The process of introducing a new health technology into a healthcare system is characterized by uncertainty and risk for those involved—pharmaceutical companies, payers, patients and the government. In view of the accelerated introduction of new technologies in recent years, mechanisms to reduce uncertainty are of growing interest. One example is the Managed Entry Agreement (MEA), which we explore using a mechanism design approach. We make use of the Israeli experience, in which pharmaceutical companies and health plans (i.e., payers) negotiate over the introduction of new technologies into the national Health Services Basket (HSB) with the Ministry of Health acting as a mediator. We use the framework of bargaining within a mechanism design framework to show that in the process of negotiation the parties, the pharmaceutical company (PC) and the health plan (HP), have independent private valuations and that a situation of common knowledge that gains from MEA exists is rare. Adding a mediator (i.e., the MEA team) to the mechanism, as in a direct-revelation mechanism, reduces the level of uncertainty for both sides (i.e., the PC and the HP), thus making it possible to meet the budget constraint while increasing value for patients and enhancing ex-post efficiency.
|Number of pages||11|
|Journal||European Journal of Health Economics|
|State||Published - Jul 2021|
Bibliographical noteFunding Information:
We wish to thank Alexey Belinsky, currently at the Strategic and Economic Planning Administration of the Ministry of Health, for preliminary work on this study in his position as research assistant at the Myers-JDC-Brookdale Institute (MJB), and Dr Bruce Rosen, head of the Smokler Center at MJB, for his helpful comments and support throughout the study. We also thank participants at the 2017 European Conference and the 2018 Israeli Conference of the International Association of Pharmaceutical Economics and Outcomes Research (ISPOR) for their valuable comments on presentations of the study’s preliminary findings. Finally, our thanks go to the Israeli branch of ISPOR, headed by Prof Dan Greenberg, which awarded the 2017 Young Researchers Scholarship to Elad Daniels and Ira Yaari.
© 2021, The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.
- Health technology
- Managed Entry Agreement
- Mechanism design
ASJC Scopus subject areas
- Economics, Econometrics and Finance (miscellaneous)
- Health Policy