One of the central tensions in pharmaceutical policy is the distinction between what a medicine is and what it is. Worthy and what it really is Cost. In theory, the price of a drug should reflect its value – its ability to improve health outcomes relative to the next best alternative. In practice, list prices are set by manufacturers, net prices are shaped by opaque discount negotiations, and whether these prices bear any resemblance to value-based benchmarks is an empirical question. What does the literature say about this?
American evidence
The most direct empirical test of whether US prices align with these benchmarks comes from Bloudek et al. (2021)published in value in health. Their analysis compared ICER’s value-based price benchmark to the actual net prices of newly launched drugs. Key findings: Across all medicines studied, net prices were higher than the ICER price-based benchmark in most cases. Specifically, “81% of drugs had a net price greater than $100,000 per QALY VBP and 71% had a net price greater than $150,000 per QALY VBP”, requiring price reductions of more than 36% for some drugs to fall within acceptable cost-effectiveness ranges. The important thing is that this was true even Net The prices – that is, after accounting for discounts – mean that the price-value misalignment is not simply an artifact of list price inflation.
ICER’s 2025 launch price and access report found that the average net price of newly launched drugs increased by nearly 51% from 2021 to 2024, well above inflation. More precisely, ICER estimated that this pricing trajectory caused the US healthcare system to lose approximately $1.5 billion in spending over value-based benchmarks – in a relatively short period of time. However, the ICER report has several flaws including (i) failure to take cost offsets into account, (ii) prices examined where only prices were in place at the time of launch – which matters because IRAs cap the ability to raise prices versus inflation, (iii) ‘value’ includes only QALY-based concepts of value rather than broader societal value, and (iv) drug prices as a share of health care spending have not increased in recent years.
Does price assessment affect coverage?
The next logical question is whether payers actually use value assessments when making coverage decisions. Chambers et al. (2023)published in Managed Care and Pharmacy JournalExamined how US commercial health plans use ICER reports.
Drugs with higher (less favorable) CERs are planned to be covered more restrictively than drugs with CERs less than $100,000 per QALY: odds ratio (OR) = 4.48 if $100,000-$175,000 per QALY; or = 2.00 if $175,000-$500,000 per QALY; and OR = 2.10 if $500,000 or more per QALY (all). P <0.01).
Their conclusion: Health plans that received a “low value” or “high value” rating from ICER were more likely to implement restrictive formal policies – prior authorization, step therapy, or quantity limits – than those with drugs that received favorable evaluations. ICER ratings do not determine coverage, but they appear to shift leverage in formal negotiations.
Comparison across therapeutic areas
Within the US, the cost-price relationship also varies significantly by disease area. Cherla et al. (2020) Comparative cost-effectiveness analyzes of heart, obesity and diabetes medicines were conducted, comparing ICER estimates with NICE (UK National Institute for Health and Care Excellence) estimates for similar products. One key finding: The two bodies agreed on clinical evidence far more often than they agreed on value assessments – and when they diverged, the driver was almost always priceNo efficacy. Medicines approved by NICE but receiving a “low value” signal from ICER were often medicines where the US net price was significantly higher than the UK price.
This has a direct impact on the common policy argument: that the US subsidizes global pharmaceutical R&D by overpaying. The Cherla analysis shows that when the same molecule is evaluated with the same methodology, the US cost-effectiveness ratio is often unfavorable simply because of the price difference – not because the clinical evidence is weak.
IRAs and Value-Based Price Signals
The Inflation Reduction Act (IRA) introduced Medicare drug price negotiations for the first time—a structural reform that explicitly raises questions about whether negotiated prices align with value-based benchmarks. Initial analysis of the 10 drugs selected for negotiations in 2025–2026 shows that negotiated prices represent meaningful discounts from the list price, but comparisons to a clear QALY-based threshold remain limited. USC Schaeffer Center researchers investigating anti-obesity drugs found that value-based prices (at the $100,000-$150,000/QALY range) would be significantly lower prices than current list prices – a finding with important implications as GLP-1 drugs enter the conversation pipeline.
international evidence
Outside the US, the cost–value relationship has been studied more rigorously, primarily because most high-income countries have formal HTA systems with clear cost-effectiveness criteria.
