Cost-effectiveness as a guide to pricing a new pharmaceutical product.

This paper applies cost-effectiveness analysis to a major clinical innovation. Using a structured survey of professional judgements to obtain estimates of research costs associated with its use, the analysis suggests that a premium price for the drug decided on by the manufacturer would be justified on the grounds that it could provide substantial cost savings. The results obtained appeared sensitive neither to variations in the cost assumptions, nor to alternative definitions of effectiveness. In general, ex ante economic evaluation of a new medicine before price setting is shown to be both feasible and informative.