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Value-based drug pricing offers an important way to bring down the high cost of drugs in the United States.

In this approach, a drug’s price is tied to demonstrated effectiveness and benefit on patient outcomes. Results-based pricing is built into contracts between pharmaceutical manufacturers, health care payers, and health care providers. The more effective a drug, the higher the target price payers submit, with discounts and rebates given for drugs that are less effective than expected.


Traditional, fee-for-service contracts are still dominant in drug pricing today, but the transition to value-based care is accelerating in the health care industry, especially in Europe, according to a McKinsey study. And while the U.S. lags behind in adopting value-based agreements, many policymakers are realizing that value-based pricing can be an important, viable solution to the high and rising expenditures that payers lay out for prescription drugs.

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