has attempted to implement value-based pricing dating back to 2010. After extensive consultation with industry, academia and patient groups, NICE concluded that the assessment model could not be adequately applied in practice. The project has largely been abandoned.

There is no metric that translates health innovation into value. And there is no incremental pricing scale to value in health. To mathematically capture the human-concept of "value" is just not possible. It's like trying to put humanity in a bottle.

Drug companies wants a pricing system that ensures access and value for the industry. What that system is remains a mystery.

(Diagram via @CR_UK)