Value based pricing (also called value optimized pricing) is a pricing strategy which sets prices primarily according to the perceived or estimated value of a product or service to customers rather than according to the cost of developing the product or its historical price.
In healthcare industry decision-makers are calling for manufacturers to tie the prices of drugs to their actual value to patients, a process which become easier with the growth of targeted or individualized therapies. In the UK around 2010 a VBP approach was proposed for the NHS, which in addition to effectiveness and cost-effectiveness would incorporate a wider set of factors such as the burden of the illness in society, level of unmet need, how innovative the drug is and the wider social benefits it offers, as a basis of direct negotiation of drug prices. However agreement was not reached on how to operationalise VBP and it has been set aside in favour of the somewhat broader ‘value-based healthcare’. More recently there has been renewed interest in ‘indication-based pricing’, which recognises that value may vary according to different uses of a drug (for example in different oncology populations), but this has not yet been implemented in healthcare systems.
How to cite: Value Based Pricing [online]. (2016). York; York Health Economics Consortium; 2016. https://yhec.co.uk/glossary/value-based-pricing/