News Release: IHE releases report on theoretical models for supply-side cost-effectiveness thresholds

The IHE today released a report titled Theoretical models of the cost-effectiveness threshold, value assessment, and health care system sustainability, which details the relationship between the demand- and supply-side approaches to the cost-effectiveness threshold and its potential role in promoting innovation.

In December 2017, Health Canada published proposed amendments to the Patented Medicine Regulations. One area for proposed policy change is the introduction of a value-based pricing component for the determination of maximum wholesale price for certain patented drugs in Canada. As one component of background research to inform potential pricing regulation changes, the Institute of Health Economics (IHE) was commissioned to prepare a research report. The report can be accessed at:

“There are implications for innovation and patient access of moving to value-based pricing, and this academic report examines specific methodological approaches and provides a theoretical framework to understand those issues,” said Dr. Christopher McCabe, CEO and Executive Director of the IHE. He explained further, “The report does not provide specific recommendations but puts economic theory into a policy context as one input to PMPRB’s determination of the scope, scale, and timing of the introduction of a value-based pricing component to their processes.” The report was supported by a financial contribution from the Patented Medicines Price Review Board (PMPRB).

The IHE also produced a related background document, Observations on proposed changes to PMPRB regulations and guidelines: A briefing document for IHE stakeholders, which summarized feedback from government, public agencies, and industry in areas where further clarification and deliberation could be helpful. The background document can be accessed at:

Additional related information produced by, or events hosted by, the IHE include the following:

  • Developing technologies that we can’t afford: Can value-based pricing help? – NOAHE Health Economics and Technology Assessment Rounds – March 2018
    Dr. Paulden and Dr. McCabe provide an overview of the standard model of value-based pricing and its limitations, and then present a theoretical model that links value-based pricing to population health optimization, rewarding innovation and signaling to the biomedical R&D community high value targets for future innovation.
  • Investigation and analysis of options to enhance Canada's patented medicine price ceiling regulatory regime – October 2013
    This report was commissioned by Health Canada’s Strategic Policy Branch/Office of Pharmaceuticals Management Strategies and is an analysis of the theoretical basis for value-based pricing, relevant international developments, and areas for improvement within Canada’s patented drug pricing system. This report intends to inform future policy research, advice, and Canadian drug policy discussions regarding the feasibility and implementation of value-based pricing approaches.

The IHE is an independent, not-for-profit organization that performs excellence in health economics research and health technology assessment. Our core objectives include: supporting decision-making in health policy and practice with evidence from research in health economics and health technology assessment; assessing the medical, economic, social, and ethical implications of both established and new health practices, procedures, and technologies; and facilitating discussions and partnerships among government, academia, industry, and healthcare providers to address important issues in health care. Visit us at to learn more.


Jasmine Brown, Institute of Health Economics
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