Developing a new drug is not just a scientific challenge – it’s a complex strategic and economic process. Pharmacoeconomics, as a subfield of health economics, evaluates the costs and effects of pharmaceutical products to inform smarter decision-making in healthcare. It supports not only public health systems and payers but also developers and providers involved in drug research. From the earliest phases of research to post-market positioning, pharmacoeconomic influences which drugs reach the market – and which never make it beyond the laboratory.
A question of value, not just safety
Every year, pharmaceutical companies invest billions into research and development. Yet only a small fraction of candidate drugs ever become licensed products. The reasons are not always scientific. In many cases, the decision to halt a development project is based on poor economic viability – either the anticipated demand is too low, or the added therapeutic value doesn’t justify the high development costs.
A special case where pharmacoeconomics plays a critical role is in the development of orphan drugs for rare diseases. Because the potential patient population is so small, purely market-based incentives are often insufficient to justify the high costs of research and development. In these situations, individual states or groups of countries may step in to share development costs, offer targeted incentives, or provide dedicated reimbursement pathways to make such therapies financially viable. This public support is typically grounded in pharmacoeconomic reasoning: even if revenues are limited, the societal value of treating an otherwise neglected condition can justify substantial investment.
Here, pharmacoeconomics provides a framework to evaluate the potential return on investment. This evaluation goes far beyond profit forecasts. It involves a deep analysis of how a drug compares to existing treatments in terms of cost, clinical outcomes, and broader societal impact.
Building value-based development strategies
Today’s healthcare environment increasingly demands value-based innovation. It’s not enough for a drug to work – it must provide measurable benefits at an acceptable cost. Payers are more reluctant than ever to cover expensive drugs without clear evidence of economic benefit. This shift has led many pharmaceutical companies to incorporate economic modelling early in the development process.
Through pharmacoeconomic analysis, developers can anticipate whether a drug is likely to be reimbursed, what price points are sustainable, and how different health systems may assess its value. In short, economic evidence is no longer an afterthought – it’s a strategic asset.
The key methods of pharmacoeconomic analysis
Pharmacoeconomics includes a variety of methodological tools. Each serves a different purpose depending on the stage of development, the type of drug, and the available data. The most commonly used methods include:
Cost-minimization analysis (CMA): Applied when two or more treatments show equivalent outcomes. The goal is to identify the option with the lowest cost. Although straightforward, CMA is only useful when clinical outcomes are proven to be identical.
Cost-benefit analysis (CBA): Calculates and compares costs and benefits based on their financial worth. This method allows developers to compare very different types of interventions, as all outcomes are expressed in currency. However, it can be challenging to assign accurate monetary values to health outcomes.
Cost-effectiveness analysis (CEA): Compares the relative costs and health outcomes (often in life years gained) of two or more options. CEA is widely used in drug development, particularly when treatments vary in efficacy.
Cost-utility analysis (CUA): A more refined form of CEA, where outcomes are measured in quality-adjusted life years (QALYs). This method captures both the quantity and quality of life, making it ideal for evaluating treatments with subjective or long-term outcomes.
These methods are not only used retrospectively. Increasingly, decision-making in early-phase trials includes predictive modelling based on these tools, helping sponsors to shape trial design, select target populations, and build a stronger case for future reimbursement.
The hidden value in clinical data
Pharmacoeconomic studies rely heavily on clinical trial data – but they also give those data new meaning. Beyond proving efficacy or safety, clinical trials generate the raw inputs for economic models: rates of adverse events, length of hospital stay, improvements in quality of life, or reductions in caregiver burden.
By interpreting these metrics through an economic lens, pharmacoeconomics helps identify which treatment characteristics are most likely to make an impact in real-world settings. For example, a slightly more expensive drug that reduces hospital visits might be more cost-effective in the long run than a cheaper but less convenient alternative.
One size doesn’t fit all: Adapting to national contexts
Another essential feature of pharmacoeconomics is local adaptability. A treatment that is cost-effective in one country may not be in another. Differences in pricing, healthcare system organisation, population health, and national health priorities all affect economic evaluations.
This makes it crucial for pharmaceutical developers to adapt their models to each target market. Local health economic expertise can help identify country-specific cost drivers and tailor the value proposition accordingly. For companies seeking reimbursement in multiple jurisdictions, this localisation is not optional – it's the key to market access.
From compliance to competitive advantage
Too often, pharmacoeconomics is viewed as a regulatory box to tick – a requirement to get a product listed. But smart companies know that economic modelling is much more than that. It’s a tool for differentiation.
In crowded therapeutic areas, where several products offer similar efficacy, pharmacoeconomic value can become the deciding factor. A drug with clear economic advantages – whether in hospital budgets, patient adherence, or reduced care needs – will often win favour with decision-makers, even when its clinical benefits are modest.
Moreover, building a robust economic case early can accelerate time to market. Delays in pricing and reimbursement decisions are a common source of lost revenue in pharma. Having a well-supported cost-effectiveness model ready at launch can prevent these delays.
Inthera: Experience-driven solutions in pharmaceutical services
With more than 30 years of hands-on industry experience, we focus on supporting clinical trials, managing drug supply interruptions, handling complex regulatory matters, and providing EU GMP-compliant services. Our expertise extends to highly specialised areas such as sourcing orphan drugs for rare disease studies, where limited availability, strict regulation, and complex funding structures demand a particularly reliable and knowledgeable partner.
Thanks to our wide-reaching supplier network, we consistently offer dependable access to high-quality products – including hard-to-find and orphan medicines – at highly competitive prices. Collaborating with Inthera means gaining a reliable partner who delivers tailored expertise and responsive solutions for long-term success.