Pharmaceutical Price Regulation Scheme

The OFT's (Office for Fair Trading, UK) study identifies a number of drugs where prices are significantly out of line with patient benefits. These include treatments for cholesterol, blood pressure and stomach acid. At present, many alternative products are available in these and other major areas of expenditure, yet some drugs are much more expensive, but not significantly more effective, than others. Specifically, some drugs currently prescribed in large volumes are up to ten times more expensive than substitute treatments that deliver very similar benefits to patients... The study proposes two options under which the prices of on-patent branded prescription drugs could be set according to value-based principles:
  1. Ex post value-based pricing - this would involve retaining upfront   freedom of pricing for companies but would replace company-wide profit controls and price cuts with a series of reviews of the cost effectiveness of individual drugs or drug classes, conducted some years after launch.
  2. Ex ante value-based pricing - this, in addition to the ex post reviews, would involve a fast-track ex ante assessment of a new drug's cost effectiveness before launch.

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