One of the central tensions in pharmaceutical policy is the gap between what a drug is worth and what it actually costs. In theory, a drug’s price should reflect its value — its ability to improve health outcomes relative to the next best alternative. In practice, list prices are set by manufacturers, net prices are shaped by opaque rebate negotiations, and whether these prices bear any resemblance to value-based benchmarks is an empirical question. What dos the literature say about this?
US Evidence
The most direct empirical test of whether US prices align with these benchmarks comes from Bloudek et al. (2021), published in Value in Health. Their analysis compared ICER’s value-based price benchmarks to the actual net prices for a range of newly launched drugs. The headline finding: across the drugs studied, net prices exceeded ICER’s value-based benchmarks in the majority of cases. Specifically, “net price of 81% of drugs exceeded the $100 000 per QALY VBP and 71% exceeded the $150 000 per QALY VBP”, with some drugs requiring price reductions exceeding 36% to fall within the acceptable cost-effectiveness range. Importantly, this was true even for net prices — i.e., after accounting for rebates — meaning the price-value misalignment is not simply an artifact of list price inflation.
ICER’s 2025 Launch Price and Access Report found that the average net price of newly launched drugs rose approximately 51% from 2021 to 2024, substantially outpacing inflation. More pointedly, ICER estimated that this pricing trajectory cost the US healthcare system roughly $1.5 billion in excess spending above value-based benchmarks — over a relatively short window. However, ICER’s report has a number of flaws including (i) failing to take into account cost offsets, (ii) prices examined where only those at launch–which matters because IRA halts the ability to increase prices vs. inflation, (iii) ‘value’ includes only QALY-based concepts of value rather than broader societal value, and (iv) pharmaceutial prices as a share of health care spending has not increased in recent years.
Does Value Assessment Influence Coverage?
The next logical question is whether payers actually use value assessments when making coverage decisions. Chambers et al. (2023), published in the Journal of Managed Care & Pharmacy, examined how US commercial health plans use ICER reports.
Plans tended to cover drugs with higher (less favorable) CERs more restrictively than drugs with CERs less than $100,000 per QALY: odds ratio (OR) = 4.48 if $100,000-$175,000 per QALY; OR = 2.00 if $175,000-$500,000 per QALY; and OR = 2.10 if $500,000 or more per QALY (all P < 0.01).
Their finding: health plans that received an “low value” or “high price” rating from ICER were more likely to implement restrictive formulary policies — prior authorization, step therapy, or quantity limits — compared to drugs that received favorable assessments. ICER ratings don’t determine coverage, but they do appear to shift the leverage in formulary negotiations.
Comparing Across Therapeutic Areas
Within the US, the price-value relationship also varies considerably by disease area. Cherla et al. (2020) conducted a comparative cost-effectiveness analysis of cardiovascular, obesity, and diabetes drugs, contrasting ICER assessments with NICE (the UK’s National Institute for Health and Care Excellence) assessments for the same products. A key finding: the two bodies agreed on clinical evidence far more often than they agreed on value assessments — and when they diverged, the driver was almost always price, not efficacy. Drugs approved by NICE but receiving a “low value” signal from ICER were frequently drugs where the US net price was materially higher than the UK price.
This has direct implications for a common policy argument: that the US subsidizes global pharmaceutical R&D by paying more. The Cherla analysis suggests that when the same molecule is evaluated with the same methodology, the US cost-effectiveness ratio is often unfavorable simply because of price differences — not because the clinical evidence is weaker.
The IRA and Value-Based Price Signals
The Inflation Reduction Act (IRA) introduced Medicare drug price negotiation for the first time — a structural reform that implicitly raises the question of whether negotiated prices align with value-based benchmarks. Early analyses of the 10 drugs selected for negotiation in 2025-2026 suggest the negotiated prices represent meaningful discounts from list price, but comparisons to explicit QALY-based thresholds remain limited. USC Schaeffer Center researchers examining anti-obesity medications found that value-based prices (at the $100,000–$150,000/QALY threshold) would imply substantially lower prices than current list prices — a finding with significant implications as GLP-1 drugs enter the negotiation pipeline.
