Posted by Michael Wonder on 12 Aug 2019
Is rate of return pricing a useful approach when value based pricing is not appropriate?
12 August 2019 - The pricing of new health technologies, such as drugs or devices, involves deciding how the economic surplus generated by the new technology is shared between the producer and consumer.
In theory this division is determined by the market-clearing price. However, in health care markets, third party payers act for patients, and suppliers of technologies have patent protection, so the price of a new technology has to be agreed by these two parties.
There are several rules for the pricing of new health technologies, in particular drugs, but the majority of health economists consider value-based pricing to be the method of choice.
