Revisiting the Relationship Between Price Regulation and Pharmaceutical R&amp;D Investment

Shaikh, Mujaheed; Giudice, Pietro del; Kourouklis, Dimitrios

doi:10.1007/s40258-020-00601-9

Cited by 13 publications

(8 citation statements)

References 27 publications

(54 reference statements)

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“…Some authors have argued that price controls may inhibit innovation. [50][51][52] This is outside the scope off the current analysis. However, many of the results in this article focus on comparisons between RSAs given the decision to implement one.…”

Section: Discussionmentioning

confidence: 93%

How Risky Is That Risk Sharing Agreement? Mean-Variance Tradeoffs and Unintended Consequences of Six Common Risk Sharing Agreements

Zaric

2021

MDM Policy & Practice

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Background. Pharmaceutical risk sharing agreements (RSAs) are commonly used to manage uncertainties in costs and/or clinical benefits when new drugs are added to a formulary. However, existing mathematical models of RSAs ignore the impact of RSAs on clinical and financial risk. Methods. We develop a model in which the number of patients, total drug consumption per patient, and incremental health benefits per patient are uncertain at the time of the introduction of a new drug. We use the model to evaluate the impact of six common RSAs on total drug costs and total net monetary benefit (NMB). Results. We show that, relative to not having an RSA in place, each RSA reduces expected total drug costs and increases expected total NMB. Each RSA also improves two measures of risk by reducing the probability that total drug costs exceed any threshold and reducing the probability of obtaining negative NMB. However, the effects on variance in both NMB and total drug costs are mixed. In some cases, relative to not having an RSA in place, implementing an RSA can increase variability in total drug costs or total NMB. We also show that, for some RSAs, when their parameters are adjusted so that they have the same impact on expected total drug cost, they can be rank-ordered in terms of their impact on variance in drug costs. Conclusions. Although all RSAs reduce expected total drug costs and increase expected total NMB, some RSAs may actually have the undesirable effect of increasing risk. Payers and formulary managers should be aware of these mean-variance tradeoffs and the potentially unintended results of RSAs when designing and negotiating RSAs.

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Section: Discussionmentioning

confidence: 93%

How Risky Is That Risk Sharing Agreement? Mean-Variance Tradeoffs and Unintended Consequences of Six Common Risk Sharing Agreements

Zaric

2021

MDM Policy & Practice

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“…Leahy (2011) used the different turnover ratios to explain profitability in the pharmaceutical industry, thereby basically using one financial success indicator to explain another. Reversing the perspective, Shaikh et al (2021) considered profitability as determinant of current research in the pharmaceutical industry.…”

Section: Literature Reviewmentioning

confidence: 99%

Innovation Options and Profitability of Pharmaceutical Brand Manufacturers

Riedel¹,

Špacek²

2022

IJTech

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Much research exists covering clinical development success rates, development costs of new drugs, and market launch impact on stock market valuation of companies, but little systematic work has been done to establish the impact of research input on new product launches and, in turn, their impact on profitability of drug manufacturers. This article investigates these relations using data from the world's largest pharmaceutical brand manufacturers and their product launches in the US over a period of more than 25 years. The objective is to determine the impact of innovation intensity on innovation output intensity and of innovation output intensity on profitability. It is shown that there is a complete lack of evidence that launches of New Molecular Entities (NMEs) necessarily lead to higher profitability, suggesting that many launches of NMEs are not particularly successful from an economic point of view. Furthermore, it was found that intangible knowledge assets acquired by company mergers and acquisitions do often not live up to their valuation. This leads to the conclusion that such intangible assets seem to be overpriced on average. The more and more frequently used strategy of launching new drugs without NMEs like combination drugs or extension of indications increased short-term profitability making this a valid approach to avoid setbacks when patent protection of blockbuster drugs expires.

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“…And why is it important to regulate prices appropriately? A recent paper [ 13 ] has revisited the (old) question of whether price regulation affect R&D investment (by companies). Theoretically, price regulation can affect R&D via intermediate variables, such as cash flow and profitability, if on the one hand, price regulation affects cash flow and profitability, and on the other, cash flow/profitability affects R&D expenditure.…”

Section: How To Price Value?mentioning

confidence: 99%

Public health policies for the common interest: rethinking EU states’ incentives strategies when a pandemic reshuffles all interests

et al. 2021

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Revisiting the Relationship Between Price Regulation and Pharmaceutical R&D Investment

Cited by 13 publications

References 27 publications

How Risky Is That Risk Sharing Agreement? Mean-Variance Tradeoffs and Unintended Consequences of Six Common Risk Sharing Agreements

How Risky Is That Risk Sharing Agreement? Mean-Variance Tradeoffs and Unintended Consequences of Six Common Risk Sharing Agreements

Innovation Options and Profitability of Pharmaceutical Brand Manufacturers

Public health policies for the common interest: rethinking EU states’ incentives strategies when a pandemic reshuffles all interests

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