Conflicts with Value-Based Medication Pricing

With multiple diverse variables and stakeholders to consider, controlling healthcare expenditures has proven to be a difficult problem to solve. Recently, the American Medical Association has voiced support for Value-Based Medication Pricing. This means that a drug would be priced based on the benefit to the patient’s care. While this may seem like a promising strategy, there are several concerns that arise under value-based pricing. For instance, generic drugs often provide high levels of care but do not fall under high price brackets. Under a value-based system, would the prices increase to reflect the value of a low-cost antibiotic? Also, many nonessential prescription products do not make it onto an insurance formulary, including various topical products that are mostly used for cosmetic purposes. This means that the value is much more personal to the patient. The ambiguity in value makes it extremely difficult to establish a value-based price.  In value-based pricing, the payer is the stakeholder defining value.  Another concern that is often brought up when discussing drug costs is research and development.  Often, profits in pharmaceutical manufacturing are used to fund research and development for new innovative medications. Many fear that drastically changing the way medications are priced could hinder new drugs coming to market. Time will tell if value-based pricing attracts more attention but both arguments highlight the fact that coming up with a strategy to price medications is no easy task.