NDLI: A proportional rule for setting reimbursement prices of new drugs and its mathematical consistency

Content Provider	Springer Nature : BioMed Central
Author	Gandjour, Afschin
Abstract	Background Value-based pricing (VBP) of new drugs has been suggested both as a way to control health expenditures and to maximize health benefits based on the available resources. The purpose of this work is to present a simple mathematical proof showing that prices of new drugs are set in a mathematically consistent way when the sum of intervention and downstream costs is proportional to the size of health benefits. Such proportional relationship underlies the efficiency-frontier method used by the German Institute for Quality and Efficiency in Health Care (IQWiG). Methods A proof by contradiction is presented that is based upon the following three premises: 1) total costs (intervention plus downstream costs) of existing non-dominated drugs and interventions are acceptable to decision-making bodies; 2) new drugs with health benefits in-between those of the most and second most effective existing interventions are not automatically excluded from reimbursement and are acceptable if prices are sufficiently low; and 3) value is measured on a cardinal scale. Result The proof shows that a proportional rule sets reimbursement prices of new drugs in a mathematically consistent way. Conclusion Based on the proof and the underlying assumptions a proportional relationship between costs and health benefits ensures mathematical consistency in VBP of drugs.
Related Links	https://bmchealthservres.biomedcentral.com/counter/pdf/10.1186/s12913-020-5055-4.pdf
Ending Page	6
Page Count	6
Starting Page	1
File Format	HTM / HTML
ISSN	14726963
DOI	10.1186/s12913-020-5055-4
Journal	BMC Health Services Research
Issue Number	1
Volume Number	20
Language	English
Publisher	BioMed Central
Publisher Date	2020-03-23
Access Restriction	Open
Subject Keyword	Public Health Health Administration Health Informatics Nursing Research Cost-effectiveness Drugs Innovation Pricing I18
Content Type	Text
Resource Type	Article
Subject	Health Policy

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1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
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9	IDR Setup or Support	Queries related to establishment and support of Institutional Digital Repository (IDR) and IDR workshops	idr@ndl.gov.in

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