title: Pricing schemes for new drugs: a welfare analysis.
abstract: Drug price regulation is acquiring increasing significance in the investment choices of the pharmaceutical sector. The overall objective is to determine an optimal trade-off between the incentives for innovation, consumer protection, and value for money. However, price regulation is itself a source of distortion. In this study, we examine the welfare properties of listing through a bargaining process and value-based pricing schemes. The latter are superior instruments to uncertain listing processes for maximising total welfare, but the distribution of the benefits between consumers and the industry depends on rate of rebate chosen by the regulator. However, through an appropriate choice, it is always possible to define a value-based pricing scheme with risk sharing, which both consumers and the industry prefer to an uncertain bargaining process.
authors.affiliation: Department of Economics and Business, University of Brescia, Via S. Faustino 74/b, 25122 Brescia, Italy. Electronic address: levaggi@eco.unibs.it.
authors.forename: Rosella
authors.initials: R
authors.lastname: Levaggi
mesh_terms: D003363:Cost Control; D003365:Costs and Cost Analysis; D004345:Drug Industry / Q000191:economics*; D017850:Economics, Pharmaceutical; D006801:Humans; D007558:Italy; D004364:Pharmaceutical Preparations / Q000191:economics*; D012946:Social Welfare / Q000191:economics*
chemical_list: D004364:Pharmaceutical Preparations
keywords: Listing process; Pharmaceutical industry; Price regulation; Value based pricing; Welfare analysis