Setting cost-effectiveness thresholds as a means to achieve appropriate drug prices in rich and poor countries

Finding better mechanisms to enable differential pricing that reflects different degrees of willingness to pay across countries with different income levels is an important challenge for drug manufacturers and policy makers. Drug prices must be high enough to meet manufacturers' needs--covering costs and ensuring adequate investment in research and development, as well as producing a profit--but low enough to allow consumers access to medicines that they need. Examining drug pricing, we found that in rich countries, insurance coverage can make consumers insensitive to price, which means that manufacturers' prices are largely unrestrained unless payers intervene. In middle- and low-income countries, where most consumers pay for drugs out of pocket, we found that the poorest countries face the highest prices, relative to their mean per capita income. We recommend that countries and payers set their own cost-effectiveness thresholds to reflect how much they are willing to pay for "health gain"--in other words, for a measured improvement in the health of a person or a population. Adopting this approach broadly should lead to appropriate price differences across and within countries, benefiting consumers and manufacturers alike.