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Why Performance Pricing May Become Significant for Those in R&D Pharmaceutical Courses

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The research and development of new or newly improved medical products is often quite a lengthy process. It can be many years before an effective treatment is formulated and ready for the public, by which time thousands of working hours have been punched in. The necessary raw materials, production equipment and testing process also add to the increasing costs of drug creation. That’s why the pharmaceutical industry is looking at new ways of reducing the financial strain on consumers and insurance companies.

Performance pricing is an attempt to tackle such high prices by reducing the requirement to pay when the treatment is ineffective. It’s a relatively new concept which has had a mixed reaction so far. Here’s a useful guide for those who are interested in a career in pharmaceutical research and development.

Performance Pricing is a Results-Focused Attempt to Decrease Drug Costs

As many students in R&D pharmaceutical courses will know, governments around the world have expressed their concern about the growing costs of medical treatment, which has prompted a rethink in the pharmaceutical sector. Performance pricing is financially beneficial to the consumer if the treatment doesn’t work, but it can also produce savings for the health system.

Performance pricing can reduce the financial risk of medicine for patients
Performance pricing can reduce the financial risk of medicine for patients

The pharmaceutical company would be paid in full for effective treatment, and the customer would be less reliant on further expensive medical treatment as a result. Insurance companies and customers are likely to be more inclined to cover the cost of medical treatment if they know that they’re only paying for positive results. Meanwhile, pharmaceutical companies can also ensure that they don’t lose out financially by charging more for effective products.

Students Could See More Indication Specific Drug Pricing After Pharmaceutical College

Medical treatments are often prescribed to treat more than one condition, and their benefits usually vary in each situation. Performance pricing takes this into account by offering alternative pricing methods based on their effectiveness with each condition.

For example, a drug may have recorded excellent results dealing with lung cancer, but fewer benefits with other types of the disease. Those prescribed the drug for pancreatic cancer, for instance, wouldn’t be asked to pay as much, because of the reduced impact of the treatment.

The Concerns Surrounding Performance Pricing for Drug Products

The development of consistent metrics to measure drug effectiveness is an ongoing source of concern in relation to the performance pricing concept. The pharmaceutical industry is vast and international, so achieving agreement on a set of industry standards requires plenty of work. The definition of medical success varies hugely, too. Consider, for example, the treatment offered to people to quit smoking. Would the treatment be regarded as a failure if a person decides to start smoking again in the future?


Anti-smoking treatments can present challenges to performance pricing plans
Anti-smoking treatments can present challenges to performance pricing plans

Pharmaceutical college grads will also find that many companies remain skeptical about the benefits of the performance pricing system. A report published last year by PricewaterhouseCoopers found that only 25% of US pharmaceutical companies surveyed had used such value-based contracts. Among the problems cited were the challenges surrounding the sharing of patient data, which would be needed to prove whether a treatment is effective or not. While there are a lot of creases to iron out with this concept, it is likely to remain a hot topic in a pharmaceutical sector which is trying to reduce medical costs for the public.

Get a great head-start in this exciting sector with pharmaceutical research training.

Find out more about the top-class program at Toronto Institute of Pharmaceutical Technology.

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