title: Convergence of decision rules for value-based pricing of new innovative drugs.
abstract: Given the high costs of innovative new drugs, most European countries have introduced policies for price control, in particular value-based pricing (VBP) and international reference pricing. The purpose of this study is to describe how profit-maximizing manufacturers would optimally adjust their launch sequence to these policies and how VBP countries may best respond. To decide about the launching sequence, a manufacturer must consider a tradeoff between price and sales volume in any given country as well as the effect of price in a VBP country on the price in international reference pricing countries. Based on the manufacturer's rationale, it is best for VBP countries in Europe to implicitly collude in the long term and set cost-effectiveness thresholds at the level of the lowest acceptable VBP country. This way, international reference pricing countries would also converge towards the lowest acceptable threshold in Europe.
authors.affiliation: Frankfurt School of Finance and Management, Frankfurt, Germany.
authors.forename: Afschin
authors.initials: A
authors.lastname: Gandjour
mesh_terms: D003363:Cost Control; D003362:Cost-Benefit Analysis; D003365:Costs and Cost Analysis; D016527:Drug Costs; D004345:Drug Industry / Q000191:economics*; D017850:Economics, Pharmaceutical; D005060:Europe; D006801:Humans; D004364:Pharmaceutical Preparations / Q000191:economics*
chemical_list: D004364:Pharmaceutical Preparations
keywords: Europe; manufacturer; pharmaceuticals; reference pricing; value-based pricing