Incentive Structures During Negotiation Has Significant Impact on Outcomes

October 2021

Value-based pricing (VBP) of pharmaceuticals has exciting potential to impact societal goals such as timely access to novel treatments or incentivizing research to improve patient outcomes.

Researchers ran an online experiment to examine the impact of the negotiation situation for life-extending drugs on societal outcomes. Participants were randomly assigned into four treatment groups for a reimbursement negotiation between two roles (health minister, pharma representative) in two price framings. Payoff to participants included fixed salary and a potential bonus, depending on their preferences, their price offer, and the counteroffer of a randomly paired negotiation partner.

The findings show that despite agreements between average regulators and sellers on their stated preferences, most reimbursement negotiations can still fail due to valuation gaps in individual negotiation situations. The societal consequences vary, based on the price magnitude of the interventions. The price level of current new treatments reduced patient access, but also payer costs, compared to an intervention in a low-price frame.

In the era of stagnant health care budgets, and ever-expanding demand for care, VBP could generate value for a health care system. But to unlock value, it is important to understand the capacity of VBP policies and how existing policies for new drugs are effective in reaching conflicting societal goals.

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