Value-based pricing in pharmaceuticals – hype or hope?

Value-based pricing in pharmaceuticals – hype or hope?

Value-based pricing of pharmaceutical products can help improve outcomes – at an affordable cost.

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In the face of stagnant healthcare budgets, and ever-growing demand for care, pharmaceutical companies are under severe pressure to demonstrate the value of their products. Often it is no longer enough to show that drugs are efficacious; they now need to show improved outcomes that justify the price.

The industry is under the public and political microscope, with demands for an alternative to the traditional, sales-led approach to marketing. One payment model receiving increasing attention is value-based pricing (VBP).

Within a VBP arrangement, risk is shared between pharmaceutical companies and payers, which should focus all parties on appropriateness of use and on outcomes.

In this article, we outline the challenges facing VBP implementation, notably the need to define and measure outcomes, and overcome any regulatory and legal barriers. We discuss how to overcome these challenges, and feature a case study based on Novartis’ experience to date with the heart drug Entresto.

We believe that, with certain products, under certain conditions, VBP can add the value that healthcare systems and patients are looking for. This is the first in a series of discussions on VBP by KPMG professionals.

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