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Health Econ. 2019 Aug;28(8):1035-1051. doi: 10.1002/hec.3903.

The impact of pharmaceutical marketing on market access, treatment coverage, pricing, and social welfare.

Author information

1
Ivey Business School, Western University, London, Ontario, Canada.

Abstract

Pharmaceutical spending in the United States, Canada, and the EU is growing. Public payers cover a large portion of these costs and have responded by instituting various pricing and access policies to limit their expenditure. One challenge that public payers face is additional demand induced by a manufacturer's marketing effort. We use a game theoretic approach to study the impact of pharmaceutical marketing on six practical pricing and access policies: negotiated pricing, open pricing, controlled pricing, a listing process, a risk-sharing arrangement, and a value-based pricing with risk-sharing arrangement. We find that all non-value-based policies result in either restricted access or suboptimal treatment coverage. We find that marketing is the highest in the first-best setting where all decisions are made by a social planner. We also find that the value-based pricing with risk-sharing arrangement is preferred by the manufacturer and from a societal perspective whereas no policy is universally preferred by a health care payer. A value-based pricing with risk-sharing arrangement always results in zero net monetary benefit for a health care payer. Therefore, considering non-value-based arrangements, we find that a negotiated pricing policy, a controlled pricing policy, or a risk-sharing arrangement may be socially preferred.

KEYWORDS:

game theory; health care; inefficiency; listing process; managed entry agreement; marketing; optimal policy; pharmaceuticals; pricing; risk sharing; value-based pricing

PMID:
31310424
DOI:
10.1002/hec.3903

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