Value-Based Pricing: L’Enfant Terrible?

Concern over pricing of pharmaceuticals and other health technologies in both highand low-income countries is not new. It has been high on the World Health Organization (WHO) agenda for a number of years [1]. Affordability of products, both to individual patients and to health systems, is one of the main barriers to accessing many effective medicines. In high income countries this debate has been focused primarily on medicines for cancer and orphan diseases, but in 2014 the pricing of sofosbuvir expanded the issue much more broadly: here was a ‘cost-effective’ treatment for hepatitis C that was unaffordable to countries of any income. The price being asked on the basis of costeffectiveness evaluations might be considered to be ‘value based’, but as described in Iyengar et al. [2], was completely unaffordable for countries to use to treat all eligible patients. So what has gone wrong with so-called valuebased pricing (VBP)? VBP is a well-established pricing strategy for commodities. The basic idea behind this approach is that the price of goods should reflect the value to the buyer rather than the actual costs of production plus a margin. But in the context of pharmaceuticals there is no widely accepted definition of VBP. It is generally defined as the use of any policy or strategy designed to link the price and/or approval of a pharmaceutical or health product to the perceived value of the product [3]. On the face of it the theory is very simple; health systems should pay similar amounts for products with the same therapeutic effect or ‘value’. However, in practice this has proved more complicated, particularly when establishing what metrics should be included in ‘value’ assessments. As noted by Neyt [4], assessments of the clinical and economic value of pharmaceuticals are a key component in many countries for decisions as to whether specific pharmaceuticals should be provided by health care systems. Indeed, health technology assessment and cost-effectiveness evaluation have been used by high-income countries for over 20 years, notwithstanding the well-documented limitations of economic evaluations [5–7]. As Neyt also points out, there have been many debates about using ‘cost-effectiveness thresholds’. But we have to emphasise that WHO has not recommended three times gross domestic product (GDP)/capita as ‘relatively cost effective’ [8], which highlights that even in high-income countries controversy and confusion reigns over what the cost-effectiveness threshold represents. Is it the ‘shadow price’ or does it represent ‘willingness to pay’? As Neyt correctly says, the cost-effectiveness ratio should only be the first consideration of many in making decisions about what to reimburse. But what we have learnt is that using cost-effectiveness ratios as the sole basis of either decision making or price setting is fraught with difficulties. For example, should ‘innovation’ attract a premium regardless of the actual therapeutic benefits? Industry has argued for this approach to ensure continued innovation [9], but determining how much innovation is worth is as difficult as determining ‘value’; particularly when the research and development costs are not transparent. Globally, the risks of using value-based assessments as the sole basis for pricing are that it does not take into account This reply refers to the comment available at doi:10.1007/s40273017-0566-5.