COST-EFFECTIVENESS AS A GUIDE TO PRICING A NEW PHARMACEUTICAL PRODUCT

This paper applies cost-effectiveness analysis to a major clinical inn ovation. Using a structured survey of professional judgements to obtai n estimates of research costs associated with its use, the analysis su ggests that a premium price for the drug decided on by the manufacture r would be justified on the grounds that it could provide substantial cost savings. The results obtained appeared sensitive neither to varia tions in the cost assumptions, nor to alternative definitions of effec tiveness. In general, ex ante economic evaluation of a new medicine be fore price setting is shown to be both feasible and informative.