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All things Pharma

Value-based pricing: finding the best solution

Pf Web Editor Di Spencer summarises the main aspects of the highly-anticipated value-based pricing approach and some of the issues to come out of the consultation (with a little help from the NICE Conference 2011).

Now, we’ve all read the Government’s value-based pricing consultation, but it is a “masterpiece of ambiguity” as Professor Karl Claxton (University of York) put it at last week’s NICE Conference, so you may have failed to glean the key points. In light of this, I thought it would be useful to summarise the key messages based on my own detailed reading of the document (and the recent NICE Conference session ‘Value-Based Pricing: What it is and what it will achieve’). The consultation closed on 17 March unfortunately, so the chance to have your say has passed.

The aims of value-based pricing (VBP) are to:

· improve patient outcomes through better access to medicines

· stimulate innovation and the development of high value medicines

· widen the scope of benefits taken into consideration, including wider societal benefits.

The plan is that the Government will set out maximum threshold prices based on the different values medicines offer. These will be based on current cost-effectiveness thresholds and QALYs, though there will be higher prices for drugs that are innovative, tackle unmet medical needs or offer wider societal benefits. NICE appraisals will, however, remain at the heart of drug assessment.

Value-based problems

The key issue with the premise is how this value should be assessed. Who, for example, should be responsible for assessing how innovative a drug is, or the monetary value of someone being able to return to work?

The definitions will be far from simple, Jon Sussex from the Office of Health Economics cautioned, and is most likely to create a system of ‘value-based negotiation’.

Another problem, as pointed out by Karl Claxton in his talk, is how the decisions, once made, are enforced to ensure the drugs are prescribed. It seems the options are either carrot or stick, i.e. either incentives are offered for following guidance (carrot) or the guidance is mandatory (stick).

The UK is often used by other countries as a reference for drug pricing, which presents another issue. If pharma companies offer reduced prices to the UK, how can they ensure these will not be referenced elsewhere?

And, finally, what should trigger a renegotiation of a drug’s value assessment? Should a renegotiation be instigated following the availability of new evidence and/or the approval of a new indication for the medicine?

VBP is, predictably, proving to be a minefield. I certainly don’t have the answers, but the Government does have until 1 January 2014 to find solutions to these questions, and the many more that will no doubt crop up as the new process is negotiated.

Check out the following for more on VBP:



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