Comments on: BIOTECH: The Myth of Value-Based Pricing – So Far http://healthaffairs.org/blog/2007/02/20/biotech-the-myth-of-value-based-pricing-%e2%80%93-so-far/ The Policy Journal of the Health Sphere Fri, 20 Nov 2009 20:04:42 -0500 hourly 1 By: Hank Kearney http://healthaffairs.org/blog/2007/02/20/biotech-the-myth-of-value-based-pricing-%e2%80%93-so-far/comment-page-1/#comment-1688 Hank Kearney Mon, 05 Mar 2007 14:55:52 +0000 http://healthaffairs.org/blog/2007/02/20/biotech-the-myth-of-value-based-pricing-%e2%80%93-so-far/#comment-1688 The "Myth of Value Based Pricing - So Far" further illustrates the challenge the entire pharma industry has in justifying an out of date pricing model. Patent maximization, or driving the highest per unit price based on market interference (e.g. the patent) requires a delicate balance between the price, volume, and value, or more correctly, the perceived value. But the pharma industry has for some time now decided to weigh the balance in favor of a maximized per unit price. Countries like India long ago realized the need to increase volume, e.g. access, even at the expense of the patent. The “Myth of Value Based Pricing – So Far” further illustrates the challenge the entire pharma industry has in justifying an out of date pricing model.

Patent maximization, or driving the highest per unit price based on market interference (e.g. the patent) requires a delicate balance between the price, volume, and value, or more correctly, the perceived value. But the pharma industry has for some time now decided to weigh the balance in favor of a maximized per unit price.

Countries like India long ago realized the need to increase volume, e.g. access, even at the expense of the patent.

]]> By: Ian Spatz http://healthaffairs.org/blog/2007/02/20/biotech-the-myth-of-value-based-pricing-%e2%80%93-so-far/comment-page-1/#comment-1611 Ian Spatz Fri, 23 Feb 2007 19:54:59 +0000 http://healthaffairs.org/blog/2007/02/20/biotech-the-myth-of-value-based-pricing-%e2%80%93-so-far/#comment-1611 Light writes that "At last policymakers and readers are being set straight that the prices of drugs are not related to the immense costs of research and development"? Not so. One example is a speech, widely-reported at the time, by Merck's then-CEO, Ray Gilmartin, in which he said: "The price of medicines isn't determined by their research costs. Instead, it is determined by their value in preventing and treating disease. Whether Merck spends $500 million or $1 billion developing a medicine, it is the doctor, the patient and those paying for our medicines who will determine its true value. Those medicines that deliver the best value - in terms of true medical advances - will command prices commensurate with that value. Those medicines that represent marginal or no improvement over existing therapies will gain little respect in an increasingly demanding marketplace." See the entire speech at http://www.merck.com/newsroom/executive_speeches/113001.html Light writes that “At last policymakers and readers are being set straight that the prices of drugs are not related to the immense costs of research and development”? Not so.

One example is a speech, widely-reported at the time, by Merck’s then-CEO, Ray Gilmartin, in which he said:

“The price of medicines isn’t determined by their research costs. Instead, it is determined by their value in preventing and treating disease. Whether Merck spends $500 million or $1 billion developing a medicine, it is the doctor, the patient and those paying for our medicines who will determine its true value. Those medicines that deliver the best value – in terms of true medical advances – will command prices commensurate with that value. Those medicines that represent marginal or no improvement over existing therapies will gain little respect in an increasingly demanding marketplace.”

See the entire speech at http://www.merck.com/newsroom/executive_speeches/113001.html

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