Risk-Sharing Agreements in Pharmaceutical Markets

  1. Antoñanzas Villar, Fernando Jesús 1
  2. Juárez Castelló, Carmelo A. 1
  3. Rodríguez Ibeas, Roberto 1
  1. 1 Universidad de La Rioja
    info

    Universidad de La Rioja

    Logroño, España

    ROR https://ror.org/0553yr311

Journal:
Estudios de economía aplicada

ISSN: 1133-3197,  1697-5731

Year of publication: 2013

Issue Title: Economía y Salud: Nuevas Perspectivas

Volume: 31

Issue: 2

Pages: 359-378

Type: Article

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Abstract

In this article, we model the relationship between a health authority and a pharmaceutical firm when the real efficacy of the drug manufactured by the firm is uncertain. The ex-ante information on the efficacy of the new drug is provided by the outcomes of a clinical trial. We focus on two types of contracts. On the one hand, the health authority can set a unit price regardless of the ex-post real effectiveness of the drug (traditional contract, i.e. no risk sharing). Alternatively, the health authority can make the payments contingent upon the observed ex-post effectiveness (risk-sharing contract). The optimal contract depends on the trade-off between the monitoring costs, the marginal production cost and the health cost derived from treatment failure. When the efficacy of the drug in the clinical trial is relatively high, a traditional contract is optimal for relatively low marginal costs. When the efficacy in the clinical trial is relatively low, the health authority always prefers to condition the payments upon the effectiveness outcomes.

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