Pricing Drugs for Innovation and Affordability

Drug prices need to be high to finance research and development but low to ensure affordability and access. Attempts to balance these conflicting imperatives are bedeviled by scientific uncertainty as to product effectiveness at the time of initial launch and the subsequent evolution of clinical evidence. The combination of multiple goals and scientific complexity creates one political firestorm after another, exemplified most recently by the accelerated FDA approval, budget-crushing manufacturer’s price, restricted Medicare coverage decision, and broad physician rejection of Ahuhelm for Alzheimer’s disease. In this presentation, Robinson describes how drug prices are negotiated by innovators and purchasers in the context of rapidly evolving scientific knowledge. He then describes a model of dynamic prices that adjust to changes in the evidence of a drug’s safety and effectiveness, to be applied to products such as Ahuhelm that are launched through FDA’s accelerated review and Medicare’s conditional coverage pathways.