WINNER

The latter would entail two separate payments to the supplier: (a) a price per unit of the product equal to the average cost of production and distribution, which would roughly equal the price that one would expect following generic entry and (b) a reward for innovation, based on the assessed incremental health benefits resulting from use of a medicine, compared to the existing standard of care. [...] Further discussion of the details of the implementation of the ODRS is postponed until after a discussion of the rationale for this addition to the system of insurance and drug pricing. [...] If the innovator targets the average 9 benefit (which was the economic model used by Gilead for sofosbuvir), pricing the product at $7, the insurer may still approve the product only to treat the high group (since the benefit per patient in the low group is less than the price), resulting in profits of $500. [...] If the amount paid to the firm under the ODRS is strictly related to the health benefits, then the firm will have incentives to maximize the health benefits. [...] (In the alternative, the firm would be planning its submission for the HTA process.) If the ODRS were chosen, the firm would be required to set a price reflecting the costs of production and distribution only.