Manufacturing Process Innovations and the Economic Value of Pharmaceuticals

Appraising pharmaceutical products at different time points of their lifecycle open ups the possibility of reversals in estimates of economic value. A product that erstwhile was rated “not cost-effective” could later on become 'cost-effective'. This paper investigates, within a single country context, whether manufacturing (process) innovations could lead to improvements or reversals in cost-effectiveness. Using numerical simulations, it evaluates the impact of product price variation attributable to cost-reducing process innovations as well as the impact of savings in administration costs from successful reformulation attempts. The simulations show variation in competitive product prices, attributable to manufacturing process changes, alone did not always lead to cost-effectiveness reversals. The joint impact of incorporating variations in product prices with savings in administration costs, however, led to a more consistent and persistent pattern of reversals in cost-effectiveness. This finding stands against assertions that manufacturing process innovations do not matter and that the real source of value comes solely from product innovations that improve clinical efficacy or real-word clinical effectiveness. Manufacturers therefore need to identify, prior to market launch, alternative, feasible production possibilities and how that might impact on products’ cost-effectiveness