International Evidence
Outside the US, the price-value relationship has been studied more rigorously, primarily because most high-income countries have formal HTA systems with explicit cost-effectiveness criteria.
UK (NICE). The seminal empirical work here is Dakin et al. (2015), published in Health Economics. Using a dataset of over 400 NICE appraisals, they estimated the implied probability of a positive reimbursement recommendation as a function of the incremental cost-effectiveness ratio (ICER). Unsurprisingly, the probability of approval drops sharply once the ICER exceeds £20,000–30,000/QALY — but the relationship is probabilistic, not deterministic. Disease severity, end-of-life status, unmet need, and budget impact all influence the decision beyond the ICER alone. “…technologies costing £40 000 per quality-adjusted life-year (QALY) have a 50% chance of NICE rejection (75% at £52 000/QALY; 25% at £27 000/QALY). Past NICE decisions appear to have been based on a higher threshold than £20 000-£30 000/QALY.” This work has been extensively replicated and is the empirical foundation for much of the subsequent literature.
Australia (PBAC). The Pharmaceutical Benefits Advisory Committee uses an informal cost-effectiveness threshold, but empirical analyses — including work by Harris et al. suggest the implicit threshold is roughly AUD 45,000–75,000/QALY, with higher thresholds tolerated for life-threatening conditions with limited alternatives. The price-reimbursement relationship in Australia is tighter than in the US precisely because PBAC has statutory negotiating authority and can reject submissions outright. Specifically they find that “An increase in $A10,000 from a mean incremental cost per QALY of $A46,400 reduced the probability of listing by 0.06 (95% CI 0.04 to 0.1).”
Sweden (TLV). Sweden’s Dental and Pharmaceutical Benefits Agency (TLV) operates an explicitly value-based pricing system. Firms propose a price; TLV assesses cost-effectiveness; and the approved price is effectively set through negotiation anchored to the QALY threshold. Empirical analyses of TLV decisions–such as those by Svensson et al. 2025–confirm that the cost-per-QALY ratio is the dominant predictor of listing decisions, with severity of disease playing a significant moderating role. For instance, Klockhoff et al. 2026 found that “ICERs increased significantly with severity (P < .01)…[but the]…average ICER was 30.6% lower than the relevant threshold”
Netherlands. The Dutch system incorporates an interesting tiered threshold structure — higher severity conditions face higher WTP thresholds. Vossen et al. 2019 show that this is up to €80,000/QALY for severe disease versus €20,000/QALY for mild conditions. Empirical research from Schurer et al. 2022 confirmed that this severity weighting is reflected in actual reimbursement decisions, but also note that 65% of submission claim the highest severity rating.
Multi-country comparison. A comparative analysis by Syverson et al. 2024 examined drug price negotiation systems across seven countries found wide variation in the degree to which value-based benchmarks are formalized versus implicit. Countries with formal HTA processes and statutory negotiation authority (UK, Australia, Germany) showed tighter price-value alignment than countries relying on reference pricing or voluntary agreements.
What It Means
The empirical literature converges on a few consistent conclusions:
US net prices frequently exceed value-based benchmarks, particularly for drugs with modest incremental clinical benefit relative to existing alternatives.Value assessments do influence payer behavior in the US, even without a formal regulatory role — primarily through formulary restrictions rather than outright coverage denial.International HTA systems produce tighter price-value alignment than the US market, though no system perfectly calibrates price to value. Cost-effectiveness thresholds are probabilistic guides, not hard rules.The price-value gap appears largest in therapeutic areas with strong market exclusivity and limited competition — biologics, gene therapies, rare disease drugs — where the manufacturer’s pricing power is greatest.Value in HTA bodies is often defined narrowly. Many HTA bodies focus on health benefits and health system cost rather than total societal benefits and cost. This may have material impacts for treatments for some diseases (e.g., Alzheimer’s, schizophrenia) where the impact of the disease goes beyond health and the disease impacts caregivers and loved ones as well.
In short, the relationship between price and value is real, but in practice is a more probabilistic rather than deterministic relationship.
