Monday, July 16, 2007

Pricing Pills by the Results

Interesting article in the New York Times on pricing pills by their results. The basic idea is rather than pricing the drugs on cost + profit, they will be paid for only if they are actually beneficial for particular patients. In principle this means the drug company shares the risk with the purchaser. This has been suggested to the UK National Health Service by Johnson & Johnson in relation to one of their cancer drugs.

While I like the principle, I am not convinced that this will genuinely save money, since logically the pharma companies will have to raise their prices to ensure that they are still profitable. This may allow for more drugs to be tried, which ought to increase efficiency. However this could place increased pressure on National Health Services to provide coverage for far more marginal and very expensive drugs for the few patients they are effective for, regardless of their cost effectiveness.