This was part of Technological Innovation in Health Care Delivery

Conditional Approval and Value-Based Pricing for New Health Technologies

Ozge Yapar, Indiana University

Wednesday, May 17, 2023


Healthcare payers often make reimbursement decisions regarding new medical treatments under uncertainty. Conditional approval schemes (e.g., Cancer Drugs Fund, Innovative Medicines Fund) postpone reimbursement decisions until after the collection of post-marketing data to mitigate uncertainty regarding a treatment’s cost-effectiveness. The design of conditional approval schemes has not received much attention in the literature, however. Our game-theoretic model examines when to use a conditional approval scheme, how to design the trial and market access, and how to negotiate reimbursement during and after the post-marketing trial. We find that the interim reimbursement price offered during a conditional approval scheme’s period of post-market data collection can drastically affect equilibrium outcomes. We illustrate the potentially negative impact of policy constraints regarding interim pricing and offer a new risk-sharing mechanism to mitigate those constraints’ potentially adverse consequences.  We also show that, contrary to the common view, price reduction and uncertainty reduction might not be substitutes.