A new reimbursement system for innovative pharmaceuticals combining value-based and free market pricing

Sweden has experienced a national value-based pricing (VBP) system for innovative outpatient drugs operated by the Pharmaceutical Benefits Board - LFN (now called the Dental and Pharmaceutical Benefits agency - TLV) since 2002. VBP has the character of a monopoly system, leading to reimbursement decisions where usage of new medicines is limited to subgroups and not the population for which the drug is approved. VBP relies on a broad societal perspective, encouraging innovations by signaling to firms that value-adding treatments are demanded. However, the VBP system is operated without a drug budget responsibility. The budget responsibility lies at the regional level, not operating VBP, thus an intrinsic conflict is built into the system. The aim of this article is to suggest a modification to the current reimbursement system in Sweden where payment for pharmaceuticals is split between the regional and national levels. The system is expected to make new innovative pharmaceuticals accessible to a larger number of patients and provide more consumer surplus without reducing the producer surplus. In short, the county councils pay the marginal cost of production while the state pays for the innovation.