Highlights
- •Many policy debates center on the idea that the supply side is capturing too much of the value of the medical innovation that they generate.
- •We analyze a large data set with > 9000 cost-effectiveness measures for various interventions and find that a large share of the value of medical innovation accrues to patients on the demand side given that the revenue to innovators is often far less than the patient’s value of these medical innovations.
- •Our research finds that a large share of the value of medical innovation accrues to patients on the demand side given that the revenue to innovators is often far less than the patient’s value of these medical innovations.
Abstract
Objectives
This article provides systematic evidence on the share of the value of health generated
by drugs and other healthcare goods and services that accrue to patients on the demand
side versus the manufacturers on the supply side.
Methods
We exploit a large data set with > 9000 cost-effectiveness measures for various interventions,
which we convert into measures of the shares of the value of improved health appropriated
by the supply side using literature estimates of how patients value gains in health.
Results
We find that if patients value a quality-adjusted life-year at $450 000 the median
share appropriated for drugs on the supply side is approximately 6% and has declined
at 0.1% per year between 1997 and 2019. This compares with other healthcare interventions,
such as screenings or medical procedures, which have a median value of 9% but decline
at 0.3% per year over the same period. If patients value a quality-adjusted life-year
at $150 000, the median share appropriated for drugs and other healthcare interventions
on the supply side is approximately 18% and 27%, respectively. Our estimates of appropriations
are upper bounds, partly due to QALYs not capturing full producer value.
Conclusions
Many policy debates center on the idea that the supply side is capturing too much
of the value of the medical innovation that they generate. We find that, for these
interventions, a large share of the value of medical innovation accrues to patients
on the demand side given that the revenue to innovators is often far less than the
patient’s value of these medical innovations.
Keywords
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Article info
Publication history
Published online: December 08, 2022
Accepted:
December 1,
2022
Publication stage
In Press Corrected ProofIdentification
Copyright
© 2023 International Society for Pharmacoeconomics and Outcomes Research, Inc. Published by Elsevier Inc.
