Premium
The simple economics of risk‐sharing agreements between the NHS and the pharmaceutical industry
Author(s) -
Barros Pedro Pita
Publication year - 2011
Publication title -
health economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.55
H-Index - 109
eISSN - 1099-1050
pISSN - 1057-9230
DOI - 10.1002/hec.1603
Subject(s) - anticipation (artificial intelligence) , simple (philosophy) , pharmaceutical industry , economics , welfare , public economics , business , cost sharing , actuarial science , risk analysis (engineering) , medicine , law , political science , computer science , philosophy , epistemology , artificial intelligence , market economy , pharmacology
The introduction of new (and expensive) pharmaceutical products is one of the major challenges for health systems. The search for new institutional arrangements is natural. The use of the so‐called risk‐sharing agreements is one example. Recent discussions have somewhat neglected the economic fundamentals underlying risk‐sharing agreements. We argue here that risk‐sharing agreements, although attractive due to the principle of paying by results, also entail risks. Too many patients may be put under treatment. Prices are likely to be adjusted upward, in anticipation of future risk‐sharing agreements between the pharmaceutical company and the third‐party payer. An available instrument is a verification cost per patient treated, which allows obtaining the first‐best allocation of patients to the new treatment, under the agreement. Overall, the welfare effects of risk‐sharing agreements are ambiguous, and caution is urged regarding their use. Copyright © 2010 John Wiley & Sons, Ltd.