NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, August 11, 2016

Global pressure on health spending is forcing the $1 trillion-a-year pharmaceutical industry to look for new ways to price its products: charging based on how much they improve patients’ health, rather than how many pills or vials are sold.

In the United States, both parties are promising fresh action on drug prices whoever wins the White House. In Europe, economies are stalled, squeezing state health budgets. And in China and other Asian markets, governments are getting tougher with suppliers.

Pricing drugs based on clinical outcomes is one way to ensure that limited funds bring the most benefits to patients now and pay for the most promising medical advances in future. Some experiments in pricing have already been made.

But shifting the overall industry to a new model requires improvements in data collection and a change in thinking, say drug pricing experts.

“Eventually, we are going to get there,” said Kurt Kessler, managing principal at ZS Associates in Zurich, which advises companies on sales and marketing strategies.