Pricing of medical devices under coverage uncertainty--a modelling approach.
Product vendors and manufacturers are increasingly aware that purchasers of health care will fund new clinical treatments only if they are perceived to deliver value-for-money. This influences companies' internal commercial decisions, including the price they set for their products. Other things being equal, there is a price threshold, which is the maximum price at which the device will be funded and which, if its value were known, would play a central role in price determination. This paper examines the problem of pricing a medical device from the vendor's point of view in the presence of uncertainty about what the price threshold will be. A formal solution is obtained by maximising the expected value of the net revenue function, assuming a Bayesian prior distribution for the price threshold. A least admissible price is identified. The model can also be used as a tool for analysing proposed pricing policies when no formal prior specification of uncertainty is available.
Department of Public Health, Epidemiology and Biostatistics, University of Birmingham, Birmingham B15 2TT, UK. A.J.Girling@bham.ac.uk
Alan J
AJ
Girling
Richard J
RJ
Lilford
Terry P
TP
Young
D001499:Bayes Theorem; D003362:Cost-Benefit Analysis; D003365:Costs and Cost Analysis / Q000379:methods*; D004864:Equipment and Supplies / Q000191:economics*; D006801:Humans; D007349:Insurance, Health, Reimbursement; D008389:Marketing of Health Services / Q000379:methods*; D018803:Models, Economic