Value-Based Pricing is a Double-Edged Sword for Drug Manufacturers

BURLINGTON, Mass., Dec. 9, 2013 /PRNewswire/ -- Decision Resources, one of the world's leading research and advisory firms for pharmaceutical and healthcare issues, finds that payers are increasingly adopting value-based pricing as a way to focus their limited pharmaceutical budgets on drugs that meet genuine clinical needs and better reward manufacturers for developing such medicines. Value-based pricing is a method of pricing medicines based on willingness to pay or the perceived additional benefit of new drugs relative to established comparator therapies.

The Strategic Insights report entitled, Key Trends in Market Access: Implications for the Pharmaceutical Industry, notes that while the promise of higher prices is attractive to drug manufacturers, it may prove difficult for drug makers to convince some payers of the value of an innovative medication. Moreover, drugs that are not deemed to offer any advantages over established therapies will face a challenging pricing and reimbursement environment.

Major markets that use elements of value-based pricing include Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan, the Netherlands, Norway, South Korea, Spain, Sweden and the United Kingdom (beginning autumn 2014).

"Value-based pricing is increasingly common in mature pharmaceutical markets. European countries, in particular, are embracing this approach to pricing," said Decision Resources Group Vice President of Global Market Access Insights Neil Grubert, M.A. "Because there is such a wide range in the approaches to value-based pricing, it is important for pharmaceutical manufacturers to understand the exact requirements of each system at a very early stage in the drug development process. Errors in clinical trial design and endpoints could lead to market access delays and less advantageous pricing and reimbursement terms. Or, drugs could be excluded from reimbursement altogether."

About Strategic Insights

Strategic Insights is a new series of high-level, strategic reports from Decision Resources Group thought leaders, designed for corporate executives in the biopharma industry. The Strategic Insights series evaluates global industry trends that are shaping the healthcare market, and delivers targeted, actionable insight in an easy-to-read PowerPoint format.

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Decision Resources (www.decisionresources.com) is a world leader in market research publications, advisory services and consulting designed to help clients shape strategy, allocate resources and master their chosen markets. Decision Resources is a Decision Resources Group company.

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SOURCE Decision Resources