UK(NIS). Here is the original empirical work Dakin et al. (2015)published in health Economics. Using a dataset of over 400 NICE evaluations, they estimated the implied probability of a positive reimbursement recommendation as a function of the incremental cost-effectiveness ratio (ICER). Not surprisingly, the likelihood of approval declines rapidly once the ICER exceeds £20,000–30,000/QALY – but this relationship is probabilistic, not deterministic. Severity of disease, end-of-life status, unmet need, and budget impact all influence the decision beyond the ICER alone. “…technologies costing more than £40,000 per quality-adjusted life-year (QALY) have a 50% chance of NICE rejection (75% at £52,000/QALY; 25% at £27,000/QALY). Previous NICE decisions appear to be based on a much higher threshold of £20,000-£30,000/QALY.” This work has been extensively replicated and is the empirical basis for much of the subsequent literature.
Australia (PBAC). The Pharmaceutical Benefits Advisory Committee uses an informal cost-effectiveness threshold, but empirical analysis – including work Harris et al. The suggestion is that the underlying range is approximately AUD 45,000–75,000/QALY, with a higher range tolerated for life-threatening situations with limited options. The cost-reimbursement relationship in Australia is stricter than in the US because the PBAC has statutory negotiating authority and can reject submissions outright. Specifically they found that “an increase of $A10,000 from an average incremental cost per QALY of $A46,400 reduced the probability of listing by 0.06 (95% CI 0.04 to 0.1).”
Sweden (TLV). Sweden’s Dental and Pharmaceutical Benefits Agency (TLV) operates an explicitly value-based pricing system. Companies offer a price; TLV assesses cost-effectiveness; And the approved price is effectively determined through negotiations based on the QALY threshold. Empirical analyzes of TLV decisions—such as that conducted by Svensson et al. 2025—Confirm that the cost-per-QALY ratio is the key predictor of listing decisions, with disease severity playing an important moderating role. For example, Klockhoff et al. 2026 found that “the ICER increased significantly with severity (P < .01)…[but the]...the average ICER was 30.6% below the relevant threshold”
Netherlands. The Dutch system involves an interesting tiered threshold structure – situations with higher severity face higher WTP thresholds. Vossen et al. 2019 suggests this is up to €80,000/QALY for severe disease, compared to €20,000/QALY for milder conditions. Empirical research from Schurer et al. 2022 confirmed that this severity weighting is reflected in actual reimbursement decisions, but also noted that 65% of submissions claimed the highest severity rating.
Multi-country comparison. A comparative analysis by Siverson et al. 2024 examined drug price negotiation systems in seven countries, finding wide variation in the degree to which price-based benchmarks were formalized versus implicit. Countries with formal HTA processes and statutory negotiating authority (UK, Australia, Germany) showed tighter price-value alignment than countries relying on reference pricing or voluntary agreements.
What does it mean
The empirical literature agrees on some consistent findings:
- US net prices often exceed value-based benchmarksParticularly for drugs with modest incremental clinical benefit relative to existing alternatives.
- Price assessments influence payer behavior In the US, even without a formal regulatory role – primarily through formal sanctions rather than outright denial of coverage.
- International HTA systems generate strict price-value alignment Compared to the US market, however, neither system fully adjusts prices to value. Cost-effectiveness thresholds are probabilistic guides, not hard and fast rules.
- The price-value gap appears largest in therapeutic areas with strong market exclusivity and limited competition – Biologics, gene therapy, rare disease drugs – where the manufacturer’s pricing power is greatest.
- Value is often narrowly defined in HTA bodies. Many HTA bodies focus on health benefits and health system costs rather than total societal benefits and costs. This may have a significant impact on the treatment of some diseases (for example, Alzheimer’s, schizophrenia) where the impact of the disease extends beyond health and the disease also affects caregivers and loved ones.
In short, the relationship between price and value is real, but in practice it is more of a probabilistic rather than deterministic relationship.
