Why is there no single drug price relevant for all analyses in the U.S.?
Unlike many healthcare systems with centralized pricing, decision-making in the U.S. pharmaceutical market is decentralized across multiple manufacturers, wholesalers, PBMs, pharmacies, providers, payers, employers, government programs and patients. Stakeholder perspectives differ, and transactions between different parties result in different prices for the same product. As a result, no single U.S. drug price reflects the true economic cost—what economists call opportunity costs, or the value of resources in their next-best use—across all perspectives. In addition, the competition that arises in a market-oriented system like the U.S. can result in prices that change frequently compared to those systems.1
A new study from Johnson & Johnson researchers, in collaboration with The Swedish Institute for Health Economics, clarifies how U.S. drug price measures map to different perspectives and reviews existing methods for incorporating drug price dynamics over the product lifecycle in economic analysis.
What did the study find out about different price measures and analytic perspectives in the U.S.?
Even though guidelines like the U.S. Second Panel on Cost-Effectiveness and the ISPOR Drug Cost Task Force have long recommended that economic evaluations incorporate prices that reflect stakeholder opportunity costs, literature reviews indicate that this is uncommon (e.g., two-thirds of U.S. cost-effectiveness analyses used list price benchmarks—prices that do not reflect what parties engaging in a transaction pay or receive per unit).2, 3 While the reasons for this mismatch are unclear, it may be partly due to the large number of price measures, many of which are confidential. In addition, the relevant price measures for stakeholders can change over time as the business environments and policies evolve.
The authors present a table of common U.S. price measures mapped to different perspectives (i.e., transactions across the supply and payment chain) and provide key insights for economic analysis. Using the right price metric is critically important because using the wrong one results in misleading cost estimates.
What’s wrong with assuming drug prices stay constant over time?
Even when the appropriate price metric is found and used, the prices themselves in the U.S. change substantially over the product’s lifecycle due to changing competitive conditions and bargaining power (e.g., entry of new competitors, new clinical evidence, changes in policy and the emergence of generic or biosimilar competition). Despite this, many economic evaluations still assume drug prices remain constant over long time horizons. In fact, a recent review found that life-cycle price dynamics were only applied in 5% of studies in a sample of 270 U.S. cost-effectiveness analyses.
To address this issue, the authors reviewed emerging methodological approaches for incorporating drug price dynamics into economic analyses over the product life cycle. They identified five broad approaches for modeling price evolution and summarized the key assumptions, data requirements and considerations associated with each method. Although predicting future drug prices is inherently uncertain, incorporating lifecycle price dynamics using the best available methods is important because different assumptions about future price changes can materially influence estimates of cost-effectiveness, budget impact and other types of economic analyses.
What should U.S. analysts and decision-makers do differently?
This study underscores that economic evaluations can be informative for resource allocation decisions only if they adequately reflect actual opportunity costs. In the U.S., however, identifying the price inputs that best approximate opportunity costs may be challenging because pharmaceutical transactions occur across a system involving multiple stakeholders, negotiated payments, financial transfers, and evolving market conditions.
The authors therefore argue that analysts should carefully evaluate which price measures are most appropriate for the analytic perspective and decision context being studied, and when necessary, construct price metrics that best approximate underlying opportunity costs. Because drug prices evolve over the product lifecycle, analysts should also consider how changing competitive conditions, new clinical evidence, policy changes, loss of exclusivity and other relevant factors may affect prices over time. To improve interpretation, analysts should explicitly justify pricing assumptions and explore alternative price trajectories through sensitivity analyses.
Decision-makers and policymakers, in turn, should interpret results cautiously and avoid overgeneralizing findings across settings, stakeholder perspectives or time horizons. Continued methodological development and empirical research are needed to support the use of perspective-consistent price metrics and lifecycle pricing assumptions that better approximate opportunity costs in U.S. economic analyses.
The research was funded by Johnson & Johnson. For full details on the study designs, methods and limitations see: Neslusan C, Willis M, Nilsson A. Perspective Mismatch and Static Assumptions: Re-Thinking How Drug Prices Are Specified in U.S. Economic Analyses. Johnson & Johnson Innovative Medicine. Poster presented at: The Professional Society for Health Economics and Outcomes Research (ISPOR); May 17-20, 2026; Philadelphia, PA.
1. Nguyen, N.X., Sheingold, S.H., Tarazi, W. et al. Effect of competition on generic drug prices. Appl Health Econ and Health Policy. 20, 243–253 (2022). DOI: 10.1007/s40258-021-00705-w.
2. Russell LB, Gold MR, Siegel JE, Daniels N, Weinstein MC. The role of cost-effectiveness analysis in health and medicine. JAMA. 1996;276(14):1172–1177. DOI:10.1001/jama.1996.03540140060028.
3. Hay JW, Smeeding J, Carroll NV, et al. Good research practices for measuring drug costs in cost effectiveness analyses: issues and recommendations: the ISPOR Drug Cost Task Force Report-part I. Value Health. 2010;13(1):3-7. https://www.ispor.org/heor-resources/good-practices/article/good-research-practices-for-measuring-drug-costs-in-cost-effectiveness-analyses-issues-and-recommendations.
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