The Dynamics of Pharmaceutical Regulation and R&D Investments
37 Pages Posted: 6 Aug 2013
Date Written: June 24, 2013
The paper uses a real option approach to investigate the impact of performance-based risk-sharing agreements for the reimbursement of new drugs in comparison with standard cost-effectiveness thresholds. The results show that the exact definition of the risk-sharing agreement is key in determining its economic effects. In particular, despite the concerns expressed by some authors, the incentive for a firm to invest in R&D may be the same or even greater than under cost-effectiveness thresholds. When this is the case, patients would benefit from earlier access to innovations. The price for this is less value for money for the insurer at the time of adoption of the innovation.
Keywords: pharmaceutical regulation, real options, R&D, risk-sharing
JEL Classification: I18, L51, C61
Suggested Citation: Suggested Citation